If you’re considering a coffee shop franchise, there are a few things you should really take into consideration before you jump right in and start serving hot cups of coffee. The entire process of buying any franchise requires a lot of thought and a lot of due diligence before making the big decision. Way too often first time business owners or entrepreneurs jump into the first business that comes their way and they don’t do enough research. Well, this article will give you some things to think about before making a decision.
First of all, coffee shop franchise opportunities are literally everywhere as more and more chains pop up every year. Why? Well, the pure number of coffee drinkers has grown dramatically and coffee shop locations are almost on every corner. However, that’s only part of the equation. The real truth of why they are so popular is because of the culture and atmosphere created with coffee shop franchises. People come to hang out, maybe do some work, have some meetings, drink some flavored coffee and hang out.
The really positive side to this industry is the profitability because the profit margins are absolutely HUGE. I mean people are paying – or more for a cup of coffee that probably has a total expense of $ .25. Percentage wise that’s really big, but selling cups of joe is a volume business. I’m pretty sure nobody’s getting rich selling a few coffees. The real secret to increase the volume dramatically is to have a drive-thru. People are lazy and they want their stuff fast.
On the other side, the total costs including cost to entry can be significant. Initial franchise fees can vary from 5 figures to 6 figures and beyond. On top of that, you have to get a retail location (or maybe they just ‘tell you’ where you’re store will be), maybe lease large equipment, get inventory, have fixed and variable costs, marketing costs, employee wages, utilities and so much more. Also, don’t forget about the royalties because the franchisor definitely wants their share and royalties are usually based on gross revenues, not net profits.
The real question can be deciding whether a franchise model or traditional business model will be right one for you. On the surface, the easy answer seems to be franchise model because of it’s ‘proven system’, which is what coffee shop franchises possess. Typically the business plan, marketing plan, advertising programs, relationships with vendors and training systems are all included in the franchise model meaning there’s no guess work on what to do. On the flip side, the traditional business model doesn’t have all of these things that come with the ‘business in a box’ but you definitely can make a lot more money with just 1 business than with a franchise.
Tags: coffee drinkers, coffee shop locations, cold truth, employee wages, flavored coffee, franchise fees, franchise opportunities, initial franchise, profit margins, shop franchise