Monthly Archives: May 2011

Roasting Coffee for Your Coffee Shop

Are you trying to decide if you want to roast your own coffee for your coffee shop?  Are you just opening a coffee shop and find yourself torn between roasting your own coffee beans and buying coffee from someone else?  Hopefully I will be able to put it all in perspective so you can make an educated decision.

There are so many variables when considering roasting coffee for your coffee shop.  This really is another career of sorts.  You will now be responsible for more than just roasting coffee beans.  You will also have to keep up proper roaster maintenance, buying and storing green coffee, proper packaging if you plan to pre-package your coffee (usually not a good idea, more on this later), and designating and keeping separate an area specifically for roasting.

There is also a good chance that once people know that you roast your own coffee beans in your shop, you will get interest from other shops, cafes, restaurants and other establishments wanting to buy your product wholesale.  Try to plan for this as it can open up a whole new revenue stream.  Although this is totally up to you.

Do not make the decision to roast your own coffee beans based on the cost factor alone.  Besides green prices being double what they were a year ago, it is still cheaper to roast your own rather than buy coffee from a roaster.  However there are elements involved in coffee roasting that you should realize before you start roasting coffee yourself, as I will describe in the course of this article.

You also will now have the expense of buying a coffee roaster.  Whether you pay for it outright or finance it, you still have to repay the loan or recoup the money you used to buy the roaster so there is the extra debt service.  If you are about to open a coffee shop, this additional cost will add approximately $10k-30k to your equipment cost.  Yes, coffee roasters are not cheap!

If you do decide you want to roast your own coffee beans, you have other decisions to make like gas or air roaster?  The gas roasters, in my opinion are the better ones.  They can run on natural or propane gas and the heat source is an open flame on a rotating drum.  The internal drum heats like an oven.  You can roast small batches from 5-30lbs before you get into industrial-sized roasters.  However, I believe flame drum roasters give your coffee beans a more even roast, and overall better flavor profile.

The other option is an air roaster called a fluid bed roaster.  It uses hot, forced air either heated by a flame, or electricity (heating element).  The force of the blowing hot air inside the roasting chamber keeps the beans suspended in air for even roasting.  Think of the old air poppers for popcorn.  I think that fluid bed roasters are better for higher capacity roasting of 250lbs or more at a time.  The air is much hotter and the roast time is a bit shorter.

However determine the capacity that you want to roast coffee beans at:  your shop only or you and other shops, cafes and restaurants?  If you think you are going to try to wholesale, get the larger roaster.  You will need a minimum of a 30 lb roaster in order to adequately roast for wholesale.  Anything less and roasting will take you 2-3 times longer.  Being able to roast 30lbs of coffee vs. 10lbs is obviously an advantage.  A larger roaster will come in handy for wholesale.  However for just your own shop it will be a benefit as well because you will be able to roast larger batches of coffee beans and in a quicker time frame, allowing you to wear all of your hats a little easier.

The roaster must also be properly vented and connected to a gas or propane line, if applicable.  It is very likely that you will have to have a plumbing contractor put in a gas line and/or have an electrician add a power receptacle specifically for the roaster.  You may also have to have an HVAC person put in the exhaust stack if you city requires this performed by a licensed contractor.  Be sure to add this cost to your list once you get your estimates.

In regards to a specified roasting area, this is a must.  Roasting coffee in any type of commercial or semi-commercial roaster is noisy.  In fact, it can be very noisy!  You will not want to be roasting during your shop’s open hours unless you can segregate the roaster fully or at least, partially.  Some shops put the roaster in a room on its own or put up at least a ¾ wall so they muffle most of the sound.

If you are planning on roasting for wholesale as well, this specified area is even more detrimental.  Besides a roasting area, you will need a storage area for green coffee, blending area, packaging area and prep/ship area.  That is a lot of extra space for most independent coffee shops and it’s hard to come by.  Choose your space wisely.

