Where do coffee shops come from?

May 14, 2010 5:42 AM

My dad plans to open up a small coffee shop -- how can I become more knowledgeable about such an endeavor so that I can be a better resource and support for him?

Yesterday I received a text from my dad saying that he's planning to open up a coffee shop. He and my mom have experience being self-employed and he's run a small business in the past, so I'm confident he understands the financing / business-y side of things. He's applied for all the paperwork and already has the space (near north side of Chicago). What he doesn't have is the more coffee-shop-specific knowledge and experience; he's in the process of continuing to research that now.

I'd like to be as supportive as possible and am looking for a wide range of advice: from good resources on the basics of starting up a small business (so that I can get up to speed on the logistics) to personal stories and tips about the challenges particular to starting an independent coffee shop.

Further parameters that might direct any advice you have: he wants to buy the beans directly from farmers/independents. He's really interested in roasting the beans on-site (how feasible or smart is that, especially since he's entirely new to the game?). The street traffic is pretty good because it's on a more commercial street (boutiques, restaurants), but there are also coffee chains nearby (Julius Meinl, a Starbucks farther away). He'd like it to develop a character or reputation where social and political fomenters can, well, foment.

Anything that could help me learn more and better be able to help him would be greatly appreciated -- thanks much!

posted by ohruaidhri to Work & Money (17 answers total)

This is the go-to cautionary tale on opening a coffee shop. There's definitely unique challenges, but every one in a while, you get to be Jonathan Rubenstein, of Joe in NYC (which is doing quite well, expanding, and sweet mother of god, delicious).
posted by Admiral Haddock at 5:54 AM on May 14, 2010 [1 favorite]

Hard to say what the recent economic lapse has done to this particular calculus, but for many years there, coffee shop was an excellent choice for small business. It wasn't very expensive to run, the margins were incredible, and it was hard to screw up. Compared to the dismal one or two year survival rates for new restaurants, coffee shops were a lock.

Here's an article from Slate about how Starbucks turned out to be the best thing that could have happened for indie coffee shops. Much to their dismay, apparently. They really wanted to be the nasty 800 lb gorilla of the industry, coming into town, throwing their weight around, buying up all the competition on the cheap and owning the market. It just didn't work out that way.

Note that this is from 2007 though. It's probably still one of the best choices for a small mom and pop style business, but the overall tide is obviously a lot lower than it was then.
posted by Naberius at 5:59 AM on May 14, 2010

Maybe he could steal away one of the managers from one of the other coffee places, someone who might want to share in his vision? Given the description of the feel he's going for, maybe he could get experienced people on board if they bought in as co-owners?

Roasting coffee is unbelievably smelly. It's very powerful and lingering, and there might be complaints from neighbors if that smell is there all the time (which it would have to be). He should probably roast them off-site and bring them in.

Overall, I think the only chance a new coffee place has is to market itself as a touchy-feely/green/liberal/fair-trade antidote to Starbucks -- and market that HARD. Push the activist angle, invite speakers, talk to people from activist groups about making that a community space, a "corporate-free zone".
posted by overeducated_alligator at 6:00 AM on May 14, 2010

Okay Slate, way to play both sides of the fence there...

:-)
posted by Naberius at 6:00 AM on May 14, 2010

Earlier: "I want to open a coffee shop but I have no experience in the industry. Where do I start?"
posted by willem at 6:17 AM on May 14, 2010

The street traffic is pretty good because it's on a more commercial street (boutiques, restaurants), but and there are also coffee chains nearby (Julius Meinl, a Starbucks farther away).

I worked at a local coffeeshop in Madison, WI that's about one block away from a Starbucks. It has just a few locations, all in Madison. We had long lines, often literally out the door, for hours every day. One of my co-workers brought in a Wall St. Journal article about how Starbucks helps indie cafes (similar to the second Slate article above), and we were all in agreement with that article.

The idea that Starbucks can cause nearby cafes to dwindle or shut down doesn't make economic sense. People don't need cafes the way they need to go to the grocery store for milk and bread. The demand is highly "elastic," as economists might say. Starbucks is largely responsible for creating the cafe craze in America; many indie cafes wouldn't exist if not for Starbucks. It causes people to become generally interested in going to cafes, but they'll go to a nearby indie cafe if it has more character and a better selection.

Here's a book about how to start a coffeeshop business.
posted by Jaltcoh at 6:36 AM on May 14, 2010

He'd like it to develop a character or reputation where social and political fomenters can, well, foment.

This is a noble goal. But it always seems to me like the fomenters don't spend money, which kind of hurts the whole staying in business angle.
posted by madcaptenor at 6:39 AM on May 14, 2010 [1 favorite]

Response by poster: Damn, my missing willem's link is a lesson not to search/post in the morning. But still -- the responses from there aren't quite what I'm looking for. My dad's not going to spend a year+ working in someone else's shop (though I guess along the lines of my desire to know more in order to better support him, I could certainly try to do that).

overeducated's note about the smelliness of roasting is more in line with what would be helpful for me -- things that I can mention to him that may not be as obvious if he's working on finding a partner and working on the business logistics. The details and stories that I can collect and convey to him are what I'd appreciate, either the smaller aspects (roasting) or overarching context (Starbucks nearby can help!) that I can slip into conversation and offer up for his consideration.

