Breaking Down the Math of Coffee Shop Profitability
Not counting water, coffee is America’s non-alcoholic beverage of choice. 74% of Americans drink coffee every day. And a whopping 79% of American coffee drinkers take the caffeinated plunge twice a day.
So it stands to reason that coffee shops in America would be enormously profitable. But exactly how much do coffee shops make in a month? Let’s break down the math to find out the answer to the question: are coffee shops profitable?
Expenses
Before we calculate profits, we first need to calculate a coffee shop business’ operating costs. Specifically:
- Fixed costs
- Variable costs
It might be difficult to generalize, as everything from local minimum wage laws to your real estate market affects overhead costs. But we can at least make some assumptions.
According to Chron, your fixed costs should stay beneath 35% of your projected sales. Similarly, variable costs for a cup of coffee can be averaged at about 86.6 cents per cup.
Projected Sales
With costs estimated, we can talk about every small business owner’s favorite subject: sales projections.
Every business is different. But making some assumptions about everything from your potential regulars to your area foot traffic can help make clearer projections.
SharpSheets uses an average of 200 customers per day. They also use $6.20 for the average of a typical customer order.
With those assumptions, you could estimate a total income per day of $1,240. This becomes $37,000 gross revenue per month before calculating the effect of your fixed and variable costs.
So how much do coffee shops make a month? Expect a number that is potentially far south of this gross revenue example and simply subtract.
The Path to a More Profitable Coffee Shop
As we’ve said, there are a lot of variables that can make or break a business’s profit margin. Overhead, labor, and liability costs are non-negotiable expenses. And each of these and more risk a higher profit.
But there is one tried-and-true method for cutting out unnecessary expenses: franchising.
In the examples mentioned above, all of the fixed and variable costs noted are purely about day-to-day operations. These are the necessary building blocks for your business. But these costs say nothing of the additional costs for growing and maintaining market share. This could include:
- Marketing & direct mail
- Social media promotion
- Community outreach
- Product sourcing
- Additional Locations/Expansion
- Legal fees
- And more
There are countless benefits to joining a franchise family. Brand recognition is one. Quality sourcing is another.
But the chief reason among them is that many additional costs become your parent company’s concern. When asking the question of do coffee shops make money, it’s key to limit the potential costs.
Ellianos Coffee Company is a successful coffee shop network throughout the southeastern United States. Our customers love us for delivering Italian Quality at America’s Pace®. And our franchisees love us for treating them like a part of the family. Learn more about franchising and find an Ellianos near you.
