7 Coffee Shop Costs That Sink Coffee Shop Owners

Coffee Shop Costs That Sink Coffee Shops

Avoiding Costs Will Save Money and Improve Profits

Coffee Shop Costs That Sink Coffee Shops

No one likes to witness a slow death. But when coffee shop owners step away from controlling their costs, that's precisely what happens.

Operating a coffee shop business requires constant engagement on your part. Without looking, costs can get away from you and sink your coffee business – usually very slowly.

Since costs can get ahead of even the most seasoned coffee shop owner, we want to discuss some of the typical expenses that sink coffee shops – and how to avoid them. Avoiding costs can also help your coffee shop make more money.

If you are interested in general coffee shop startup costs, you might consider reading our post, How Much Does a Coffee Shop Cost?

Costs That Sink Coffee Shop Businesses

While any number of costs (seen and hidden) can ruin a coffee business, let's talk about a few everyday expenses that can trip up a coffee shop owner. As we go through them, consider how you will avoid these costs with your own coffee business.

For a more in-depth article on coffee shop failings, read Why Do Coffee Shops Fail?

Over-Scheduling Baristas

For many coffee shops, labor can be the highest operational cost during the month. Keeping your coffee shop adequately staffed is essential, but over-staffing can decimate your budget – and your profits.

Having just one extra barista on a shift a couple of times a week can lead to thousands of additional costs per year.

Reliable and well-trained baristas are a godsend, but even the best barista standing without a clear purpose can siphon your profits.

Hire the best baristas. I believe that if you do find a great barista, you should do everything you can to hold on to them. For example, provide them with excellent barista training and empower them with various responsibilities.

The proper scheduling of your baristas will go a long way in saving you money. Often, this means understanding the ebb and flow of your customer visits. For example, if you are hit with morning rush hours during the workweek, it may be good to hire two or three baristas in the morning and have only one barista in the afternoon.

Take a good look at your data with the help of your coffee shop POS system. Your POS system will tell you what days and times of the week are your busiest and slowest.

Utilize your hard data, customers' observations, and address any other needs adequately. For example, if you have a kitchen that needs to be deep-cleaned, you may need to keep enough staff to do the cleaning while others serve customers at the same time.

Costs That Sink Coffee Shops (Continued)

Avoidable Coffee Shop Waste

If you have ever worked in the food industry, you know just how much food and beverages can be wasted.

Wasted food and drinks are wasted money.

For example, when things get hectic during a busy morning, it's easy to get sloppy and waste coffee, milk, syrups, and cups when making drinks. Getting orders wrong can also lead to waste.

Additionally, inadequate or improper handling and storage of food can lead to unnecessary trips to the dumpster.

You might not be able to anticipate every rush, and you can't avoid the occasional accident. Still, by planning for busy times and creating systems and efficient workflows, you might be able to mitigate much of the waste.

While small levels of waste seem trivial, over time, they can really add up. By reducing your waste, you can save significant money every week, month, and year.

Pro tip: ensure that each of your baristas has proper barista training.  Create an easy-to-manage workflow. Assign particular baristas for particular jobs. For example, you may have one barista taking orders and prepping cups for another barista behind the espresso machine.

Coffee Shop Inventory Management

Poor inventory management can lead to high costs and significant waste of money.

Trashing perishable items, holding up real cash in inventory that may not sell, or not having enough stock to meet your customers' needs – inventory mismanagement can sink a coffee business over time.

The most crucial part of inventory management is knowing what your customers want and what they are buying. Again, having a robust coffee shop POS system can help you with the hard data you need to make changes.

Additionally, being able to purchase just-in-time inventory may be helpful. This may require you to re-schedule deliveries and work with your vendors to meet the possible demand fluctuations throughout your week.

Creating a system that accounts for “what goes in and what goes out” every day will play an essential role in helping you manage your inventory.

An efficient inventory system in place can mitigate employee or customer theft. It's a challenging topic to discuss, but coffee shop owners continuously run into this problem. This leads us to our next major cost outlined below.

Employee Giveaways

It's common to allow employees to make themselves a coffee or beverage once or twice on their shift. Complimentary beverages are a positive perk when working as a barista.

Allowing your employees to try different products or even spend time creating new espresso-based beverages will require a bit of trial and error. Experimentation will require coffee, milk, syrups, etc. This is an expected cost for most coffee shops.

Also, every morning, you will want to dial in your espresso. This may take up to 80-100 grams of coffee to get it right. Trying new coffees and perhaps offering coffee tasting will siphon your inventory. Still, these are an essential part of your coffee business and should be included in your operational cost.

The real problem, however, may be employee giveaways. Employees who give away free drinks and food to their friends and families can grow into a systemic problem.

A coffee here and a latte there can cost you thousands of dollars over the course of your employee's time with you.

Giving away drinks can lead to a double-dipping of losses:

1. Loss of inventory
2. Loss of sales

One could look at “free” giveaways as employee theft. Therefore, it's essential that you have an employee-free drink policy in place. For example, you may decide that an employee may have two free drinks per shift. This is acceptable and is suitable for morale. However, you may also institute a policy that giving free drinks to friends and family is strictly prohibited unless approved by a manager.

Instead, consider offering a discounted price for “family,” such as 40% off the regular price. To help account for each “comped drink,” consider having a free item programmed into your POS system so you can see how many free drinks are given out every month.

If you have a loyalty-card program, I have seen employees add extra “stamps,” indicating the customer purchased much more than they actually did. To avoid this, consider having a digital loyalty program with your POS system tied to the customer's order history.

Remember, all of these giveaways are like minor cuts… and to paraphrase a saying, you don't want to experience death by a thousand tiny cuts!

