How to Start a Coffee Shop Business
Feb 2, 2025
Few businesses capture the entrepreneurial imagination quite like a coffee shop. The appeal is obvious: the aroma of fresh espresso, the buzz of conversation, the satisfaction of creating a space where community gathers. Coffee shops become neighbourhood fixtures, daily rituals, and gathering spots that people genuinely love.
The industry fundamentals are strong. Coffee consumption continues growing globally. Specialty coffee culture has transformed what consumers expect and what they'll pay. Independent coffee shops thrive by offering what chains cannot—personality, quality, and genuine connection.
But romantic notions don't pay rent. Coffee shops operate on thin margins, face intense competition, and require significant upfront investment. Many fail within the first few years. The ones that succeed combine passion with business acumen, quality with efficiency, and vision with realistic execution.
This guide covers everything involved in starting a coffee shop business—from initial concept to opening day and the operational realities beyond.
Is a Coffee Shop Right for You?
Before investing money and years of your life, honestly assess whether this business suits you. If you love the idea of a community-focused business but aren't sure coffee is the right fit, other high-street ventures like starting a barbershop business share many of the same rewards—regular customers, creative control, and becoming a neighbourhood fixture—with a different daily rhythm.
The Realities of Coffee Shop Ownership
Early mornings are non-negotiable: Coffee shops open early. If you're not a morning person, you'll need to become one—or accept that you'll spend years exhausted.
The work is physical: You'll stand for long shifts, lift heavy supplies, and stay constantly active. This isn't a behind-the-desk business.
Margins are tight: Coffee seems expensive to consumers, but after costs, the margin on each drink is modest. Success requires volume, efficiency, and careful cost control. Understanding the brutal economics of coffee shop ownership before you sign a lease is the single most important thing you can do to avoid becoming part of the 60% that fail in year one.
Competition is fierce: Every high street has multiple coffee options. Chains spend millions on marketing. You're competing with everyone from Costa to the café two doors down.
It's all-consuming initially: Expect 60-80 hour weeks in the early phase. The business needs you constantly until systems and staff are established.
Customer service is relentless: Every day, all day, you're serving people who haven't had their coffee yet. Patience matters.
The Rewards
Daily cash flow: Unlike businesses that invoice and wait, coffee shops generate immediate revenue with every transaction.
Community impact: Your shop becomes part of people's daily lives. You'll know regulars by name, their orders, their stories.
Creative expression: Your menu, your space, your atmosphere—it's your vision made tangible.
Scalable potential: One successful shop can become two, then three. Some independent coffee entrepreneurs build substantial businesses.
Recurring customers: Coffee is habitual. One satisfied customer can mean years of daily visits.
If the challenges don't deter you and the rewards excite you, let's build your coffee shop.
Planning Your Coffee Shop Business
Define Your Concept
Before anything else, clarify what kind of coffee shop you're creating:
Target customers: Commuters grabbing takeaway? Remote workers needing space? Families on weekend outings? Students studying? Your answer shapes everything from location to layout to operating hours.
Experience level: Quick-service efficiency or relaxed third-place lingering? Both work, but they require different spaces, staffing, and expectations.
Coffee focus: Specialty single-origin pour-overs for enthusiasts? Quality espresso for everyday drinkers? The depth of your coffee programme affects equipment, training, and pricing.
Food offering: Coffee only? Pastries and light bites? Full breakfast and lunch? Food increases revenue potential but also complexity, licensing, and costs.
Atmosphere and identity: Industrial minimalist? Cosy and warm? Bright and modern? Your aesthetic attracts matching customers and differentiates from competitors.
Write this concept down clearly. Reference it when making decisions. A coherent concept prevents the scattered approach that confuses customers and dilutes your brand.
Research Your Market
Study the competition: Visit every coffee shop in your target area. What do they do well? Where do they fall short? When are they busy? What do their reviews say? What would you do differently?
Identify gaps: Perhaps no one opens before 7am for early commuters. Maybe no one offers quality decaf. Perhaps families can't find kid-friendly options. Gaps represent opportunity.
