Opening a Coffee Shop is Easy with our 10 Step Guide
Thinking about opening a coffee shop? Turn your coffee bean dreams and passion for business into a lively venture to serve your community.
MyCompanyWorks has formed LLCs and Corporations online for small businesses since 2001. Tap into expert advice and tips to open your coffee bar quickly. If you decide that this business model is right for you, you can begin the process with any of our business startup packages.
Opening a Coffee Shop: The Basics
You don’t have to look too far to see that independent coffee houses are all the craze and have become community hubs for socializing and networking. If you’re interested in owning your own shop, it’s a great small business idea. But where do you begin? What type of startup options are available? Before we dive into the startup process, let’s go over a few different options.
Coffee Startup Options
You can build your company from the ground up, which is desirable to many entrepreneurs. It’s exciting to have a say in the build-out and create a space that expresses your creativity. However, starting a brick-and-mortar store from scratch can be more costly and requires a lot more effort than other options.
Buying an existing coffee house could be a viable option if you’re willing to revamp someone else’s creation. Commercial business brokers and websites like BizBuySell can help you locate existing businesses for sale in your area. Buying an existing business may not be as exciting as building from scratch, but you can save a lot of money – and headaches.
Franchises are another option to start your business quickly and with support from a franchisor. NerdWallet has published a great article on the best coffee house franchise opportunities. The initial investment can be quite high, but worth exploring if you’re looking for a turnkey startup.
Common Startup Equipment and Supplies
You may not need all the products or supplies listed, but most coffee houses use the following supplies and equipment:
Equipment:
- Industrial grinder for coffee beans
- Automatic drip coffee pots
- Espresso machine
- Blenders
- Ovens and/or toasters for hot foods
- Refrigeration and freezer unit to keep cold foods and liquids
- Storage for foods, condiments, and serving products like cups, lids, and napkins
- Tables and seating – consider adding outdoor seating if you have room and your local business authority allows it
- Mops, brooms, buckets for cleaning
Supplies:
- Milk (dairy and non-dairy), flavored syrups, sugar, and other sweeteners, water
- Hot and cold cups, lids, straws, stir sticks, napkins
- Employee uniforms – hats, aprons, shirts, name tags
- Gloves for handling food
- Cleaning supplies
Some Expert Startup Tips
- Study your local market to find problems you can solve by setting up shop. Does your downtown have sufficient patio seating for casual dining or meeting places? Do you live in an area that lacks businesses and services? Could you offer space for community events or networking groups? Asking yourself questions like these will help you determine when, where, and why you should open your shop.
- Take a few hours to properly plan your business. There are templates available for free, and we also offer a quick and effective guide to get you started. Research shows that even when you don’t need a business plan, potential landlords and investors will likely want to see detailed plans showing how you will establish, maintain, and grow your business.
- Investing in employees means investing in your business. Finding qualified help takes time, and sometimes a little turnover to find the right team. Even if new hires have experience, they will still need to be taught your model and methods. A little coaching goes a long way, and the time and money you spend upfront on proper training will turn into profits as your well-trained staff serves your customers. Recruiting sites like ZipRecruiter and Indeed can help you attract the right candidates. Indeed even offers a free recruitment guide for download. You can usually post job ads for free.
- Don’t make the common mistake of ignoring your company’s accounting. If you aren’t strong with numbers, hire a bookkeeper or accountant to manage your finances. Whether you manage your books or hire someone to do it for you, you’ll save loads of time by keeping the books updated.
- Avoid issues like high turnover, lack of proper training, and miscommunications by writing an effective employee handbook and training your staff. The more you prepare before your shop opens, the easier it will be to manage employees and keep your shop running smoothly. Check out our blog for business startup and management tips.
1. Choose a Name and Business Type for Your Coffee Shop
The Company Name
- Think of your business name as its identity. Then think of names that represent your products and services and are easy to remember. You can even have fun with family and friends by trying out business name options together. Say your ideas aloud so you can hear how they sound.
- Pick a name that can represent your company over time. If you’re starting with coffee now, but want to add food or other beverages later, it’s best to work them into your business name at the beginning.
The Right Type of Business Entity – LLC, Corporation, or DBA
We can form your company for you, but you’ll want to contact an accountant or lawyer to decide which business type is best for your business. Both Limited Liability Companies (LLCs) and Corporations can apply for Small Business status with the IRS. This allows what is called “pass-through” taxation. This prevents businesses from being taxed at the corporate level. Contact one of our accounting partners for more information.
- LLC: Most startups can form a Limited Liability Company, or LLC, which keeps taxation low and business management and ownership flexible. LLCs don’t file “business” tax returns. Instead, business owners record income, expenses, and losses on individual tax returns.
- Corporation: If you expand and your business becomes more complex, there may be a time to convert your LLC to a Corporation, but that brings on additional paperwork, higher taxes, and more scrutiny from the IRS. Corporations must also be owned by US citizens and are limited to having 100 shareholders.