Coffee Shop Costs That Can Ruin Your Business:

Marketing That Isn't Working

Marketing and promoting your coffee shop can be expensive. As a business owner, you might be offered to take out an Ad in your local and regional paper. You might pay for a social media expert to work on your social media campaigns. You may decide to create TV commercials or launch a snail mail campaign to local businesses and residents.

These can all be very expensive to launch and maintain – costing you thousands of dollars per year with little or no impact on your sales numbers.

Paid marketing is one way to promote your business, but the costs could outweigh the benefits! If you are spending any money on marketing and promotion, examine how it's working out for you and make the necessary adjustments.

Unless you find it necessary, eliminate all unnecessary paid marketing. Get creative in determining what marketing has worked and stick with that.

Marketing your coffee shop is always essential, but it should always bring you a return. Create a marketing plan that allows you to measure its impact on sales, customers, and inventory movement.

Lack of Proper Equipment Maintenance

You need your coffee equipment to run smoothly to operate your coffee shop. If your espresso machine goes down, your grinders stop running, or your sink clogs up… you might have to close up your shop for the day for needed repairs.

When this happens, you are paying for the repairs, and you are absorbing the loss of sales.

While it should be expected that you will have to utilize and contend with coffee equipment throughout your coffee career, many potential problems can be avoided with proper maintenance.

Invest in learning how to properly maintain your coffee equipment and train your employees to adequately use, maintain, and clean each piece of equipment they work with.

Create systems and maintenance schedules and communicate those with your employees. For example, you might want to create a checklist for opening and closing duties. Duties may include cleaning your espresso machine, vacuuming out coffee from the grinders, sanitizing blenders, and wiping down refrigerators.

While you cannot help the normal “wear and tear” of your coffee equipment, you can reduce expensive repair costs and some of the downtime that occurs.

Additionally, it might be a smart idea to put your “feelers” out there for good espresso repair services. Ask around. People in the coffee business are good at sharing the services or contacts they work with.

Costs That Sink Coffee Shops

The Cost of Time

As coffee shop owners, we have to put out many fires. Issues with customers, vendors, employees can take up quite a bit of our day.

Our time is our most precious resource. So many things can draw us away from doing our job and thinking critically.

If you are beginning to feel overwhelmed with work, you have to reassess your time management and allow yourself to have more time for the things you need or want.

When you start to run out of time or waste time on things, you will eventually become inefficient, grumpy, and ineffective at making good decisions. Over time, this could cost you significant money and ruin your coffee business.

Next, I'll offer recommendations to reduce your costs.

Costs That Sink Coffee Shops

Tips to Reduce Coffee Shop Costs

1. Determine What Takes up The Most of Your Time

Determine all the time-sucks and see how you can eliminate them. Remove the things or people that you don't want or don't need to deal with anymore.

For example:

• Is a particular employee injecting too much toxicity into your coffee shop?
• Are you frustrated with the deliveries of a specific vendor?
• Is an espresso machine breaking down every other week?

Eliminate these sand traps and free up your time and energy to invest in your business, yourself, or employees.

2. Learn to Say NO More Often

As a coffee shop owner, you will be asked a million different things every day. You should probably say no to 98% of those requests. By saying no first, you can always go change your mind and reconsider various costs once you have had time to consider your options.

3. Create Systems That Work For You

From your barista scheduling, barista training, inventory deliveries, food prep, cooking, or inventory shopping, you should create systems that develop efficiencies. Create a coffee shop operational manual or general recipes that should be followed. 

4. Use Technology

While the process of pulling espresso shots is about a century old, we can use other techniques to make our businesses more efficient. Use affordable technology to help you become more efficient. 

Start with a coffee shop POS system that will provide complex data and see how your operations are going. This includes your daily and weekly sales numbers.

Your POS system may also be able to serve to “clock in” and “clock out” your employees. Additionally, you can market to your customers by offering them text coupons through your POS system.

Check out LightSpeed POS for more information.

Additionally, since you may not be at your business every day or all day, you might be considering installing cameras. While cameras are great for security purposes, they also allow you to check in on your business while you are away.

5. Strive to Communicate Better

Being able to communicate is a great skill to have as a business owner. Many costs, accidents, or misunderstandings can be avoided by communicating better with your employees. Create a system for passing along information that is important to you or other employees. When you talk, be clear of ambiguity and be open to listening to your staff.

Summary

Coffee Shop Costs That Sink Coffee Shops

 We've covered a lot of hidden costs that can wreak havoc on a coffee shop business. Remember that these costs are not always visible. You might have to look for them. We summarize these potential business-threatening costs below:

• Over-scheduling baristas
• Avoidable coffee shop waste
• Coffee shop inventory management
• Employee giveaways
• Marketing that isn't working
• Lack of proper equipment maintenance
• The cost of time

Costs That Sink Coffee Shops

Related Questions:

How can I reduce my coffee shop startup costs?

The best way to reduce the cost of starting a coffee shop is to plan for a reduction right from the beginning.

For example, choosing a low-cost coffee shop concept is the first way to reduce your overall costs.

Next, consider what location you will be in. Some cities and areas can cost more than others to operate a coffee shop. You may also consider starting a mobile coffee business that would help you avoid the high cost of the rent.

For more information, please read our article, How to Start a Coffee Shop on a Budget.

How can I increase my coffee shop revenue?

Increasing your revenue is possible for every coffee business. Many factors impact your overall revenue, and adjusting or making changes to any one of these revenue factors could affect your bottom line.

For example, you might want to revamp and develop your coffee shop menu by adding new and exciting things for customers to try. You can also take a look at your coffee shop pricing strategy. You just might not be charging enough.

Additionally, taking a look at your coffee shop's marketing plan and promotions might be helpful, too.

For a more in-depth article, consider reading our post, How to Boost Coffee Shop Sales.

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