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How to Open a Coffee Shop: A Step-by-Step Guide

Editorial Note: Fundera exists to help you make better business decisions. That’s why we make sure our editorial integrity isn’t influenced by our own business. The opinions, analyses, reviews, or recommendations in this article are those of our editorial team alone.

It’s been a few decades since Starbucks emerged from Seattle to take over the world and make the $4+ coffee the norm. As a result, the way Americans drink coffee has changed drastically. This has also created a window for entrepreneurs looking to start a business. Because while the big coffee chains have expanded, so have specialty, independently run shops. According to an article in the New York Times, Americans drink less coffee today than we did in the ’30s, but we’re drinking higher quality, better-brewed cups. As such, many entrepreneurs are wondering how to start a coffee shop to serve their own high-quality brews.

Peter Giuliano, a 25-year veteran of the coffee industry, told Yahoo Business that he has seen a rise in independent specialty coffee shops and describes the phenomenon as feeling like “a trend.”

“We think there is a slow, steady rise that parallels the growth of the specialty coffee movement,” Giuliano told Yahoo. “We credit the start of the specialty coffee revolution to Peet’s Coffee opening in San Francisco in the 1960s. That inspired another wave with Coffee Bean and Tea Leaf and Starbucks in Seattle opening in the ‘70s and ‘80s. Now the people who grew up drinking good coffee are opening their own coffee shops.”

Today, it’s rare to walk a few blocks without seeing a cafe on the corner. It seems everyone wants to start a coffee shop. Donald Moy, the owner of NYC’s 12 Corners Coffee, was one of those people. With a long line of family who owned mom-and-pop shops, Moy aspired to open up his own business venture one day and chose coffee as his specialty.

“I went a couple of times all over the city [to bigger brand coffee places] and I didn’t like the way that I was being served,” he tells Fundera. “I always said that one day if I ever open one, this is how I’m going to do it.”

That day came in August 2012 when 12 Corners Coffee opened their doors in downtown Manhattan. Just two years later, 12 Corners Coffee was rated New York’s best coffee shop by Yelp reviewers.

“For a good one year and three-quarters, [business] was really hard,” says Moy. “In the last year or so, the block has definitely changed” and with it, so did business for Moy. The entrepreneur recently opened his second location a few blocks away and is currently in negotiations about a third location in Midtown.

To dig deeper into how he built his business, Fundera spoke to Moy about how to open a coffee shop.

how to open a coffee shop

How to Open a Coffee Shop in 5 Steps

Wondering how to start a coffee shop of your own? These five steps will take you through everything you need to know.

Step 1: Create a business plan. 

A business plan is key to creating any business, and a coffee shop is no exception. If you want to open a coffee shop, you probably already have a love of good coffee. To create a successful coffee shop you have to decide how you’ll get other people to love coffee as much as you do—specifically, your coffee. A business plan will help get your ideas focused and in one place. Besides the basics of what your coffee shop will be and the products you’ll sell, a business plan also includes a marketing and sales plan, as well as financial projections.

An important consideration you’ll need to take care of in the early stages, and that you’ll include in your business plan, is to decide on the business structure you want your company to operate as. There are several business entity options you can choose, including a sole proprietorship, LLC, C-corp, and more—and the entity you choose will have both tax and legal implications for your business. It’s always a good idea to seek the advice of a business attorney when making these big decisions as you start your coffee shop.

While creating your business plan, you’ll have to come up with a name for your coffee shop and decide where you want to open your coffee shop. To find the perfect location, you’ll need to think about who your target customers are and what they like, as well as how you want your coffee shop laid out (comfy couches and a cozy, stay-a-while feel, or tables perfect for a quick business meeting). You’ll also want to outline the pricing of your products, what goods you want to offer, the type of coffee shop you want to have (sit-down, drive-through), and more. This is also where you can lay out how you’ll set your coffee shop apart from the competitors out there.

According to Moy, big-chain coffee shops can’t afford to offer good customer service and that’s where small businesses have the advantage. 12 Corners Coffee is known for brewing drinks as ordered and bringing them directly to customers’ tables. It’s also not uncommon for employees to trust customers to pay at the end of their visit if they’re there for numerous hours plugging away on laptops.

“[The customer service] is sincere,” says Moy. “I like to treat people the way I like to be treated. Get to know people. If I can make a friend, that’s even better because you never know where that can lead you. Who knows who’s sitting there in the coffee shop.”

