Finding Good Spots For Coffee Shops

By Jeffrey Taylor

O.K. You’ve decided to start your own coffee shop and know you need to find a good location. How do you get started? First, take a deep breath, then get out some paper and answer the following questions:

Do I want to?

1. Be near Starbucks since they have already done the research?
2. Buy a franchise that knows how to compete against Starbucks?
3. Attract those who hate Starbucks for one or more reasons?

Starbucks is the world’s largest chain of coffee shops. Founded in 1971 as a coffee bean retailer, then acquired in 1987 by Howard Schultz, Starbucks has acquired and built coffeehouses all over the world. In addition to drip brewed coffee and espresso and beverages, Starbucks shops also serve tea and bottled beverages, pastries, ready-to-eat sandwiches, music and coffee accessories.

According to the company fact sheet, as of November 2006, Starbucks had 7,102 company-operated outlets worldwide: 5,668 of them in the United States and 1,434 abroad. In addition, the company has 5,338 joint-venture and licensed outlets, 3,168 of them in the United States and 2,170 abroad. In some cities, such as New York and Chicago, there are Starbucks stores located across the street from each other.

Note that Starbucks is the big gorilla that needs to be dealt with. They are so huge that every banker is going to ask you, “So, how are you going to compete against Starbucks?” In addition, unless you have hundreds of thousands of dollars floating around in your banking account, you will need a banker to finance your dream.

Let’s address your number #1 question; do you want to be near a Starbucks? According to industry experts, Starbucks must contend against the belief – held by customers and critics – that the company will not rest until it has managed to completely corner the coffee drinking market. According to their public relations department and their annual reports (which I highly recommend you read) they claim that they only account for only 7 percent of U.S. coffee consumption.

Monopoly or not, those down on Starbucks often blame the proliferation of the company’s stores for the demise of local coffee shops that supposedly crumble in Starbucks’ ever-expanding shadow. However, industry experts and small shop owners alike question such an assumption. Nonetheless, many small coffee shop owners actually look forward to the arrival of Starbucks as the company educates and expands the coffee-drinking market.

Key factors that you need to look at for your coffee house:

• Cost of renting space (unless you want to buy a small building and rehab it)
• Daily traffic count on roads which would access your store
• Population and demographics of those who would come back to your store over and over again (you cannot make it with one-time buyers)
• Anti-competitive clauses in landlord contracts dictated by nearby Starbucks, supermarkets and restaurants that already serve coffee

If none of the issues concern you, than you are ready to take the next step; putting together your business plan.

To be continued.

Jeffrey Taylor is a licensed Arizona Commercial REALTOR® with S. J. Fowler/GMAC Real Estate in Phoenix. He specializes in the buying, selling, leasing and managing of commercial real estate, including warehouses, mini-storage, offices, shopping centers, retail, industrial, multifamily, and executive residences. Jeffrey can be reached at (602) 708-4981 or JeffreyArizona@aol.com