Understand pricing: What do competitors charge for similar drinks? You don't have to match them, but you need context.
Talk to potential customers: What do people in your target area want from a coffee shop? What's missing? What would make them switch from their current habit?
Write a Business Plan
Even a simple plan forces clarity:
Executive summary: Your concept in one page.
Market analysis: What you learned from research. Who are your customers? Who are your competitors?
Products and services: Your menu, pricing, and food offering.
Marketing strategy: How you'll attract initial customers and build over time.
Financial projections: Startup costs, monthly expenses, revenue projections, break-even timeline.
Operations: Hours, staffing, suppliers, daily logistics.
This document isn't just for investors—it's for you. Writing it reveals gaps in your thinking.
Legal Requirements and Licensing
Requirements vary by location. Research your specific area thoroughly.
Business Registration
Business structure: Sole trader, limited company, or partnership. Each has different tax and liability implications. Consult an accountant.
Business name: Register your trading name officially.
Tax registration: Register with HMRC for self-assessment and potentially VAT.
Food and Beverage Licensing
Food business registration: Register with your local authority at least 28 days before opening. This is legal requirement for anyone selling food or drink.
Food hygiene rating: Your premises will be inspected. Achieve the highest rating possible—customers check.
Food safety management: Document your food safety procedures (HACCP or equivalent).
Alcohol license: If you plan to serve alcohol, you'll need a premises license—a separate, more complex process.
Premises Requirements
Planning permission: Ensure the premises can legally operate as a café. Change of use may require planning applications.
Building regulations: Any significant alterations need to comply with building regulations.
Health and safety: Fire safety, electrical safety, gas safety certificates as applicable.
Accessibility: Consider requirements for disabled access.
Waste disposal: Commercial waste collection arrangements.
Music licensing: If playing music, you'll need PRS and PPL licenses.
Insurance
Public liability: Essential. Covers claims from customers injured on your premises.
Employer's liability: Required if you have staff.
Contents and equipment: Covers your expensive coffee equipment. These insurance requirements aren't unique to coffee shops—any service business faces similar obligations, and the costs catch many first-time owners off guard whether they're starting a cleaning business or opening a café.
Business interruption: Covers lost income if you can't trade.
Don't skip these requirements or assume you'll sort them later. Operating without proper licensing risks fines, closure, and worse.
Choosing Your Location
Location can make or break a coffee shop. Consider carefully:
Foot Traffic Analysis
Morning commuter routes: Near train stations, bus stops, office buildings. Captures the takeaway rush.
Daytime population: Areas with workers, shoppers, or residents who might stop in throughout the day.
Evening potential: Some locations die after 5pm. Others have evening foot traffic. Match your concept to the location's natural rhythm.
Visibility: Can people see your shop easily? Corner positions and street-facing windows have advantages.
Competition Proximity
Being near other coffee shops isn't always bad—it can create a destination cluster. But the area needs to support multiple options. Assess whether you're adding to a thriving scene or fighting for scraps in an oversaturated market.
Accessibility
Parking: Important outside city centres. Lack of parking limits your market.
Public transport: Proximity to stations and stops matters for commuter trade.
Pedestrian flow: Which side of the street do people naturally walk on?
Practical Considerations
Size: Enough space for your planned service model, seating, and any food preparation. Room to grow if successful.
Condition: A shell requiring full fit-out is cheaper to rent but expensive to prepare. A former café with existing infrastructure costs more but opens faster.
Lease terms: Length, break clauses, rent reviews, permitted alterations, hours restrictions.
Utilities: Adequate electrical capacity for coffee equipment (espresso machines draw significant power), water supply, drainage, ventilation for cooking if applicable.
Extraction and ventilation: Critical if cooking or even just brewing coffee at scale. Check what's permitted and what neighbours will accept.
Take your time with location. A wrong choice is expensive and difficult to fix.
Equipment and Supplies
Coffee shop equipment represents a significant investment. Choose wisely.
