Something I ponder nearly every time I enter a restaurant, coffee shop, or even a mom-and-pop store, is whether they’re actually earning a profit.

CoffeeBecause we have so many brand new coffee shops in this state, and most of them are run by new owners, I often doubt whether they are a financial success. It takes a rather large number of daily customers to make ends meet, and often years to build that kind of traffic.

A few questions: If you run a successful coffee house, what would you say is the #1 thing you did to earn a profit?

Is location more important than anything?

Please don’t name names, unless you are the owner. I’m wanting this to be more of an open conversation about what works and what doesn’t work, and whether you think most coffee shops make a profit.

Have a great weekend!

Arizona Coffee

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  1. Sherry

    I am willing to bet most coffee shops in the valley do not make a profit. Having worked for several mom and pops and even a couple larger corporate stores I have seen it first hand. Although location is probably a very big factor in a shops success, I think creating some sort of brand recognition in your local area is most important. Take for instance a certain L.A. based Coffee & Tea company who keeps opening stores fairly close to each other in the Scottsdale area. I’m sure most people would agree they serve an OK product but there are certainly many other places with better coffee in the area. They do well though because they have created an image in that target area that people have become familiar with and associate it with “Scottsdale”. On the flip side of the coin, the ill-fated Seattle franchise that began opening stores all over the valley a few years ago and not targeting one area or audience in particular failed because although they may have had a recognizable brand, they did not create the familiarity people desire. This doesn’t mean a coffee shop owner need to open several locations in one area, it just means you need to pick a specific target audience and focus on pleasing them. They in turn will help promote your business to others like them and suddenly you’ve created a trend people become familiar with and make a part of their everyday lifestyle.

  2. Interesting comments, Sherry. Here’s a follow up question as it relates to location.

    Is the trendy location near a bunch of restaurants and food joints worth the extra money you end up paying per month?

    Quite honestly, location matters a lot. I like to think so anyways.

    Should coffee shops team up for locations next to good food places? Go where the money is…

  3. They say a coffee bar should be located near an anchor (mall, college, hospital, etc.), yet one of the most successful bars I know of in the L.A. area is located in more of a neighborhood environment and is patronized by neighborhood locals more than anything, at least from what I’ve observed. So that’s a tough question. I think if the demographics are just right, not being near an anchor and therefore lower rent/overhead would be better.

  4. Geographically speaking, when nearly 90% of the morning commute traffic traveling from QC area into Phoenix, one might think that it’d be a no-brainer to open up a shop – and quick-like – somewhere in Johnson Ranch at the Fry’s center or even further up on Elsworth or Ironwood so that the early morning commuters can stop in for their cup of go-juice (Marine Corps knickname) before having to travel nearly 20 miles.

    I agree that location is pivotal, if not THE key to success in the less rural areas. But I’m not sure it has to do with anchors so much, as Victor pointed out. It’s about how the one behind the bar is going to pour that magical number of drinks per day.

    I know of a shop in Gilbert (one of four in the Valley – Ma & Pa type) that is a decent pour, better than most I should say. But what makes the pours at the Gilbert location higher in number than either of the Tempe shops or the Ahwatukee?


    The barista that works nearly every work-day morning has established a relationship (that we all know as [former] baristas) with her clientèle over the past (and get this) decade or so that causes them to come back.

    Putting the right barista behind the bar at the right time of day is a huge factor, in my opinion.

  5. Pierce

    I have to agree that coffee houses are a funny breed of cat……….

    Whenever I am in Globe I frequent vida e caffe (sp) across from the fire station due in part to the ‘vibe’ there.

    Somewhat free spirited but not out in ‘left field’ as some other indie places that shall remain nameless locally.

    A big positive for me a live music/readings, etc. at night.

    What I am trying to say is a coffee house is a ‘proxy’ for a bar/tavern. Being that I am essentially a non drinker that IS a significant consideration for me 🙂

  6. Wow! Great comments. Sometimes the location, location, location thing, does make sense. In a pocket of population were most of the customers commute to work and there is only one way out, will make sense not to open a coffee shop on the wrong side of the road. Commuters will turn right even if a product does not justify the choice. I love the fact that people in this forum do recognize quality but the average consumer doesnt. A vast majority of the population will drink coffee diluted into sugars, milk, chocolate and crushed ice. In response to the profitability issue, most of the coffee houses do not brand themselves correctly and do not aim to retail as much as the big chains do. In different studies the underdog effect gives the mom and pop store the advantage, as long as the overall perception of quality is taken into consideration. In a product as widely consumed and as profitable as coffee is hard to believe that independent coffee houses are not as profitable as large chains but they aren’t.

  7. I don’t know.. I think the planets have to come into alignment either by chance or by force for a small independent coffee shop to thrive.

