How Much Do Coffee Shop Owners Make? (Are Coffee Shops Profitable?)
Considering the investment, the question of coffee shop income is bound to come up at one point or another. To make things clear, there is a difference between a café’s revenue and the money you make as an owner. As such, it could take some time before you actually turn a profit.
However, you shouldn’t let this discourage you. The popularity of small boutique coffee shops has been on the rise across the globe. If you play things right, you can build a substantial income and even consider expanding further down the line to leverage on the trend.
This article digs deep into the coffee shop business to answer a question that is probably on every small café owner’s mind – how much do coffee shops make? You will also find some useful stats to help you assess the potential returns.
How Much Do Coffee Shops Make? – Small-Scale Local Cafés
As said, the first distinction you need to make is between operating income and gross margin. In fact, there is a contradiction between the two notions in the coffee shop industry. To be precise, gross margins are quite high on average, but the profit (operating income) remains comparatively low (1).
“The average profit for a small café is about 2.5%.” – Chron Small Business
Given the average percentages, there seems to be little room for your income. However, you should know that these stats include all the overhead like supplies, rent, work, and advertising. On the bright side, most of the operational expenses should be stable over the course of a few years.
This means that you can factor in an increased influx of customers that will bring more revenue and greater earning. At the very start, it is also advisable to manage the business on your own and increase your income that way. To put things into perspective, independent coffee shop managers earn more than $54,000 (annual average) in Seattle and Miami (2).
If you are wondering about the low-end figures, the earnings are in the $30,000 range. So as a coffee shop owner and manager, you can expect a decent income that may make you reconsider your current 9-to-5.
Did you know that basic coffee stands can sell up to 300 cups of their signature espresso per day?
How Much Do Coffee Shops Make? – Large-Scale Coffee Shop Chains
Before Howard Schultz stepped down as the Starbucks CEO in 2017, his compensation for the previous year was close to $22 million. And in 2018, he reportedly owned about 35 million worth of shares (direct shares and indirect trusts) of the company (3). Currently, his net worth is around $4.1 billion, which ranks him as the world’s 617th richest billionaire on Forbes’ 2019 list.
The boom in the coffee market does not seem to have reached its peak yet as projected in Euromonitor International's report (4).
“Asia-Pacific will be home to the largest sales increase in specialist coffee shops, totaling over $3.7 billion in new value growth.” – Euromonitor International
These numbers can be mind-boggling and they signal the rising trend of unique cafés that offer a special customer experience. And if you are to factor in the $3.3 billion growth projections (Euromonitor International data) for North America, it’s easy to understand how profitable the business can be.
In addition, coffee shop chains in the UK are expected to grow well beyond 10,000 additional venues by 2023 (5). Plus, they’ve experienced a turnover increase of 7.9% in 2018, which marked two decades of steady growth in sales as well as outlet business.
“20 years of consecutive growth, in terms of outlets, turnover, and like-for-like performance is an impressive feat by this robust segment.” – Jeffrey Young, Allegra Group
As indicated by the Euromonitor projections, high hopes and profits for coffee shop business are not limited only to developed markets. For example, a Vietnamese coffee shop chain Highlands Coffee experienced a soaring success in the first ten years of operation before it was purchased by Jollibee, a fast food conglomerate from the Philippines.
Another example is The Coffee House, a local Vietnamese chain which doubled revenues in 2017. By late 2018, this chain was expanding at an average rate of 10 new venues per month. Although smaller than The Coffee House, the Vietnamese local coffee shop brand Trung Nguyen was making between $17,000 and $21,000 a month (average) per venue in 2018.
In the end, there is more to owning a coffee shop than just the profit. It is supposed to be a business born out of a passion to give your customers a cup of coffee that excites their senses. If you approach it this way and focus on quality first, high profits and incomes are bound to follow soon.
When you've considered all things and laid out a concrete business plan, then it's time to pick the best coffee makers for your shop – and we're here to help you decide! We've rounded up and reviewed the best commercial espresso machines here.
Are coffee shops a good investment?
Yes, coffee shops are a good investment and a well-thought-out coffee shop can become quite lucrative. However, you need to know that the competition is fierce. Aside from the established giants, there are more than a few popular newcomers that are taking over the market share. This is why you need to do careful analysis and preparation before starting the business.
Is a coffee shop a profitable business?
Without a doubt, a coffee shop is a profitable business. Looking at the numbers, you can expect profit margins of up to $1.25 per cup. Of course, this depends on the type of coffee you sell and the size of the establishment. Keep in mind that it is not advisable to set the margins high in the beginning to increase your chances of attracting a varied crowd.
Why do coffee shops fail?
Coffee shops fail if they don’t provide excellent coffee every time. This is why your primary concern should be quality control, even if it means you’ll earn a bit less in the first few years of operation. Another reason is that people underestimate the costs of setting up a cafe, or purchase low quality equipment that lets them down in the end.
- Gartenstein, D. (2019, January 31). The Average Profits for a Small Cafe. Retrieved July 1, 2019, from https://smallbusiness.chron.com/average-profits-small-cafe-30768.html
- Affeld, M. (2017, September 26). Salaries of Coffee Shop Owners. Retrieved July 1, 2019, from https://bizfluent.com/info-8726054-salaries-coffee-shop-owners.html
- Rego, M. (2018, December 13). Who Are the Largest Shareholders of Starbucks? Retrieved July 1, 2019, from https://www.investopedia.com/articles/insights/052416/top-4-starbucks-shareholders-sbux.asp
- Coffee Shops Around the World: Three Key Insights for 2016. (2018, February 15). Retrieved from https://blog.euromonitor.com/coffee-shops-around-the-world-three-key-insights-for-2016/
- £10.1bn UK coffee shop sector achieves 20 years of sustained growth. (2019, January 15). Retrieved from https://www.worldcoffeeportal.com/Latest/News/2019/UK-coffee-shops-achieve-20-years-of-sustained-grow