Having said that, if you happen to be a one-person operation you do not want to roast when you’re shop is open in any event.  There are too many distractions that could ruin your roast or even cause a fire if you are not paying attention.  You must pay attention to your roaster at all times.  Ask me how I know this.

A word about bean displays for your shop:  I am a big advocate of allowing customers to smell the actual beans before they buy.  This means putting them in a glass or heavy duty plastic jar.  Then you can get the brown “Kraft” tin-tie bags, get some labels printed and a scale and sell the coffee beans by the pound.  You are done!

If you still plan on roasting in your shop, know you are embarking on something wonderful.  It is a lot of work yes and attention to detail, but the resulting product will have people talking about the fresh roasted coffee beans you have available in your shop.  It takes more than a desire for freshness or to save money; it takes passion for the bean.  Good luck to you!

My name is Tony DiCorpo, and I am a coffee roaster, coffee shop business consultant and barista trainer.  I am a coffee shop business consultant and have an eBook on how to start a coffee shop.  I also own Troubadour Coffee Roasting Co. where I sell coffee and espresso equipment and where you can buy gourmet coffee beans online.

Buying a Water Softener for Your Coffee Shop Equipment

In all reality, if you are going to open a coffee shop the choice to get a whole water system softener is like choosing where to get your coffee beans:  It should be an educated decision as it can make you are break you.

In all, it is going to depend on where you are located.  In Central Texas, the water is VERY hard but I chose to not soften my whole water system, just for the espresso machine.  If you are not familiar with hard water, this is what causes lime build-up.  It’s a white, crusty looking build up that will kill your $8000 espresso machine and other equipment.  It clogs up the piping that in time, builds up to the point of the water not being able to get through.  Then your machine needs to be completely taken apart and de-limed (aka de-scaled).  Not pretty and not cheap!

I had my one group de-limed for about $900 in the beginning.  The 2 group needed to be done but I actually tackled that one myself.  What an experience!  Avoid lime scale build-up by getting a water softener.

Before you open a coffee shop, in my experience regardless of where you are you should get a water softener of some sort.  Aqua Pure (formerly Cuno) makes an in-line water softener filter that will last for about 30-90 days based on your volume.  The replacement filters are about $40, and can be bought by the case.  This is not recommended for large volume stores as it can get costly. There are a variety of water softeners you can get, do some checking around.

I have clients using a softener called INOXDEP.  It is a small, cylindrical shaped container that you add salted water (i.e. salt pellets) to every month or so.  It’s kind of a small, manual version of a large, whole house-type water softener.  I have this same softener and I love it; it works great. If you are to have a lot of kitchen equipment like an ice maker, dishwasher, etc you may want to consider getting a large water softener for the entire water supply. Or at least the cold water supply.

I have another client that has only his hot water softened as he has a restaurant and he wanted to protect his dishwasher.  The ice maker is on its own filter system and so is the espresso machine and coffee maker.  So there are numerous ways you can go.   Hard, bad, unfiltered water will not only kill the taste of your coffee but will kill your espresso machine and other expensive equipment.  Do not overlook this!  Ask me how I know!

Whole system softeners cost about $2000-4000 and may be overkill for some, but worth it for you so you do not have to change out a filter monthly.  Just replace the salt.  You may want to talk to your city water department about the hardness and overall water quality so you can plan accordingly.

If you are going to open a coffee shop, some industry gurus will tell you to go to a water softener specialist or get reverse osmosis but in my opinion, that is overkill.  Just take care of the water for your espresso and coffee (and other important equipment if applicable) and do not worry much about the faucets.  In reality, a whole house-type water softener from Home Depot will work just fine if that is the way you want to go.

On a side note, be sure to test your water at least weekly to be sure it is in the soft zone.  A company called Hach makes test strips under the “Softech” brand that will do the test job for you.  You can get them online.

So when opening a coffee shop, just like where to buy coffee beans that are fresh a water softener can make you or break you because it can make your equipment work more efficiently and extend the age of it all.  Hopefully these tips will give you some insight as to what to look for.

