According to reports, small to medium-sized coffee shops can generate as much as $60,000 to $170,000 each year. However, the amount of money you will take home as an owner will often depend on product pricing and profits, the number of staff you have, its size, location, the number of years it has been in business. and other business expenses.
When contemplating starting a coffee shop, it’s only natural to wonder about the level of income you could expect every month.
It goes without saying that the answer to the question; “How much do coffee shop owners make?”, will depend on certain factors such as the type of coffee business you have, your volume of sales, your pricing point, your costs, and other factors as well, such as existing debt, labor costs, taxes, et al.
In addition, the income you get to keep after subtracting all expenses will be determined by your startup costs, operational costs, taxes, money re-investment into your business, et al. In other words, asking how much a coffee shop owner makes on a monthly basis encompasses complex insights to what kind of coffee business you will ultimately create.
First and foremost, you have to bear in mind that that every coffee shop is different. For instance even with the standards across board, individual Starbucks Coffee locations do not bring in the same revenue. Likewise, despite having the same concept and products, the revenue can vary from one coffee shop to the next.
Also note that there are coffee shops that offer foods, including bread, donuts, cookies, and other sweets that go down well with coffee. And aside from these ready-to-consume options, you will find shops that sell coffee beans, supplies like mugs and coffeemakers, and other take-home items.
Some also offer in-house seating or even drive-through-only options. Since most café costs are fixed, attracting one more customer an hour or boosting average sales by $1 per sale could genuinely grow your revenue significantly.
Consider selling higher-margin products, such as alcohol, low-prep plates, and desserts you can make cheaply in-house such as ice cream and cakes. You should also encourage your staff to up-sell and cross-sell as much as possible without coming off as pushy to the customer.
How Much Money Do Coffee Shop Owners Make?
In a bid to answer how much coffee shop owners make, it is important to determine the variables that can help throw light on the answer. How much money you make with your coffee shop ultimately depends on your coffee shop revenue as well as other things. Here are the key elements to look out for:
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Is the amount of money your coffee shop makes. It is generated from all the sales that occur throughout the day, week, and month.
Is a collection of all the money paid to you from coffee, tea, soda, muffins, pasties, etc. It does not include the cost of doing business. Usually, the revenue that you will make from your coffee shop will be based on two factors;
1. Your number of sales
This number reflects how many customers walk through your door or perhaps drive up to your espresso drive-thru window and buy something. Each purchase equals one sale. The more buying customers, the more sales and presumably, the more revenue your coffee business will have.
So, let’s say you average 150 customers a day. A 20% increase from that will bring that up to 180 customers a day. This means that an increase in sales will dramatically boost your revenue for the month. There are a lot of factors that can affect your volume of sales.
For instance, your location will make a very big impact on your profits. The “better” location for your coffee shop, coffee stand, or kiosk, the more optimal or higher your number of customers you will likely have. Factors like parking, convenience, traffic flow, lighting, et al., are essential things to look at.
Additionally, marketing, promotions, or community outreach will also play an important role and can dramatically impact your numbers.
2. Your average receipt total
Your average receipt amount is another important variable to your profitability. A single receipt can be $3.00 another can be $15.50. For instance, let’s assume that on average, customers buy a cup of cappuccino and a muffin totaling $5.
Of course, not everyone will order a cappuccino and/or a muffin. Some orders will have multiple drinks and/or multiple muffins or snacks. Some receipt totals may add up to just $2.50, while other receipts might be as much as $35.95. Take all your orders and divide them up by your total sales, and you’ll get your average ticket price.
If you have a variety of moderate to high margin menu offering (that is popular with your customers), the average cost of your receipt prices will also likely go up. So, if you offer your famous cheese cake for $6.95 a slice and a coffee for $2.75, your receipt price will be $9.70.
Adding these two essential variables (total number of customers and the average receipt total) will determine our revenue for your coffee shop business. Both of these elements play an equally powerful role in your financial success as a coffee shop owner.
Any change to one or both of these can cumulatively increase or decrease your bottom line and your income. In order to be successful as the owner of a coffee shop, you should strive to boost these two factors upwards as much as possible. Independent coffee shops produce more than $12 billion in annual sales.
The average drive-through espresso stand sells 200 to 300 cups of java a day. Seattle has the most coffee shops per capita of any city in the united states.