Coffee Equipment
Espresso machine: Your centrepiece. Budget £5,000-20,000+ depending on quality and capacity. Consider volume needs, reliability, ease of maintenance, and whether you'll need multiple group heads.
Grinders: At least one for espresso, ideally one for filter/batch brew if offering. Quality matters enormously for consistency. Budget £1,000-3,000+ per grinder.
Batch brew or filter equipment: For those who prefer filter coffee. Various options from pour-over to automated batch brewers.
Water filtration: Essential for both coffee quality and equipment longevity. Coffee is mostly water; filtration matters.
Knock boxes, tampers, accessories: The small tools that enable efficient service.
Food Preparation (if applicable)
Refrigeration: Display fridges for pastries and food, storage refrigeration for ingredients.
Food prep surfaces: Stainless steel work surfaces, food-safe and easy to clean.
Cooking equipment: Ovens, panini presses, toasters—depending on your menu.
Dishwashing: Commercial dishwasher for cups and equipment.
Front of House
Counter and display: Where customers order and see your offerings. Invest in attractive displays—they sell food.
Seating: Tables, chairs, sofas, stools—matching your concept and comfort expectations.
POS system: For orders and payments. Many options from simple card readers to sophisticated café management systems.
Technology
WiFi: Expected by customers. Reliable, with appropriate bandwidth.
Music system: Quality speakers, properly licensed music.
Booking/ordering systems: Online ordering, table ordering apps if relevant to your model.
Loyalty program: Essential for coffee shops. The classic "buy 9, get 1 free" stamp card is perfectly suited to coffee's habitual nature. The difference between a stamp card that drives daily visits and one that gets forgotten comes down to designing your stamp card programme around the right number of stamps, the right reward value, and the right promotion strategy. Choosing the right loyalty app for your coffee shop matters more than the reward structure itself—the wrong platform creates friction that kills adoption before customers ever reach their first free drink. Perkstar offers digital stamp cards that customers save to Apple Wallet or Google Wallet—no app download, no paper cards to lose. Every drink earns a stamp, and push notifications remind customers when they're close to a free coffee or when you're running promotions.
Supplies
Coffee beans: Your most important ingredient. Develop relationships with quality roasters. Consider freshness, consistency, and values alignment.
Milk and alternatives: Dairy, oat, almond, soy—customers expect options.
Syrups, chocolate, tea: Supporting products for your full menu.
Takeaway packaging: Cups, lids, sleeves, bags. Consider sustainability—customers notice and care.
Cleaning supplies: Commercial cleaning products for daily hygiene.
Budget for quality where it matters (espresso machine, grinders) and economise where you can (décor initially, admin systems). You can upgrade later.
Menu Development
Your menu defines your offering and significantly impacts profitability.
Coffee Menu
Core espresso drinks: Espresso, americano, flat white, latte, cappuccino—the standards everyone expects.
Specialty options: Single origins, seasonal offerings, signature drinks that differentiate you.
Filter options: Batch brew, pour-over, cold brew—for filter coffee enthusiasts.
Non-coffee alternatives: Hot chocolate, chai, matcha—for non-coffee drinkers in groups.
Sizing and pricing: How many sizes? How much difference between them? Consider that larger sizes often have better margins.
Food Menu
Complexity vs. quality: A small menu executed perfectly beats an ambitious menu done inconsistently.
Production requirements: What can you make on-site vs. sourced from suppliers? On-site production requires more staff, equipment, and licensing but may deliver better margins.
Peak period focus: What will sell during your busy periods? Morning pastries for commuters, lunch items for midday trade.
Dietary requirements: Vegetarian, vegan, gluten-free options are increasingly expected.
Display and freshness: Food needs to look appealing in displays and stay fresh throughout the day.
Pricing Strategy
Cost-plus: Calculate ingredient costs, add margin. Simple but may not reflect market realities.
Market-based: Price relative to competitors. Helps with positioning but may not ensure profitability.
Value-based: Price based on perceived value. Premium quality justifies premium pricing—if you deliver. Whatever pricing model you choose, avoid discounting as a default retention strategy—most businesses that rely on blanket discounts discover why their loyalty programmes fail when customers become trained to wait for deals rather than paying full price.