My name is Tony DiCorpo, and I am a coffee roaster, coffee shop business consultant and barista trainer.  I am a coffee shop business consultant and have an eBook on how to open a coffee shop.  I also own Troubadour Coffee Roasting Co. where I sell coffee and espresso equipment and where you can buy gourmet coffee beans.

Consistency and Customer Service Reign Supreme in the Coffee Shop Business

Maybe you are just opening a coffee shop, or maybe you already own one.  Whether your customers buy coffee beans online or in your store, there are some things you need to be sure are in place from the beginning.  If these things were not in place, there is still time to make a change.  Once these basic elements are identified, take the time to learn how to actually implement them, teach them to staff and continue to enforce them as policy.

Consistency

I have seen this more times than I care to admit:  Barista #1 makes the best drinks because barista #2 doesn’t make them sweet enough.  And the barista that works on Saturdays always makes my drink too hot.

We have to be sure every barista is grinding, tamping and pulling shots correctly.  Couple that with proper steaming, pouring, drink building and everything in between.  No exceptions.  Anyone that cannot follow the rules needs to be looking for a new job.

All baristas preparing drinks at your store (management included) needs to be retrained and tested at least yearly to be sure there is consistency within your shop.  This will ensure that you and your staff continue to make the best coffee in town.

Consistency however does not stop there.  There is also the fact that just buying the best quality ingredients also helps to make you consistent.  If you get Ghirardelli all the time, do not stray from it unless you can no longer get it.  Then you have to be sure to replace it with something comparable to it or better.  This goes for all of your products, especially your fresh roasted gourmet coffee beans.

You also have to maintain consistency in your employees.  Something that can hurt your business is a high employee turnover rate.  As an employer, you have to do everything you can to remain firm, but fare and balanced with your employees for a high retention rate.  Your customers will thank you and your bottom line will reflect it.

Exceptional Service

You walk in to a local store, and the clerk behind the counter greets you, asks how you are, what you would like or what they can help you with.  Then they assist you with what you came in for, ring the transaction while engaging in idle chit chat with you, give you your receipt and wish you a great rest of the day, all with a smile.  It happens!  And sometimes it doesn’t.

You walk in to a local store, and the clerk acts like you are not there, or that you are bothering them, or like you are an idiot.  Little talk happens, and they barely make eye contact.  They basically throw your change at you and you leave.  Wow!  You think, ‘yikes, what a personality!’

Which store would you be more likely to go back into?

Exceptional service must be consistent as well as it is essential to keep your customers coming back.  You have to remember that every customer is GOLD and deserves a smile.  Don’t ever forget that customers make it possible for you to make a living.  We also have to be sure we do not lower our standards of quality in any product or service.  Do not skimp on quality to cut corners.  You will see how fast you will get complaints and ultimately lose customers.  Stay focused on quality in every element and you will see the difference.

So if you are just starting a coffee shop, are a roaster just selling coffee beans, or a retailer selling it all, be consistent and have superior customer service.  It will make a difference!

My name is Tony DiCorpo, and I am a coffee roaster, coffee shop business consultant and barista trainer.  I am a coffee shop business consultant and have an eBook on how to start a coffee shop.  I also own Troubadour Coffee Roasting Co. where I sell coffee and espresso equipment and where you can buy gourmet coffee beans online.


Use the Hiring Process to Your advantage When Opening a Coffee Shop

Management

When starting a coffee shop, if you are an absentee owner or want to pass the management to a dedicated manager they will need to have the authority to hire, fire, purchase and possibly sign checks.  You will also have to pay them what most owners make in a year in order for them to take on the responsibility of the entire shop.  In order to get and retain an excellent and proven manager, the salary should be competitive and quite possibly include some perks.  Pay in the $35-50,000 per year range is not uncommon depending on your [anticipated] volume.  If you do not have the volume to have a dedicated manager then obviously the business may be something you should manage yourself unless you are focusing on other things.  However you will need a moderate to high volume shop to justify a dedicated and passionate manager. 

