On the Road to Retailer Profitability, Part 2

Let’s talk about how to be profitable again.  Last time we discussed some areas of your COGS.  There are a few other areas to watch as well.

When starting a coffee shop, general supplies are another area to keep an eye on.  This would be non-consumables like napkins and paper towels.  Try to get these items yourself if possible at a Sam’s or other small-business oriented wholesale club for better prices.  Sometimes food service suppliers are not the lowest especially if you need to buy a minimum to make an order.   I have seen some food supplier costs be a lot higher than Sam’s.  Do the comparisons.

Also be sure you are getting the best rates on electric, gas, cable, internet, phone, etc.  Shop around.

In addition, most advertising for the coffee business is not like restaurants simply because coffee is an impulse buy. You should get more business off of your sign outside (i.e. traffic; vehicle and foot) than anything else.  Coupons do not work well at all. Position yourself in the community as the place to go for great coffee.  Being visible at networking and other community events is a great way to achieve this, as has been my experience.  If you are in the planning stages of opening a coffee shop this is an easier change than if you are already open.  However you can make modifications to your existing sign locations if you are willing to implement changes.  You may need to spend some (more) money before you can start to see more money however.

Cost of goods sold are critical and it’s mandatory you understand it all.  However for many, a larger issue at hand is sales, or lack thereof.  Attracting new customers is hard, the visits are not as frequent as they should be and ticket sale averages are low.  So what to do?

There have been some shops selling brewed coffee at a lower cost.  If you could sell a 12oz cup for $1.00 you could outsell any competition and may be able to get a muffin or other pastry up sale in addition.  You should still have a margin of below 50% on the coffee, which is not ideal but doable if you can get a lot of traffic in the door.  The perceived value is now different as the customer is getting two items rather than one for not much more than they were paying before for one.   You will most likely notice that you will be throwing away less coffee from your airpots if you do this.

Just to clarify, I am not talking about cheap coffee at cheap prices; I am talking about great coffee at affordable prices.  However this can have an opposite effect on you as customers may see this as ‘low price=cheap coffee’ so be careful how you align it in your community.  Be sure your marketing reflects the fact that your coffee is fresh, and the freshest possible.  You can up sell your customers by getting them to buy gourmet coffee beans from you too.  Any time you can get more money from a customer and they get a high quality product in return is a fair trade-off.

Another avenue to look at is to try to change up your pastry offerings.  Customers tend to get bored with the same old stuff day after day and especially if everyone else carries it.  You might even be able to get some PR on this and the affordable coffee idea; it is an angle that writers are looking for.  Imagine that, fresh roasted high quality coffee at affordable prices.  That is newsworthy!

As I said last time, I wish that this was a finite list but obviously I do not have all the answers.  Who does?  Try to think outside of the box when it comes to watching costs and increasing sales.  With a little practice and patronage from your customers you should see an increase in sales.

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 roasted coffee beans.

On the Road to Retailer Profitability, Part 1

Let’s talk about how to be profitable.  Simple concept but for some it is difficult to attain.  There are so many areas to look at whether your shop is already open or you are just about to open a coffee shop.  This will be the first of a two-part article on the subject.

It all starts with an excellent location because all the marketing, cost control and working your arse off in the shop are not going to help if customers cannot find your door and get to it easily.   Furthermore if you fall into the bad location dilemma, even if you iron out all of your costs and increase sales it does not mean a thing if you yourself are still left working 150hrs a week from now until the end of time because you can’t afford to pay more employees.  It’s physically not possible.   Ask me how I know this.

What is particular is that if your rent is way out of line, there is not much you can do unless you renegotiate your lease, complete it, get out of it or buy it out and move. This is often the biggest $$$ issue before COGS and payroll.  Having said all of this presuming you are in a good location (A or B tier), let’s look at a few areas that can give you more profit as a coffee retailer.