Thanks for the thoughts so far!
posted by ohruaidhri at 6:48 AM on May 14, 2010

For the social/political bit, he might want to study the example of Blue State Coffee. Every quarter, they propose 4 progressive causes ranging from overtly political to uncontroversial community causes like homelessness or literacy. Each customer who purchases a coffee gets a wooden chip, and they can drop it into one of four jars, voting for a cause. The coffee shop donates 5% of sales to these causes, allocated according to votes. It's very successful.

He should spend a lot of time in model coffee shops, studying how the music and seating affects business and length of stay. The number placement of power outlets should be carefully considered, to minimize accidents and achieve the desired number of loiterers. The Starbucks at my school had a long, sturdy table with many seats and lamps with built-in outlets, which was a perfect way to maximize space for the inevitable loiterers.
posted by acidic at 6:56 AM on May 14, 2010

In a town loaded with touchy-feely coffee, the places that seem to be doing best are a couple of recent places that do REALLY GOOD coffee rather than corporate or ethical coffee. I mean, you can still do the fair trade thing, but quality and minimalism is what I'd aim for. Stripped down menu that just includes good drip/brewed coffee, decent tea for the weenies, and good espresso drinks.

I like the suggestion of finding someone who *knows* coffee to partner with. You don't start a winery without a vintner or a brewery without a brewmaster. Coffee is almost as hard to get right and just as difficult to perfect.
posted by pjaust at 7:08 AM on May 14, 2010

Time Out Chicago recently did a feature on newish coffee shops, most of which are roasting their own beans. (Unfortunately, the online version is broken up into 5 pages.) I suggest learning about what these places are doing right and maybe, as overeducated_alligator suggests, poach one of their employees.
posted by Xalf at 7:34 AM on May 14, 2010

When I worked at a mom and pop coffee shop, they TRIED to do in-house roasting, but found that it wasn't financially possible.
posted by k8t at 9:18 AM on May 14, 2010

IF it becomes too expensive to roast the beans themselves find a small roaster . The small brandsa are better.

Also get to know the customers. I go to a smal lcoffee shop where the guy knows my name and uses a small italian brand of coffee from brooklyn. Beats starbucks hands down.
posted by majortom1981 at 10:09 AM on May 14, 2010

My dad's not going to spend a year+ working in someone else's shop

So, umm, why the fuck not? Seriously, this sort of stuff baffles me: he's ready to commit a sizable investment, with his financial future in the balance, but he can't be bothered to do the one thing that will actually help answer his questions about the business? Seriously?

I'm being harsh b/c I grew up in the business and watched this scenario happen repeatedly. Everyone likes to drink/eat out, so they decide they'll start their own coffee shop/restaurant. But just because they've been successful in one type of work doesn't automatically mean they'll have a clue about the new venture. Nonetheless, they're ready, impatiently, to dive right in without a safety net.

Look, if he's in Chicagoland, then there's an existing operation in a nearby neighborhood doing *exactly* what he plans to do and, therefore, the kind of information he really needs is there, not in books, on the internet, or the gossip of folks who happen to eat out, etc. Why not take the time to see what works/what doesn't when it's someone else's livelihood on the line rather than his own?

Having said all this, it can be a great opportunity for the right kind of person with the right training.

Anyway, sorry for being a crank - I haven't had my daily cup yet....
posted by 5Q7 at 11:21 AM on May 14, 2010 [4 favorites]

My father spent the last 20 years before he retired running a coffee shop. He was already a small businessman, but had always wanted to do something along those lines, so he planned and he did it. He's social by nature and it fit him perfectly.

What he and my mum did was make notes of equipment and practices in all the other coffee shops that they visited (and they visited a bunch!). He already had the equipment/suppliers sorted out as he was already involved on the fringes of the industry and had a good idea of how to go about it.

I think the suggestion to work in someone else's coffee shop is a good one, he gets a feel for the business and will figure out what works and what he'd like to change.
posted by arcticseal at 12:12 PM on May 14, 2010

A few anecdotes:

First, a couple of years ago I was talking to a financial analyst who'd recently gone through the process of developing a valuation for a small puget sound area business that operated some shops, and had started wholesaling roasted beans. He said most of the value was in the roasting business. Margins were good, and return on invested capital was good as well.

Second, an excellent coffeeshop and small roaster opened in my neighborhood of Seattle a few years ago. He had other decent espresso shops within a few blocks in either direction, and two Starbucks about a half-mile to the north and south. His business seemed to do quite well, but he ended up selling the retail operation to someone else so he could focus on roasting. In his case, I think it wasn't necessarily a matter of where the money was, and more a matter of what he liked doing. He liked roasting beans, and he liked dealing with retail customers, but doing it all day wore him out, and hiring/managing people to cover the front was its own set of no-fun (for him).

People, are, of course, right that your father should be doing all he can to learn the business. But for starters, I'd suggest he think more about his market. If he's thinking about roasting his own, then it sounds like he may want to appeal to aficionados. In that case, knowledge in sourcing the green beans, roasting them, and pulling a great shot are going to be essential, as is a good espresso machine, and good barristas.
posted by Good Brain at 12:44 PM on May 14, 2010

Response by poster: Thanks for the responses -- definitely some useful stuff for me to think about and share with him, even as he's (been) doing his own research (including speaking at length with the owners of at least one highly successful coffee shop in the area).

Xalf: I actually have a stack of TOC's that have been piling up, unread, so thanks for pointing me in that direction!
posted by ohruaidhri at 8:58 AM on May 15, 2010