When you are interviewing for management for your coffee shop start-up, look at their previous employment and see any patterns, positive and negative.  Is their work history short and choppy without good reasons like moving out of the area or going back to school?  Contact their previous employers to confirm the accuracy of past jobs.  Ask for references and check them out. 

Is your manager going to also buy coffee beans for your store?  Are they going to buy food products and your other stock?  Decide what their responsibilities are going to be and plan accordingly.

They have to be worth their pay in every way but be careful not to mingle.  Let them manage, unless of course things are not progressing as they should, then intervene.  But, if you take any of the authority away or override their authority, they will quit.  Well, at least the good ones will.  Of course you have to make them 100% accountable for your business and their mistakes, but you hired them to manage so let them manage.

Employees

As in management, you need to be sure you find the right employee each time you hire someone when you are opening a coffee shop.  Be sure you know ‘who’ you want.  Are you looking for high school students?  What about a college student?  How about more mature employees?  Bottom line is you get what you pay for.  Sometimes you need to pay above the going rate in order to get good employees.  Try to make your place the most desirable place to work at and word will spread.

Bringing all candidates in twice is really the best option.  If at all possible have two people you’re your business meet and interview the candidate.

Only hire people that you want to keep working for you for the long term.  Make every expectation very clear up front.  All guidelines should be made clear and enforced adequately. 

Small perks to show gratitude for their service will be a plus.  Will you give them coffee beans?  Will they get a discount on other products?  Free products or an incentive program?  Be sure to have all these thoughts finalized before you start interviewing.

As we talked about earlier, check references and their prior employment to see if they worked a lot of jobs for a short time.  Starting a coffee shop is not the easiest task however implementing a hiring and employee retention strategy will make things easier in the long run.

My name is Tony DiCorpo, and I am a coffee roaster, coffee shop business consultant and barista trainer.  I am a coffee shop business consultant and have an eBook on how to start a coffee shop.  I also own Troubadour Coffee Roasting Co. where I sell coffee and espresso equipment and where you can buy gourmet coffee beans online.


Lease Negotiation is Essential When Starting a Coffee Shop

So you are starting a coffee shop.  Before you sign any lease, be sure you read it.  You will be amazed how ‘boiler plate’ most commercial leases are.  Try to do everything you can to get what you want in your lease.  That is, things that will benefit you and your business first.  Most leases usually benefit the landlord, not the tenant.  However, if you do not feel that you can negotiate your own lease consider a commercial real estate attorney or an experienced commercial realtor. 

Now, just because you ask for something to be in your lease does not mean you’ll get it.  However it cannot hurt to ask; you may just be surprised.  These last few years and for the next few years, vacant store fronts and other spaces are not exactly filling up so landlords are willing to give incentives to sign you up.  On the flip side, be prepared to give something on the backend such as a few additional months or a rent increase at a certain point in time.  The following items are always negotiable and many are NOT in most leases unless you ask for them specifically:

Rental Amount

Yes, this is always the first negotiable point when negotiating a space to open a coffee shop.  A landlord calculates the rent amount based on the square footage of the space.  Be careful what footage the landlord uses to figure the rent.   A common tool for them is to include common areas like the floor area on the outside of the door, or an elevator if you are in an office type building.  Try to get this out of your lease.  Generally they base the rent on a yearly rate such as $12.00 per sf.  (1000 sf would be $12 x 12 months = $12,000 per year, or $1000 per month).

Description of the Property

The lease should clearly describe the property under lease.   For instance, it should clarify whether bathrooms, common areas, kitchen area, a parking lot, etc is included in the lease.

Signage

Be certain that the lease agreement does not prohibit putting up signs that are visible from the street, or certain types of signs on the building itself.   If you cannot put up a large enough sign for cars driving by to see, then this spot may not be a prime location and you may want to just pass.