Pastries and food are almost always a problem area.  When opening a coffee shop this can be the toughest area to control until you get some sales history.  Then you can base purchasing on historical figures. Fact is sometimes it is the waste factor (amount tossed at day-end) or the cost of the ingredients if you are baking in-house.  You should watch your ordering closely and track all the waste.  That goes for everything.   As well, your staff should always be trained properly to be consistent.  Anyone that cannot do what you tell them needs to look for a new job. That is just the way it is.

Unfortunately theft is also easy for some and a way for you to lose revenue.  Be on the lookout for free coffee drinker friends of employees and employees helping themselves rather than buying.  You can weigh your coffee beans and measure your products to know what you actually use each day.  Match that up with your sales figures and you can see what you should have in cash vs. inventory used.  This is where a POS comes in handy to achieve this much faster.

Be sure to keep a log of everything that is thrown out.  You also need to keep a log of any comps as well so you know where it is all going.  In the end, your waste should not be more than 2.5%, max.  Even that is a little high.  Of course lower is always better.  However, your waste should be accounted for in your pricing.  Retool your menu prices if need be; once a year is not uncommon to raise prices.  Sometimes just increasing your items a nickel will show high on the bottom line.  I try to keep COGS at a high of 33% and a low of 28%.  For the smaller operator the lower is harder especially since saving sometimes means spending more cash.  However if you are only saving 50 cents on a bottle of syrup is it necessary to spend more cash for the entire pallet?  Probably not.

Another area of concern is payroll.   When starting a coffee shop running high on staff hours can spend through your cash fast, but running too light may make customers leave if the wait is too long so finding the balance is key here.  It will take some time but if you keep on it, you will get the right balance.  I have always budgeted 30% or lower for labor, including my salary.  This would include manager salary as well if you are not managing hands-on and working elsewhere (pronounced ‘not taking a paycheck’).

I wish that this was a finite list but no such luck.  Next time we will dive into a few other areas to watch as well as increasing sales.  Try to think outside of the box when it comes to watching costs.  With a little practice however you should see an increase in your bottom line.

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 I wrote 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 coffee beans.

Social Networking for Your Coffee Shop, Part 3

So let’s get to part three, the final page of social networking for your coffee shop.  It’s exciting to break into new areas of marketing.  It has never been easier to market a business since the online world arrived and has evolved.  Here are some more ideas for you:

LinkedIn

LinkedIn is geared more toward professionals or business networking but it should be considered to be included in your social networking group.  You never know if there is a business looking for a local coffee house to supply coffee and pastries for its monthly meetings.  Or better yet, if you roast coffee you could just connect with another shop looking to buy coffee beans wholesale.  Maybe they are not happy with their current supplier or are just about to open a coffee shop.

MerchantCircle

This is kind of like LinkedIn but for your business and on a local level.  Where you have the profile on LinkedIn, MerchantCircle focuses on your business profile, not yours.  I would say it’s a glorified Yellow Pages ad.  I have had good experiences with MerchantCircle because they help local businesses connect with new customers through referrals based on online advertising.

Manta

Manta is the largest free source of information for small companies.  Your company can be among profiles of more than 64 million other businesses and organizations.   Its emphasis is on small- and medium-size businesses.  Business owners and sales professionals use Manta’s huge database and custom search capabilities to quickly find companies, easily connect with prospective customers and promote their own services.  You can list your company details such as company name, address, number of employees, estimated annual sales and more.

What I like most about Manta is the fact that you can add key words and terms that describe your business and services and your information will be listed in the major search engines.  It is an added feature to go with your SEO marketing.

This is only the tip of the iceberg. There are numerous other social networking sites making ground like Digg, MySpace and others.  My advice is to keep it simple but have enough diversity.  If you are planning on opening a coffee shop this is a great way to have a ‘media blitz’ (of sorts) because you are tackling your marketing on numerous levels.  If you plan to customers buy coffee beans online from you, this will only reinforce your internet presence.