    Schomer started with just a cart on the street, and today, Caffe Vivace is now valued at 1.7million, if I recall correctly.

    Artigiano was a small shop that grew into an empire in record time.

    So what does it take? Proper branding is a HUGE part of it. Most places just don’t match the image their brand is putting off, or the brand is so weak, that it really wouldn’t matter either way.

    Yes, location is important, but I think branding is at least as important in terms of long-term success.

    From what I’ve seen, shops will more often than not either, A: underfund the business, or B: throw money at it hoping it will generate business on its own.

    If you look at the businesses that fail from the insider’s perspective, you can predict the failure at least a year before it goes under. I’ve been shocked at the foolishness of many shop owners who open a shop, and wonder why it didn’t just thrive.

    All that having been said, the notion that 85%(is that right? I don’t remember) of all small businesses will fail is a statistic that includes huge successes as well as the vast number of people who fail to do their homework beforehand.

    I think that if you’re smart about it and don’t rush into it, you can pretty easily succeed.

    Just my $.02 having worked for so many that have gone under, barely scrape by, as well as a Starbucks that I’ve seen start out excellent, and then drop to downright awful.

  8. I forgot to add.. branding and culture should match the location.

  9. MikeFTrevino

    This is why I prbably won’t go into bussiness for myself. I am still nieve enough to believe that if I provide the best product to the best of my abilities and strive for better, that will alone bring me some success. (Always the barista, never the coffee shop owner.)

  10. I’m trying to open my own coffee shop, and perhaps I started backwards because I started with the image (logo, branding, the works…), somehow everything’s coming together and probably will open up pretty soon, I have about a year and a half doing research on every side and aspects of creating a successful business that will turn into a franchise, and I consider branding more important than location, you see Starbucks is now one of those anchor business in some small centers, obviously that is because it is now a strong brand, so location it is more important than brand when you’re a small business, but what if you can create an image for yourself that looks just like the real thing?… I takes just a little bit of talent and constant fixing, if you open your eyes wide open, you will see on the road opportunities that you won’t miss and let go. I’ve started maybe with the last part, but as far as I can see, it has helped me more to get what I want if I see it has if it is already that big. Once I’ve heard someone say, to be big, you have to look big. Maybe we can get together and start this brand together to compete face to face with big retailers, it’s just a matter of comitment, hard working and believing. Hope that you get the success you look for. Happy shots!….

  11. bIll

    It is very hard to make a profit right now with Coffee shop. You need 200+ customers daily to make net profit. All depends on your location, competition, pricing power, loyalty of your customers and how expensive is everything you need to operate your business. Location is about 50% and better it is more it cost = more you need to sell. Beans are not enough to make a decent living from 1 or 2 shops. You need to add some food and some drinks beside coffee. I own 5 shops in large west coast city. 3 are doing well, 1 is struggling and 1 is bankrupting me.

  12. bIll

    yes and forgot, if your employees are not super nice and very friendly, forget it! One thing you can do to improve you margins is to sell some other higher margin things in your shop, like b-day cards, energy drinks etc. Cheese cake slices are great for us now! Can’t make them yourselves, find a good supplier, and you will need a small refrigerated counter display for that.

  13. bIll

    If you want to open a coffee shop in a new location have 6 months worth of reserve money ready, otherwise you will go under. don’t sign a very long lease without some opt out options, otherwise there is no way out if sales are poor. Branding is not crucial for new shop, but how convenient you are to you customers is. In your busy hour make sure all your staff is there, once you loose a customer due to a long wait, they don’t come back for a very long time if ever. I earn $25 K per shop in my pay and profit. So around $75K a year for 3 minus $15K that 1 is loosing and that is around $60K. This is very low for so much work. many folks working in IT make more $ and work way less, not to mention they don’t invest own money and have way less risk. When I think about this all I am ready to retire and let someone else by my shops and have fun!!

  14. I’m about to launch a coffee-kiosk-on-wheels business with 5 kiosks in the Pacific Northwest. But I’d be foolish to think that serving primarily coffee will make me profitable. You’ve got to serve coffee, drinks, and other things the people want. There are great food-drink service ‘role models’ out there who are doing it right — the best one offers only 8 menu items, the most expensive one under $4. What do people go out and seek when hungry? Why would I go to the same coffee location time and again – just for the coffee? I think not. So that’s my approach, to improve what’s offered from my kiosks…in addition to coffee and pastries. Doesn’t seem so hard…

  15. Angela B

    I am wondering how many of these shops have a drive thru? I am from Washington state originally and there were coffee shops or carts everywhere. Since being here I have to go into a shop to get a good coffee and have not seen any drive thru’s. The convenience of a drive thru on the way to my work is priceless

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