- DBA: DBA is the abbreviation for “Doing Business As”. Other common names for this business type are Fictitious Name, Assumed Business Name, and Trade Name. A DBA is formed when you apply to your state to use a business name without registering a company. DBAs are useful for existing companies that want to separate multiple operations. You can also form a DBA without registering a business, but you won’t have any liability protection. You’ll also have to use your social security number on all tax and legal documents. We recommend forming an LLC or Corporation to protect personal assets.
2. Write an Effective Business Plan
Do I really need a business plan?
Most businesses need a business plan to apply for financing and lease space. A business plan is a key requirement for applying for financing as well as a way to track your progress and grow your business. There are plenty of free business plan templates online that you can download and edit to suit your needs. To find out more about business planning services, head to our Business Planning Resources page.
What is included in a business plan?
Be sure to include an executive summary, marketing strategy, and financial statements in your business plan. In the executive summary, include your mission statement as well as a description of your company and the benefits you offer. The marketing strategy is where you’ll detail how you will promote your services to potential clients. A financial section should include information such as how much money will go towards salaries. A business plan can be a vital tool for tracking goals, refining methods, and collecting resources the business will use to accomplish its objectives.
Make sure these items are included in your business plan:
- Mission statement defining why you’re in business, overall goals, products and services offered, and primary market
- List of objectives that spell out things like increasing market share, reducing turnover, improving customer service, etc.
- Strategy for marketing and sales
- Competition
- Financial projections for profitability
Related Articles and Resources
How to Write a Small Business Plan | Business Entity Types | Use a Checklist to Start a Business Fast
3. Apply for a Federal Tax ID if Your Shop Will Employ Workers
What is a Federal Tax ID, or EIN?
The Federal Tax ID, or Employer Identification Number (EIN) is a nine-digit number assigned to each US business by the IRS. Businesses that employ workers must have EINs.
How to apply for one?
If you have a social security number, you can apply online for an EIN with the Internal Revenue Service (IRS). If you’re forming your company on your own, you can apply online with the IRS for a Federal Tax ID, also called an Employer Identification Number (EIN). Note that a Social Security Number to apply. International entrepreneurs must satisfy additional requirements if they don’t have a social security number. Add an EIN application to any coffee business startup package.
What are the benefits of having an EIN?
An EIN becomes part of your company’s legal identity. Most banks require an EIN for business bank accounts. You’ll also need one to hire workers and file your business taxes. DBAs are only required to have an EIN if you want to hire workers, but without one, you’ll have to use your personal Social Security number on all business tax and legal documents. We recommend all businesses with DBAs apply for an EIN so you can keep business and personal tax and legal matters separate.
4. Open a Business Bank Account
Many larger banks also offer business banking products, so the best place to start is to contact the bank where you keep your personal funds. If your bank doesn’t have a satisfactory banking solution, interview other banks to find the best one for your business needs. Our banking partners can also help you find the best banking solutions for coffee startups.
5. Find the Right Location
A quick internet search will show all the commercial real estate brokers in your area. They can help you locate the right store site and negotiate a lease. Our Vendor Network is a great place to find a commercial real estate agent.
6. Apply for Local, County, and State Licenses and Permits
Most coffee shops don’t require federal licensing unless they also sell alcohol. However, the state where you do business will have its own set of business license and permit requirements. Many states have business websites where you can start researching license requirements. Our business license compliance package does all the research for you.
7. Apply for Business Insurance Policies
Business insurance costs are determined by factors like risk and equipment value, so they’ll be a little different for each shop. You can expect to pay somewhere around $900 for a business insurance policy. Workers’ Compensation policies can run anywhere from $1000 to $2000 annually. The median cost for General Liability policies is roughly $400. If you need help choosing the right business insurance, contact our partners Hiscox or netQuote for recommendations and a free quote.
8. Set Up Accounting and Filing Systems
It’s critical for every successful business to set up a system to manage your business finances and records. You can work with something as simple as a spreadsheet or use a program like Quickbooks Online. Hiring a bookkeeping or tax professional may be well worth the money if numbers aren’t your strong suit. Accountants and bookkeepers may also be able to manage your payroll and tax returns for an additional cost. Find qualified accounting experts in your area.
Organizing files for all your invoices, receipts, bills, and business records makes finding them much easier if they’re filed when they’re received. Take advantage of free services like Google Drive or other cloud storage to create a paperless filing cabinet, or set up a secure filing cabinet in your office. Do what works best for you, but do it! You’ll be glad you did the first time you have to find a document. Here are some file labels to consider for your filing system:
- Employee Records: file completed job applications, W4 forms for tax deduction backup, employee appraisals, and disciplinary actions
- Customer Files: orders, account details, preferences, and surveys
- Vendor Files: contracts, account details, catalogs and price lists, orders, invoices, receipts
- Legal Documents: state business documents, special certifications, documents for lawsuits, and other legal matters
- Tax Documents: keep all filed tax returns, supporting documents, and tax forms
9. Recruit and Hire Qualified Employees
How do I recruit qualified staff?