A word about social networking on the internet:  The more followers and people in your networks you have the better your marketing will be.  Where else but the internet can you write about your business and have it immediately available to the public?  You can do it all in-house but it’s pretty time consuming.  I have always handled this and continue to do so in my roasting and consulting business because I enjoy this end of it.  It is also a lot cheaper.  You just need to set a schedule and stick to it as it is a daily event.  If you have a lot of irons in the fire, you can also hire a company to do it for you; most of them are local, really good at it and it is well worth the money if you think your time is better spent elsewhere.

YouTube

Yes, broadcast yourself.   There has been a rise in businesses making videos and posting them to their YouTube account.  You can produce latte art videos and even how-to videos.  If you roast your own coffee beans and sell wholesale it is a good way to give your future customers a ‘primer’ to see your operation in action.  You can even upload videos taken by you and customers at events right there at your shop.  There are so many possibilities.  Again, remember to stay on subject.

So that is it for our time together talking about social networking for your coffee shop.  If this is done properly and with consistency, you will see good results and an increase in traffic and sales.

My name is Tony DiCorpo, and I am a coffee roaster, coffee shop business consultant and barista trainer.  I have written 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 coffee beans.

Social Networking for Your Coffee Shop, Part 2

So let’s get to part two of my social networking series for your shop or if you are starting a coffee shop business.  It’s exciting to break into new areas of marketing.  It has never been easier to market a business since the online world arrived and has evolved.  Here are some more ideas for you:

Facebook

How can I leave out Facebook?  Today, there are so many people and companies using it to keep in touch and their name in front of people.  I cannot think of a better way to do this.  Some companies are opting to put more emphasis on Facebook rather than their company website as the latter is so limited now.

You can elect to build a ‘friend’ page or a ‘like’ page.  The friend page will require you to approve anyone wanting to be friends while the like page will not require approval.

It is a good idea to keep personal and business as separate Facebook pages.  This is good for obvious reasons but really a good idea as it increases your chances of circulation (you post, friends comment, their friends see it and comment) but also shows a level of professionalism as well.  The best part of this is that friends will repost your post and if it’s interesting enough so will their friends.

Facebook is a great place to also promote your shop so customers can know when you have fresh roasted coffee in so they can buy coffee beans.

Twitter

Of course, (to tweet is sweet!).  Twitter is basically a short version of blogging because it is 140 characters or less to type.  A popular thing is to tweet within your 140 characters enough information to redirect followers to your blog where the full story is.  You can also redirect them to your website or Facebook.  You can essentially post the same information to all places; your blog, Facebook, Twitter, and your website if you set it up right.  There are ways to allow each site to collect and distribute the same information to the other.  This is another area to stay focused on your business and its doings.  Of course this works great even if you are about to open a coffee shop.

I recommend using your website as a base and when you update the site, then blog about what you did as well as a few other relevant things.  Then update your Twitter and Facebook so all of these social networking platforms get the information on what you did. This will redirect people to your blog, and also to your site making a circle of marketing.  As long as you create compelling information on all of your posts and sites, you will gain a network of followers.

What is great about Facebook is when you post, and one of your friends comments on it it will show on their friends pages and you have great potential to gain new customers this way to buy coffee beans or beverages so be relevant and stay on topic.

Foursquare

Foursquare is a location-based social networking service, mostly used via smartphone applications, though popular on the web.  It allows registered users to connect with friends and update their location. Then, points are awarded for “checking in” at venues and users can choose to have their check-ins posted on their accounts on Twitter, Facebook or both.   Users can also earn badges by checking in at locations with certain tags and eventually become mayor of the venue.

So why is Foursquare a marketing tool for my coffee shop you ask?  Well, many businesses are now offering special deals to people who check-in via Foursquare.  Starbucks recently inked a deal with them so customers can earn a “Barista badge” by checking in five times at a Starbucks location.  The independent can do something similar by signing up as well like extra points for frequent buyers, free refills on drip or something else equally of value.  If you are going to open a coffee shop this is a great way to promote grand opening specials.