It’s a lot to think about, but a business plan is where you can get all of these plans down in one place. Beyond that, if you’ll need outside capital to make your coffee shop dreams a reality, you’ll need to provide a business plan for funding consideration. Luckily, there are several options for business loans for a cafe, and whether you’re looking for funding to start your coffee shop or want to leave the option open for expansion down the road, having a solid business plan from the start will make the process easier.

Step 2: Register your business and get the proper licenses and permits.

The city or county where you plan to open your coffee shop will dictate the specifics of registering your business, what taxes you’ll be responsible for, any necessary licenses and permits, and more. The details of registering a business vary from state to state, but you will need to obtain an employer identification number (EIN) and establish your business structure before you can start the registration process.

You also need to make sure that since you’ll be serving coffee, and most likely some food, that you have the right business licenses and permits for that, as well. Usually, health licenses and permits are necessary for serving food. Other types of business licenses include building, zoning, and land-use permits. Be sure you consult with your local business resources so you have the proper documentation in place before you open your coffee shop.

Step 3: Find suppliers.

Customers are looking for a quality experience when they come into your coffee shop. That means quality ingredients and coffee, but also quality service and experience.

“Sometimes you go to a coffee shop and three days out of five, it’s not going to taste the same or look the same,” says Moy. While it’s tough to produce the same quality every time, this is crucial in the coffee business, especially in a time when people are becoming more knowledgeable about specialty coffee.

Having consistent and quality providers, from the beans to cups and everything else customers interact with can help keep your coffee shop running smoothly and customer experiences consistent.

When you’re first starting your coffee business, don’t be afraid to spend the necessary time finding the right coffee supplier for your business. You may have to try a lot to find the right one that will work for the products you want to offer, at the right price, with the perfect taste.

The other way to create consistency is by training employees extensively. Each potential employee goes through about two months of training with me,” says Moy. “I don’t even let them touch the espresso machine until I feel that they are going to present customers with a great cup of coffee. The people at my store are the top. I have a great bunch of people there.”

If you want patrons to walk past all the other coffee shops on the block and go into yours, you need to offer consistent quality.

how to open a coffee shop

Step 4: Create a warm, inviting environment.

A coffee shop is never just about a good cup of coffee. Many people frequent coffee shops as a place to do work, catch up with friends, or to take a break from the workday.

Moy emphasizes cleanliness and friendliness to his staff as a way to make all patrons feel welcomed. “My number one thing is clean, clean, clean, clean,” he says. “I want the place spotless.”

You want your coffee shop to have a warm and inviting atmosphere that’s conducive to meetings, relaxing, and chit chat, but also one that’s easy to keep clean and orderly. When choosing how to design the shop, be sure to take into account how many people you want the shop to fit and the kind of atmosphere you’re looking to create for them all.

Step 5: Adopt a good inventory system.

Overspending is one of the biggest mistakes small business owners make, says Moy. For his own supplies, he does careful inventory and uses local suppliers since they’re close by and he can also support small business owners. Moy likes knowing where he’s getting his goods from.

Moy also employs the following strategies: offering loyalty cards to show your appreciation, selling baked goods to increase revenue, and finding an investor who knows everything you don’t about the industry. If you want to get into the coffee industry in an easier way, you could also look into opening a smaller coffee franchise to get started.

There are a number of inventory management apps available to small business owners who need a way to manage their inventory and budget. Some point of sale systems also offer inventory management, which is something you might want to consider when choosing one. No matter what you choose, you want to make sure you have a way to manage what you need for your business so you don’t run out of customer favorites or over-order on what you don’t need.

How to Open a Coffee Shop: The Bottom Line

Running a small business is no easy feat, but for all of those coffee enthusiasts who have dreamed of opening a cafe of their own, now might be the time. Consumption and interest in the specialty coffee culture has increased steadily in recent years and doesn’t seem to be stopping any time soon. While competition from bigger chains might have been a problem at one time, modern consumers prefer to support local neighborhood shops—especially if they’re offering what the big chains can’t. So if you’ve been wondering how to start a coffee shop, start thinking about the above steps to see if this is a feasible business venture for you.

Once you have your cafe up and running, check out our guides on how to get a business loan for a coffee shop and the best POS systems for coffee shops.

Vivian Giang

Vivian Giang

Vivian Giang is a freelance journalist who covers strategy, leadership, organizational psychology and gender issues for Fast Company, Marie Claire, Fortune, Slate, among others. Previously, she was the lead entrepreneurship editor at Prior to that, Vivian launched the Careers vertical at Business Insider, which focused on the evolving office, emerging industries, and the most current employment trends. You can find her on Twitter at @vivian_giang.