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Choosing the Best Coffee Franchise

Updated on July 29, 2014
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Keith Schroeder writes The Wealthy Accountant blog with 30 years experience in the tax field. He is the tax adviser of Mr. Money Mustache.

Gourmet Coffee Franchise Alternative

The fastest way to build a successful coffee shop is with a franchise. The love of coffee is only the starting point in this business. The capital required to start and maintain a coffee franchise is large. A small shop will start at $40,000-$50,000, while most franchises require over $100,000 of capital to begin.

The large investment is required to build a profitable coffee franchise from day one. Using a proven successful business model offers the best opportunity to enjoy the ownership of your own coffee shop.

Several considerations are necessary before investing. In this article I will outline some of the most important points when considering a coffee franchise. I will not focus on which franchise is better or worse because several factor make certain franchises better in one location over another.

Coffeehouse

Investment

The investment needs to be your first consideration. You will need either liquid funds to cover the purchase of the franchise, loans, or partners. As stated above, most coffee franchises run $100,000 and more; some, like Seattleā€™s Best Coffee, run $250,000.

Even if you have liquid funds for the purchase, you may still want a bank lending facility or partners. Cost over-runs, overhead, and operating expenses in the early days of the business will strain the finances unless adequately planned for.

Another reason to consider a partner is business experience. If you have never run a business before, the task can be daunting. A current or previous business owner will be familiar and comfortable with hiring employees and the taxes that involves. A business is a great way to make a living as long as you manage the company in a way that allows you peace of mind.

Venue

After you secure funding and/or partners, it is time to research a location. A coffee house has an easier time with location than many other types of businesses. This does not mean you can take short-cuts on location. Most management decisions are easy to change; once the location is set, it is set. Moving is possible with large expense only.

Towns of every size have ample opportunities for profit with a coffee franchise. I live near a town of 200 people with a very successful coffee house. The coffee is great, as well as, the soups, sandwiches, and deserts. The place is addicting.

Crowded malls have lots of foot traffic, but may not be the ideal place to grow a coffee shop. The crowded and rushed atmosphere lends to cheap coffee offered on the run. Also, there is too much competition. You lose the ability to serve people a cup of coffee on the way to work.

A coffee shop can locate in a quiet neighborhood where rents are lower. It is best to pick a quiet spot. People wanting to stop in for a quick cup of Joe are as satisfied as the crowd that wants to chat the morning away. It is all about atmosphere with a coffee franchise.

Your shop should be ideally located where local neighbors can easily stop in to socialize. This crowd is more likely to buy more than coffee. Soups, sandwiches, and deserts are a large source of profits, too.

Ambiance

Going to a coffee shop is an experience. You can sell coffee only or other items as well. Customers will return frequently when they fall in love with the atmosphere of your coffeehouse.

Near my employment is a small coffeehouse in an old cinderblock building with all the charm of an historic building. Each night they offer either: poetry reading, book reading, singing, and open mic. The crowd is so large they turn people away every evening. And this is for a coffeehouse, where business is most brisk in the morning.

The atmosphere should reflect your personality. People will come to see you. This is not a transaction between shop owner and customer; this is a friend bringing me a drink. And I pay for the drink.

When choosing a coffee franchise, you need to consider the atmosphere the franchise is famous for. Your personality must match with the franchise style. A coffeehouse can be a morning business or a highly profitable business that packs the house with evening entertainment provided by the customers themselves. Nothing speaks profit like a packed room of customers laughing and having a good time.

Risks

As enjoyable as owning a coffee franchise can be, there are risks, as with any business. You must be prepared to hire, and fire if necessary, employees. There are bookkeeping, tax, and accounting matters that require daily attention. Costs must be contained and profit assured to continue as a viable organization.

It should go without saying, you must love coffee, the people that frequent coffeehouses, and the long hours required to run a profitable business. You can have fun and enjoy the process, but never forget you are running a business that has obligations to customers, employees, vendors, and you, the owner.

You are in business first to make a profit. Without profit there is no business and everything else does not matter. You build a profitable business by picking the right coffee franchise, a good location, providing the proper atmosphere, and assessing risks.

Your dream of being a coffee franchise owner can come true with a little planning and research. Most of all, remember to have fun.

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