Social networking is almost limitless and for the price (usually FREE!) you cannot afford to go without it.  Next time we will round out the social networking talk with a few more ideas for your marketing strategies.

My name is Tony DiCorpo, and I am a coffee roaster, coffee shop business consultant and barista trainer.  I have written 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 coffee beans.

How to Start a Coffee Shop

I get asked if I know ‘how to start a coffee shop’ a lot.  My answer to this is always a simple ‘Yes’.  However the short of it is that is really is not an easy task.  In theory it is, but reality paints another picture.

You see, it’s a complex series of correct moves:  writing a business plan, coming up with a concept, finding a location, obtaining funding, a marketing plan, equipment planning, supplier choices, menu development.  I wish it were a lot easier but it is not.

When I started in this business in 2004 I opened my first shop and had not a clue.  I went into business because I had been in business before in an industry I knew nothing about.  I learned as I went and it all worked out pretty well.  However this time around I figured since I did have a business plan it would be even smoother.  WRONG!

In all reality I pretty much was shooting from the hip.  Had I known how to start a coffee shop, I would have done it right from the beginning and avoided a lot of mistakes, grief and hard-earned money spent unwisely.

Do yourself a favor and use a professional in some way.  Experience comes in many ways and this is one way that it will work to your advantage.

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 I wrote on how to start a coffee shop.

It is worth more than what your investment is in it, and in more ways than one!

Social Networking for Your Coffee Shop, Part 1

How do you advertise?  How do you market your coffee shop?  How do you market so customers can buy coffee beans from you? If you are like most shop owners you are being very careful how your marketing dollars are spent.  If you are just planning to open a coffee shop, these tips can lead you to a smoother open.

No wasting money on typical coupons or door hangers right?  In this three part article series, we’ll talk about social networking and how it can benefit your business.

There has been a whirlwind of potential customers coming to light in social media.  This medium is very overlooked but when it’s used it is usually either overdone or done incorrectly.  If you utilize it to the best of its potential you should see an increase in customers and sales.  Here is the first of a few ideas for you to consider:

Blogging

Talk to the world online.  You may just develop a following not only local, but around the world.  If customers buy coffee beans online from you the national spotlight may just work in your favor.  Google BlogSpot and Word Press are good blogging sites and are very user friendly.  I use Word Press and I really like it. I actually write several blogs and the user dashboard is very easy to set up, even for multiple blogs.

The idea about blogging is to just write what comes to mind, but be careful to keep focused on topic and in most cases, talk about your specific business or its mission, vision and activities.  Whatever you do, don’t trash other businesses or individuals no matter how tempting it is.  Things like that will certainly show immaturity and kill your business.

However, you can blog about specials, events, the way you compost or recycle or how you use only Fair Trade or organic coffee.  You can blog about your baristas latte art or the fact that you are also an artisan roaster that roasts in small batches.  Announce a new coffee varietal that has just arrived or that you now serve lunch.  If you are not open yet, you can blog about how you are starting a coffee shop.  Live it up!

The best part about blogging is that unlike a standard website update,  immediately after you click ‘publish’, the blog sends a ‘ping’ to the search spiders saying ‘hey, there is new information on this blog, come and get it!’  You will see your post show up in relevant search results in a matter of minutes so blogging is great for specials and things you want people to know about right away.

So be sure you use your tags wisely.  Tags are keywords that the search engine filters and stores for your blog.  Keywords enable your posts to come up in search results for a relevant search term when a user types it in to Google or Yahoo!  An example would be  ‘Colombian French roast’ or ‘farmers market in Cleveland Ohio’ or whatever you put in for your tags.  Also be sure to use these keywords in your blog post copy as well as the search engine bots will pick them up and index your blog accordingly.  Be sure everything is relevant for your post.

Next time we will discuss Facebook and Twitter and how to use them to your advantage.  More social networking awaits!

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 I wrote 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 coffee beans.