Use Clause

Be sure you can open and operate a coffee shop there.  Then again, your landlord should have already qualified your business type prior to getting to the lease negotiation.  If you plan to sell coffee beans you are roasting on premises, be sure you can actually roast them there.  If you plan to rent a 1st floor space and there are other units or apartments above you, be sure you check with the city about use of open flames or proper venting for your roaster.  You may be required to run the venting through the upper units and box it in rather than up the outside of the building.

Exclusives or Write Outs

This means that no other tenants in the plaza now, or future tenants (as long as you are a tenant) will be allowed to sell coffee beans, brewed coffee, tea, smoothies and anything else you make your living from, as long as it is in your lease. 

Free Rent (Rental Abatement)

Try to get as many months of free rent as possible.  However, you usually have to ask for it.  All the landlord can say is ‘no’.  Then you have to decide if you can do without.  That depends on how good the location is and what you have to have done to make it functional for your coffee shop.  You should also ask for the free rent to begin AFTER the construction has completed on your unit and you are officially occupying it or when you actually open for business.

Personal Guarantee

In most cases, you will not get around a personal guarantee especially since you are just opening a coffee shop.  This means that if you are late on your rent or you leave before your lease is completed, it can be held against you personally, even if the lease is in the business name.  I advise to put a personal guarantee on the first year only if possible, maybe 2.  This can be written into the lease that after 1 or 2 years, your corporation is responsible from that point on, not you anymore. This will give you time to show you are responsible. 

Lease Term

Standard can be anywhere from 1-5 years.  I always ask for 3 years for a new business, with four 5 year renewal options (discussed below).  The reason I ask for 3 years is that is the maturity point.  You should know if your business is profitable enough to stick around for more time once you hit the 3 year mark.  After starting a coffee shop business it should be just becoming profitable at year three.

Renewal Options

Standard to ask for is ONE five year option.  Most leases do not even offer renewal options automatically.  You should ask for at least one five year option to renew.  If this location is prime (which it should be), you should ask for at least 4 five year options.  This gives you the option to renew the lease for five years, four consecutive times in a row, giving you a term there for at least 25 years.  That can mean a permanent spot for your business!

Improvements

This should be a ‘gimme’ but be sure it is spelled out how you are redecorating the space when starting a coffee shop.  This is more than hanging pictures; I am talking about putting up walls, taking them down, adding a drive thru window, etc or anything else major.  Be sure whoever is responsible for the payment of such is also spelled out so there are no questions later.   You also may be responsible for returning the unit to its original condition at the end of your lease.  Watch out for this!

Option to Sublet Premises

You should be able to do this as most leases allow it, but be sure it is in yours should you want to vacate early and have someone that wants to sublet from you for the remainder of the lease term.

Option for Assignment/Transfer of Lease/Assumption

This is harder to get.  A landlord wants as MUCH time on the lease as possible by one tenant, so they would rather re-lease your space to a new person than to just transfer it, or let someone assume it.  This comes in handy however, if you should sell your business.  One of the main components of business worth is the time remaining on the lease.  It can help or hinder a business but in most cases, it is an asset so a lease assumption clause is essential.

Outline of Landlord Responsibilities

Most leases state this already but be sure you get particulars as to what you are responsible for and what your landlord is responsible for.  The most common type of commercial lease is the triple net (NNN).  That means that not only are you responsible for paying the property taxes, you are pretty much responsible for all repairs of equipment like air conditioning units, heaters, water heaters, etc.  Not too bad a deal if your building is new or just a few years old.  However if you are going to lease an older building with marginal or old equipment then you need to come to some agreement on who is responsible for what, when and where.  If you are just starting a coffee shop business, this can add to your start-up reserve capital so be careful.

Rental Increase

This really should be minimal.  Most landlords figure the yearly rental increase based on a certain percentage of some magic number like the consumer price index.  Try to negotiate with the landlord for a cap on the percentage increase in order to avoid unmanageable rental costs later on during the lease term.  2-4% is usually a standard to ask for and is, in my opinion a reasonable amount of an increase yearly.

