I just read this incredible story about a recently retired police officer named Bill Schemers who wanted to start a coffee shop in Surprise, AZ. So he bought into the Bear Creek Coffee franchise and rented a location.

And then he needed more cash so he tried to get a SBA loan but nobody would lend him the money. According to the story, he had to break his lease before he even opened and has lost $70,000 with nothing to show for it. All within about 2 weeks.

Now, I know enough about coffee shops to know you could buy a heck of a lot of equipment for $70,000. and consult with some amazing local coffee professionals. It doesn’t make sense to me when people go out and approach business as an all-or-nothing venture. Most business success is built over time.

I’d be really interested to hear what people think is the correct way to start a coffee shop and what that would roughly cost.

Arizona Coffee

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  1. This is truely a sad story. From reading the story, it seems the $70,000 was spent on buying into a franchise and signing the lease for his location. The issue, to me, was that he could have waiting to act in all accounts until his SBA loan was approved. I feel very bad for this guy, since I have a similar dream.

  2. I’ve worked with 140+ businesses, beginning, small, medium, large. The same mistakes are made by all. The mistake is not being patient enough to take time for full research that includes answering the 27 questions we developed years ago. If they all have positive answers you have a real chance to succeed, If any of the first 16 get negative answers you cannot succeed with the product. Above all else you cannot assume anything about any answer until it is complete in every respect. Some of the questions take time to be fully answered. Any thing involving money, and its receipt must wait until the check has cleared and the cash is in hand.

    A person I have recently met, has had a similar experience, but did not lose his money, only his original dream.

    I spent two years researching the publishing industry and answering the 27 questions before writing my books and publishing the first with results that were successful at the expected level.

  3. Steve

    I too feel bad for this indiviual however 2 main priorities need to take place, location and the ability to actually run a business. The last statement of course is quite broad with many different angles to go with, see below my shortened and condensed version:

    Business Plan
    Location or Locations- have a back up plan
    Lease knowledge-Rent
    Guestimate on Payroll
    and lastly once you have solid estimates on all of these:

    The going average for a new coffee shop has always been about $250k give or take a few bucks. I would always suggest shopping for used items but you run the risk of warranty-less items which could leave you crying and wondering why.

    “People dont plan to fail, they fail to PLAN” <<Someone said that !!!

    Hope this helps!

  4. I feel bad for the guy, but one part irks me a little bit. He seems to think there’s no risk in opening a coffee shop because so many people drink coffee. The banks probably thought his venture was potentially risky because so many coffee shops have been closing in the last couple years.

    When times are tough, one of the first things people change are luxuries, like $4+ lattes every day.

  5. I made a similar mistake, use all your cash as collateral on a larger investment. It is a leveraged position (similar to what has gotten us into the current economic crisis) but it is still the basis for commerce.

    I spent about $2000 before I even signed my lease just trying to see what is/isn’t feasible. I also was able to take my time because the property was still occupied by the previous tenant, and I had a few months to get my ducks in a row.

    Don’t get me started on Franchses. This is where he could have committed to the $70K, but not actually spent it. (Maybe I’ll start a franchise discussion in the Forum).

  6. Oh, in answer to your question, the best of my figuring would account for 50,000 to 100,000 as minimum strtup for a coffeehouse.

    This does not include logo, web, marketing, pre-opening labor, extensive (expensive) decorations, etc. Just basic FFE (furnishings, fixtures, equipment), lease, minor electrical (240V to the espresso mach/brewer), minor plumbing modifications (hand sink, ice mach, equipt), paint, initial inventory and smallwares.

    Much of this can be saved by going into an existing location/coffehouse or purchasing such from a defunct location. Alas, the departed Bill McCauley and I were planning a startup book entitled “Don’t Frickin’ Do It!” Well, that was actually the name of the first chapter (this is true).

  7. And since most of the franchises I’ve been to serve drek, there is a really good chance that franchising fees are just money down the drain.
    There are enough suppliers of beans in this area that you could start a brand with more success (if you do it right) than any franchise.
    Barefoot, Blue Bottle, Ritual, Klatch, all of these places are successful, and not because of franchising. Intelly and Stumptown started out this way, and are starting to franchise, but in ways that don’t dilute the brand. Intelly barista competitors form the LA area are running the Chicago are baristi head to head. Look for Cartel and VanGo (or whatever Jason ends up doing) to be the next shops spoken of in this context in AZ.

  8. Phoenix Native

    Anyone see the movie “Spitfire Grill”? Diner holds a raffle to give the place a new owner. Of course, that scenario depends upon the generosity of the prior owners. (And there was a real-life case after the movie came out, IIRC.)

    [WORDPRESS HASHCASH] The poster sent us ‘0 which is not a hashcash value.

  9. These are all wonderful contributions. About the Amazing local coffee professionals; we do not pursue the franchise coffee business the way that the out of state companies do. Our image is not as strong as theirs on that aspect, were we can sell you equipment and assist you with your training before grand opening, people do not perceive us the same way. Perhaps this brings a new opportunity. Going back to this article, any franchise agreement has to be studied thoroughly (by you and by a lawyer) and the common sense clause has to be used at all times. Do ask who put together the research for the location and stay away from the “there was an empty spot in a good shopping center” after all there was a reason for why it was empty. In Arizona there are shopping centers that behave more like revolving doors for new business than business centers. The coffee house model do attract an independent thinker that wants to put Starbucks out of business but to brew better coffee is not enough, unless your place happen to be right next to one of there stores and your shop looks better than there’s. The business plan has to describe in detail how are you going to sell above the “break even” point and keep going past it, because if you get accustomed to certain amount of sales you just set your own standard. Not all coffee houses are doing poorly, I have some customers that have increased on sales but they do work extra hard and are extremely good relationship builders in there community.