Whether you need, you can post job ads online for part-time or full-time staff on Indeed.com or ZipRecruiter. Many job seekers also use LinkedIn, which means they’ll have a profile you can check out for work experience. Before you post a job ad, take these steps to prepare for your first new hires.
- Establish an employee handbook and training process
Having an employee handbook makes communicating policies, procedures, and expectations easily to new hires. It also keeps everyone on the same page, so your company runs smoothly, even while you’re away. A comprehensive employee handbook should include orientation, employee reviews, and policies and procedures for things like employee time off, how to use equipment, and general responsibilities for safe operation. You can download free employee handbook templates to customize for your shop.
- Write a job description for each employee role
You may have a few different roles to fill when you set up shop. If you hire a cashier, a barista, and a supervisor, each one will have different responsibilities. You can include a general conduct description in your employee handbook, but employee roles really should be clearly defined. The job description for each role should include a list of expected tasks and duties. Do your best to list as many details as possible so job seekers know what’s expected and whether or not they would be a good fit for each position.
- Post open positions, interview, and hire the right team
Posting a detailed job ad will reduce the number of unqualified job seekers who apply. Even if everyone who applies is qualified, you might get hundreds of applications for just one position. Ideally, you don’t want to schedule more than about 10 interviews for each position, so it’s worth taking some time to weed out the applications for less-qualified candidates. Indeed.com has a free recruitment guide to help you hire the right team.
TIP: For every employee you hire, you’ll probably interview somewhere between 6 and 10 job seekers.
10. Tell the World You’re Open for Business!
Website, Email, and Social Media Marketing
Marketing is extremely important for startups. Using the best techniques and tools to attract customers can help you spread the word that you’re opening a coffee shop. Not all businesses use websites to sell online, but many potential customers look for a website before they start calling or driving around for businesses that brew coffee. Think of your website as an updated version of the yellow pages ad. Even if you don’t run your business online, you can still use a website as a communication tool to promote events and new products, and business hours with contact information. You can order a domain, email, and website package with any of our business startup plans.
Email marketing still works, so publishing a regular newsletter or email campaign is another powerful way to market your brand and also give others something to share with friends and on social media. Collecting email addresses doesn’t have to be complicated. You can do something simple like setting up a jar with a sign and pen by the cash register. Customers can jot down their emails while you’re ringing up their orders. The best part of collecting voluntary email addresses is that you earn them honestly, you’re not buying lead lists, and they’re from people who are already customers.
TIP: Collecting email addresses is easy if you want to download a list and spam everyone until you get a hot lead. But a quality email address doesn’t require money and your customers are less likely to hit the ‘unsubscribe’ link on your newsletters if they sign up voluntarily.
These days it’s essential to set up social media accounts with Instagram, Facebook, Twitter, and Google Business if you want to promote your business online. Posting catchy ads, quotes, phrases, and product pics is either free or low-cost and has exponential potential to reach customers that are not already part of your base. People share the things they like with others, and it’s no different with social media.
Other Online Marketing
In addition to your website, email, and social media channels, there are also other ways to market your shop to the local community. Nextdoor offers free profiles for local businesses. Check out local networking and community events where you can showcase your products. Companies like Addy.co can help you create affordable, attractive online ads. Searching the internet for “coffee shop marketing ideas” can help you find free and low-cost ways to spread the word about your new shop.
It’s Easy to Start Your Business with Our Free Startup Guide
Ready to open your coffee bar? All startup packages include our FREE Startup Wizard to guide you through the process. Manage all your important documents and filings in one place with My Account Dashboard, also free with every business startup order.
What’s Next?
Opening a coffee shop can be both exciting and profitable if you take the time to start properly. Take the time to decide whether you should build from scratch, buy an existing store, or start with a franchise. Searching the internet and estimating costs for each business option will lead you to the right decision. Before you start making money, you’ll have to invest in stocking products, equipment, licensing, insurance, and recruiting. If you develop and stick to your business plan, study your local market, train employees properly, and run an effective marketing plan, your chances for success will increase dramatically.
Starting a coffee business properly may seem tedious, but it’s worth setting up systems and processes before opening your doors, so you can easily navigate potential tax and legal issues throughout your business journey. If you have read our guide and decided a coffee spot is in your future, it’s time to get started!
MyCompanyWorks can form LLCs and Corporations fast! All business startup packages include our exclusive Startup Wizard and loads of forms and tools to manage your business in one place. Our blog is also full of articles, resources, and links to help you run a successful business.
MyCompanyWorks Premium™ puts your coffee business on auto-pilot. We’ll file your annual reports, monitor business compliance, and provide over 200 business forms and other free items to maintain business compliance.
How Can We Help?
If your question wasn’t answered in our guide, our helpful Frequently Asked Questions page has answers to common business startup questions. Our friendly support team is also standing by, so email or call us for more information to start an LLC or Corporation for your new coffee shop quickly.
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