Salaryexpert.com reports that in 2011, coffee shop managers in New York City earn an average of $66,699. In Phoenix, the average annual coffee shop manager income is $45,961; and in Miami, coffee managers earn $54,075. Seattle coffee shop managers earn an average of $54,899.
The national average is $46,353. The Bureau of Labor Statistics reports that the median annual wage of salaried food service managers (including coffee shops and espresso stands) were $46,320 in May 2008. The middle 50 percent of managers earned between $36,670 and $59,580.
The lowest 10 percent of wage earners received less than $29,450, and the highest 10 percent earned more than $76,940. Coffee shop owners who manage their own establishments may net a higher average annual income than those who have the additional operating expense of hiring a manager to run their business.
What is the Profit Margin for Coffee Shops?
According to industry reports, the average profit margin for a coffee shop is 25%. Note that businesses in this industry sell drinks that vary in price as well as food items, such as pastries and pre-packaged sandwiches. If your average sale per customer is $6 and you carry out 50 sales per day, then your annual revenue will be about $110,000, giving you a profit of more than $27,000.
However, it is imperative to state that gross margins in the coffee industry are quite high on average, but the profit (operating income) remains comparatively low.
Factors That Will Influence How Much a Coffee Shop Makes Yearly
Just as was noted above, many factors come into play when analyzing the yearly income of a coffee shop. These factors include;
Brand and concept
The amount of money a coffee shop generates usually depends on its concept and offerings. There are different types of concepts such as coffee kiosks, drive-thru, franchises, and stand-alone shops. Note that the type of shop you open is probably the factor that will affect your initial investment and your earnings potential the most.
Just as was noted above, there are coffee shops that offer various foods, while there are those that sell coffee beans, supplies like mugs and coffeemakers, and other take-home items.
Location is very crucial as it affects or dictates how much your coffee shop can generate annually. Have it in mind that factors such as being close to shops and offices, parking, access, pavements, and street lighting are all worth it when choosing the ideal location for your coffee shop.
Also, note that proximity to professional residential areas can help drive your shop sales especially if people continue to work from home.
Indeed, customer footfall will definitely influence the amount of money your shop can generate in a year. You can estimate footfall by discretely counting people as they walk past your intended location at various times of the day. Also take your time to investigate similar coffee shops nearby, count the number of people who stop to purchase something, and try to estimate average receipts from what they buy.
In addition, carefully consider whether that area can support another coffee shop and that the market isn’t overly saturated with competitors.
Your coffee shop sales volume shows how many customers walk through your door or perhaps drive up to your drive-thru coffee window and buy something. Have it in mind that the more buying customers you have, the more sales you can make, and this will translate to the revenue your coffee shop will have.
If your coffee business is always busy throughout the day or has a series of caffeine-charged rushes that boost your customer numbers, your overall shop income will be higher.
Average receipt totals
Have it in mind that your coffee shop revenue will also depend on two primary sales volume elements: your average receipt totals and your number of sales.
As the owner of a coffee shop, have it in mind that it falls to you to ensure both of these numbers are always increasing, or at least, that they’re steady. Simply put, your number of sales is the number of customer transactions you have on a particular day. Note that the more people walking through those doors most often entail a higher number of sales.
A good way to make more money in this department is by charging more for items. You can easily do this by adding charges for extra syrup, non-dairy milk substitutes, or even extra shots of espresso.
Number of years in business
Note that the amount of money your coffee shop can generate will also be determined by the number of years you’ve been in business.
According to experts, your coffee shop will make more money this year than last year. Owing to certain factors like efficiency, brand awareness, less waste, and more loyal customers offering repeat business, you will genuinely make more money in your 3rd year than in your first year.
Costs (fixed and variable operating costs)
In a coffee shop, variable costs relate to the product and the container that holds it. Note that this will vary based on the types of products served and on the quantity that goes into a drink, and this can make it very hard to predict on an overall basis.
Other major expenses that will affect your business income will be the payment of rent or lease, which isn’t expected to exceed 15 percent of sales.
Staff costs, including payroll taxes, benefits, and payroll accounting services, will also have a say in your business income. Additional costs including professional fees, utilities, licenses, advertising, and maintaining the shop and its equipment will also have to be considered.