Alternate Brewing Methods Could Mean Extra Revenue for Coffee Shops

Whether you are just starting a coffee shop business or have been in the business for a while, we all know the brewed coffee made from a typical drip coffee maker.  However others are experiencing rising sales and increasing popularity of single serve and specialty brewed coffees.  Typically the ‘fashion brew’ as I like to call it is made from single origin varietal coffee beans that score an 85 or higher during cupping.  The reasoning is that with these brewing methods, one can taste the best nuances of every cup.  With that, one can also taste the defects therefore a score of 85 or higher is recommended.  However, it has been my experience that even good blends taste much better brewed single serve or pour-over than regular drip so I say, enjoy what you like.  And when I say single-serve please, for all sanity know I do not mean a single-serve coffee machine!  Take a look:

French Press

In your coffee shop business, a French press coffee offers a flavor you will not experience using brew machines.  In French press, you do not use any paper filters that can trap a lot of the essential oils detrimental for optimum coffee flavor in the cup.  To make coffee in a French press first boil the correct amount of water and grind the beans fresh on a coarse setting.  Remove the plunger and put the coffee grounds at the bottom of the glass.  Next, add the hot water and stir with a spoon to saturate all of the grounds.   After about 4 mins, press the plunger down.  This separates the grounds from the extracted coffee.  Next, pour and enjoy!

Vacuum Coffee Pot

This is similar in taste to the French press.  To brew from whole bean coffee in a vacuum pot, add the proper amount of filtered water to the bottom bulb.  This should be near boiling water.  Insert the filter to the upper glass half and fit the tube tightly into the bottom glass bulb as the directions explain.  Some models are slightly different.  Some are designed to brew on a stove top and some over a separate butane or alcohol burner.  Set up whichever burner method is being used.  Add the correct coarse grounds to the top half of the pot and set the flame.

Leave it burn as the water starts moving up the tube to the top half.  This will take about 2-3 mins.  As the top half is filling, stir the grounds to allow them to fully saturate.  You do not want the water up top to boil, just to brew the coffee.  You will see it working.  After about 60-90 seconds steep time, remove the flame.  As it cools, a vacuum will occur and pull the brewed coffee through the filter back to the bottom glass bulb leaving the grounds on top.  Genius!  Remove the top half carefully (it may be hot!) and place in the holder it came with.  Pour your brew from the bottom half and enjoy!  Vacuum coffee is not for everyone starting or opening a coffee shop.  It will be catchier in some areas but education of your customers in the coffee purist lifestyle is key here.

Single Serve

Pourover

If you are going to offer single serve pour-over, the grind of your coffee beans should be slightly between auto-drip and coarse.  This would be for a Melitta or Clever type maker.  Use the unbleached (brown) cone filters.  They also make a wire mesh screen and that is fine to use as well.  Also, heat the water in a kettle, electric or stove top is fine.  Heat the water between 195-205°F, pour about 1/3 of it onto the grounds and count to about 20-30, then pour the rest in.  It should take about 2 mins to brew through.  Enjoy!

Chemex

Again the coffee is brewed to order in low quantities.  This is kind of a hybrid between a French press and Melitta because you would use a filter product to hold the coffee grounds on top while the coffee is brewed into a carafe beneath.  You can choose from 3, 6, 8 or 10 cups with the Chemex classic series.  Follow the same temperature instructions as the Melitta method above.

So there are a few different brewing methods to try.  It may take a while to catch on in your shop and your area.  Educating the public is never easy to what is a new concept to them but the results will leave them wanting more.  Be sure to charge a premium for single serve coffees as they are labor intensive and special.  I know shops that charge up to $5 per cup for single serve pour over and up to $30 per brew for siphon coffee depending on the coffee varietal used.

So even if you are starting or opening a coffee shop, try it.  If you already have a shop you would know your customers; I guarantee you will have some that will love these methods.  You may just strike gold with one of these methods!

My name is Tony DiCorpo, and I am a coffee roaster, coffee shop business consultant and barista trainer.  I can help you open a coffee shop with my eBook.  You can also buy coffee beans via my website.