Menu engineering: Analyse each item's profitability and popularity. Promote high-profit items, reconsider low-profit low-popularity items.
Test your menu before opening. Get feedback on drinks and food from people who'll give honest opinions.
Hiring and Training Staff
Unless you're running a tiny operation alone, you'll need staff—and they significantly impact customer experience. If you're starting solo to keep costs down, you can still build customer retention systems—even launching a loyalty programme as a one-person operation is straightforward with the right digital tools, and it pays dividends once you're ready to hire.
Hiring Considerations
Barista skills vs. trainability: Experienced baristas command higher wages but deliver consistency faster. Enthusiastic beginners require training investment but may bring fresh energy.
Personality first: You can teach coffee skills. Teaching warmth and customer care is harder. Hire for attitude, train for skill.
Reliability matters: Staff who show up consistently, on time, ready to work. Unreliability destroys service quality and team morale.
Schedule flexibility: Coffee shops need coverage from early morning through closing, often including weekends. Hire people whose availability matches your needs.
Training Investment
Coffee skills: Espresso extraction, milk steaming, drink standards. Consistency matters—every latte should taste the same regardless of who made it.
Customer service: Greeting, handling complaints, creating positive interactions. Your staff are your brand experience.
Food safety: Legal requirement. All food handlers need appropriate training.
Operations: Till systems, opening/closing procedures, cleaning routines.
Loyalty program: How to sign customers up, how to allocate stamps, how to promote the programme. Staff enthusiasm directly impacts customer enrollment.
Document everything. Training manuals ensure consistency and make onboarding new staff easier.
Team Culture
Create an environment where staff want to work:
Fair wages and tips policies
Reasonable schedules
Growth opportunities
Respectful management
Team recognition
Happy staff create happy customers. High turnover costs money and damages service quality.
Marketing Your Coffee Shop
Pre-Opening Marketing
Build anticipation: Social media showing fit-out progress, menu previews, opening date announcements.
Soft launch: Friends and family testing before official opening. Works out operational kinks and generates initial word-of-mouth.
Grand opening: An event worth attending—special offers, entertainment, local personality appearances, press coverage if possible.
Ongoing Marketing
Social media: Instagram is essential for coffee shops. Beautiful drink photos, latte art, cosy atmosphere shots. Consistency matters more than perfection.
Google Business Profile: Critical for local search. Keep it updated—accurate hours, current photos, respond to all reviews.
Reviews: Actively encourage satisfied customers to leave Google reviews. Respond professionally to all reviews, positive and negative.
Local partnerships: Cross-promote with complementary businesses—bookshops, gyms, offices.
Community involvement: Support local events, offer meeting space for community groups, become part of the neighbourhood fabric.
Customer Retention
New customers are expensive to acquire. Keeping existing customers is efficient. Retention deserves major focus. Research suggests that increasing customer retention by just 5% can boost profitability by up to 95%, which is why proven strategies for attracting repeat café customers deserve as much attention as your coffee sourcing.
Exceptional consistency: Every visit should meet expectations. One bad coffee can lose a daily customer.
Remember regulars: Names, usual orders, personal details. This is where relationships are built. "The usual?" makes people feel at home.
Loyalty program: A digital loyalty program gives customers tangible reasons to choose you over alternatives. Perkstar's stamp cards work perfectly for coffee shops—customers earn a stamp with each drink and receive a free coffee after completing the card. A structured loyalty program built for daily regulars can close that gap by turning the occasional visitor's second and third visits into an automatic habit rather than a conscious decision. Wallet integration means their card is always on their phone. Push notifications can remind customers they're close to a free drink, promote new seasonal offerings, or drive traffic during slow periods.
Community building: Events, tastings, courses. Create reasons for customers to engage beyond transactions.
Consistent quality: The same excellent flat white, every single time. Quality is the foundation everything else builds on.