Compliance with the Americans with Disabilities Act

The lease should determine who is responsible for making any necessary alterations to the property such as handicapped bathrooms or wheelchair ramps, and who must pay for these changes.  Most commercial spaces already comply with this act.  However, if the space has not been rented to a new tenant in many years, or if the previous tenant was not retail oriented then there may be a chance that the space needs to be modified.

These items are some great terms to get into your leases when starting a coffee shop business as they will greatly help you during your lease term.  If your prospective landlord will not budge on any of these items, than do not be afraid to walk.  There is always another possibility around the corner.

My name is Tony DiCorpo, and I am a coffee roaster, coffee shop business consultant and barista trainer.  I am a coffee shop business consultant and have an eBook on how to start a coffee shop.  I also own Troubadour Coffee Roasting Co. where I sell coffee and espresso equipment and where you can buy gourmet coffee beans online.  

Green Coffee Prices Are Up; Are You Adjusting Your Prices Accordingly?

Whether you are opening or starting a coffee shop business, you must maintain a certain margin in order to be profitable.  Even if you are new to the coffee business, you probably know the reasons behind the green price hikes these days in the specialty coffee industry.  Right now we are in a tough economy there is no doubt.  The coffee market is up so high the price of green coffee in most cases is double what it was a year ago and in some cases triple. It’s hard to imagine paying more for fresh roasted gourmet coffee beans as well.

Being in the specialty coffee business is a lot harder than most businesses since the margin is small to begin with.  Couple that with here and now in 2011 and I think more shops and roasters will close.  I don’t want to think that but unfortunately I believe it will happen.  As a lot of us struggle to make payroll, rent and the rest of our overhead we need to be sure that we are on top of our game and hit the cost increases from the get go.

A few weeks back I wrote a two part article series about how to stay profitable that without a doubt are words to not only consider but implement if possible.  However we must not forget about our pricing structure.  I cannot tell you how much to raise your prices; that is only something that you can do.  Sometimes it’s a nickel, sometimes it has to be 10 cents or even a 25-50 cents.  However I can urge you to do it for business sake.  If you are just starting a coffee shop business then you must price your menu and coffee beans correctly from the start.

Increase has hit everything however: not only coffee but sugar, milk, grain, paper, transport, rent and other overhead.  We are faced with a dilemma:  buy cheaper products or increase prices.  I think we know what needs to be done if we want to remain in the quality game.  We must, however be prepared to educate the public as to why because we will hear some negative things about it.  I think they will be minimal though.

We must also remember to be sure we raise prices to be profitable and not just to cover the increases.  Most of us are passionate about coffee and look at profit last, however  profit makes being in business seem much less risky.  To not raise prices will be harmful to our business.  The increase must be all around however, not just on whole bean coffee or brewed coffee.

In my small artisan roasting business I am very careful to not take on much more wholesale business. Seems odd I know but my reasoning is that since wholesale green prices have increased (we pay 2 or 3 times what we paid a year ago) that we can barely double our wholesale prices and make much of a profit after costs.  I am focusing on retail, but I have that option being a roaster as I can roast my own coffee; most retailers do not.  The summer season is coming upon us in my area and we’ll be hitting the farmers markets retailing our fresh roasted coffee beans again.
I think it’s plain and simple whether you are open for months or years, or just starting a coffee shop business:  If we do not raise our prices in accordance with our costs then we will inevitably not be in business for the long term.  Some customers will understand this and some will not. The ones that do understand will be our loyal customers and will gladly pay the increase as long as they keep getting the same high quality product and service we have always provided. Those customers that leave for a ‘cheaper’ product will most likely be back when they want quality again.

My name is Tony DiCorpo, and I am a coffee roaster, coffee shop business consultant and barista trainer.  I am a coffee shop business consultant and have an eBook on how to start a coffee shop.  I also own Troubadour Coffee Roasting Co. where I sell coffee and espresso equipment and where you can buy gourmet coffee beans.