Financial Management
Startup Costs
Typical UK coffee shop startup costs (2026):
Premises: Deposit, first months rent, potentially premium. £5,000-20,000+ depending on location.
Fit-out: Counter, seating, flooring, decoration, plumbing, electrical. £20,000-80,000+ depending on starting condition and quality.
Equipment: Espresso machine, grinders, fridges, etc. £15,000-40,000+ depending on quality.
Initial stock: Coffee, milk, food, packaging. £2,000-5,000.
Licenses, legal, professional fees: £2,000-5,000.
Marketing: Signage, launch marketing. £2,000-5,000.
Working capital: Cash to cover expenses until profitable. 3-6 months of operating costs recommended.
Total: £50,000-150,000+ is realistic for most coffee shops. Smaller takeaway-focused operations can be lower; large, premium sit-down cafés can be higher.
Ongoing Expenses
Track monthly costs carefully:
Rent and utilities
Staff wages (often largest expense)
Cost of goods sold (coffee, milk, food)
Insurance
Marketing
Software subscriptions
Loan repayments
Your own drawings
Key Metrics
Cost of goods sold (COGS): What you spend on ingredients per item. Target 25-35% for drinks, potentially higher for food.
Labour cost: Staff costs as percentage of revenue. Target 25-35%.
Prime cost: COGS + labour combined. Keep below 65% of revenue.
Average transaction value: How much each customer spends on average. Track and work to increase through upselling and food attachment.
Transactions per hour/day: Volume matters when margins are tight.
Cash Flow Management
Daily cash: Coffee shops generate cash daily but have monthly expenses. Manage the timing carefully.
Seasonality: Many coffee shops see slower summer months. Plan for revenue fluctuations.
Tax reserves: Set aside money for tax bills. Quarterly estimates prevent surprises.
Your First Year: What to Expect
Months 1-3: Learning curve. Operations aren't smooth yet. Staff are new. Customer base is building. Long hours, likely losing money or barely breaking even.
Months 4-6: Getting smoother. Regular customers emerging. Staff improving. Starting to understand what works. Still building toward profitability.
Months 7-9: Momentum building. Reputation establishing. Word-of-mouth growing. Approaching or reaching break-even.
Months 10-12: Finding rhythm. Understanding seasonal patterns. Making adjustments based on real data. Possibly beginning to think about what's next.
Patience matters. Coffee shops are relationship businesses built one customer at a time. The businesses that succeed persist through challenging early months while maintaining quality.
Growing Your Coffee Shop
Once established, growth opportunities include:
Increasing ticket value: Food attachments, larger sizes, merchandise, retail beans.
Extended hours: Evening service, alcohol license, events.
Additional revenue streams: Wholesale coffee supply, coffee courses, corporate catering. Some owners test new markets by taking their brand to events and festivals using a mobile setup, applying the same marketing strategies that work for food trucks to build awareness in areas where a second location might eventually make sense.
Second location: Replicate success elsewhere. Significant complexity but substantial growth potential.
Growth should be deliberate. Each expansion increases complexity and risk. Ensure your foundation is solid before building higher.
Getting Started
Starting a coffee shop is a significant undertaking, but it's achievable with proper planning:
Clarify your concept: What kind of coffee shop are you building?
Research thoroughly: Understand your market and competition.
Handle legalities: Registration, licensing, food safety, insurance.
Find the right location: Take your time; this decision is crucial.
Invest in equipment: Quality where it matters, economise where you can.
Develop your menu: Test before opening.
Hire and train well: Your team creates your experience.
Market consistently: Before, during, and after opening.
Focus on retention: Build habits with great coffee and loyalty programs.
Manage finances carefully: Track everything from day one.
For customer retention, Perkstar offers coffee shops an ideal loyalty solution. Digital stamp cards that customers save to their phones—no app download required. Every drink earns a stamp; after a set number, they earn a free coffee. Push notifications remind customers they're close to rewards or promote new offerings. The 14-day free trial lets you set everything up before your doors open.
Start your free trial at Perkstar →
Your coffee shop journey begins with one decision: deciding to start. Everything else follows.
