Building your dream coffee shop business does take a little bit of hard work & time. Choosing the right location to open your coffee shop is going to be one of the most important factors in the success of your business.
But all your hard work could be wasted if you choose the wrong location for your coffee shop.
The main reason coffee shops fail is because owners do not know how much money they want to make from a certain location.
The key is understanding how realistic your sales goals are, based on the number of customers that will actually come through your doors.
After building multiple successful coffee shops, we have put together our winning formula to help you make sure you choose the right location every time.
1. Who is your ideal customer?
Finding the right customer for your coffee business is more important than just a busy location. The key to the success of any coffee business is meeting the needs of your target customer.
It is important to spend time identifying who your target customer is and why would they buy from you. One way to do this is to think about where your customer is going when they are passing by your coffee shop.
For example – let’s say you are planning to open a ‘grab & go’ style coffee stand. Your ideal customer would be someone who is in a hurry (office workers, construction workers, daily commuters).
On the other hand – if your coffee shop plans to have a comfortable seating area, your target customer might be someone who want to relax or socialise (university students, tourists, friends catching up etc.)
Just because a location seems busy, does not always mean your target customer is easily available.
So, what can you do?
- Spend some time in your preferred area and see if you can spot your target customers.
- If you are targeting the 9 to 5 office worker, they can usually be seen around meal times.
- Count the number of these ideal customers who walk past your potential location.
- This is a good exercise to figure out roughly how many sales you can make in a day.
- If your target customer drives to you, spend some time counting cars in the area.
Here are some possible locations that generally generates high foot traffic:
- University campus
- Shopping malls
- Service stations
- Office blocks
- Transit centres
- Gym or fitness centres
- Art galleries or concert halls
2. Is your coffee shop easily accessible?
Ask yourself whether the majority of your customers are coming directly to you, or finding your shop while walking past your location.
In a high foot traffic area, you need to make yourself highly visible through signage, outdoor seating & large open windows.
For example, having your coffee machine in a highly visible area, helps customers understand what you sell straight away.
Large signage and display becomes even more crucial in a lower visibility area. Place eye-catching street signs at crossroads nearby, with clear directions to your business.
If they are commuting to get to you directly, it is important to consider whether your location provides them with parking facilities.
So, what can you do?
- Talk to your landlord or local council to check if there are any signage restrictions in your preferred location.
- Choose a location with wide footpaths & walkways to allow more space for outdoor signage (you may be able to squeeze in a few extra seats outside as well!)
- Think about whether there are any pedestrian crossings close by. If not you may be restricting your customer count to one side of the street.
Major infrastructure projects are common in larger cities. Often these projects affect the accessibility (foot traffic flow or public transportation) to nearby businesses. To make sure your location is not affected by upcoming construction projects – check your local government websites before you sign a lease.
3. Is a shopping mall good for your coffee shop?
Shopping mall location
Shopping malls can be a great location for your coffee shop as it drives higher volume of foot traffic.
But keep in mind high foot traffic = high rent.
Ideal locations are always closer to large department stores.
Food courts often seem like ideal location, but the size usually restricts what you can do. You may have to serve a limited menu because of space & equipment constraints, affecting your ability to make higher profits.
Strip – mall location (a shopping area along a busy street)
Strip mall location can be broken down to 3 types of stores.
- A free standing building/corner site
This is generally the most visible option & tends to produce the highest sales.
- Middle location
Middle stores can be problematic, because it is difficult for the customers to notice you.
Many building will have restrictions on signage for the sake of consistency, so standing out might be difficult.
- Centre street location
This has the greatest visibility. But be sure to pay attention to choose locations close to major department stores.
So, what can you do?
- In middle locations at strip malls, find out if you are allowed to put tables outside.
- Also check if there is any restrictions around keeping your signage outside on the walk ways.
- Avoid dead end corridors – customers tend not go exploring if they do not see much activities down the corridor.
4. Who are you competing with?
No matter what you are planning to do in business, competition is always going to be there.
Spending time researching neighbouring businesses is crucial. Visit these businesses, check if they are offering the products that you are planning to sell.
Are there enough target customers in this location to support multiple businesses of the same type?
Don’t limit your research to just other coffee shops but also think about other businesses that may be selling to your target customer.
For example – let’s say you are a coffee shop who offers sandwiches or bagels for breakfast. But there is a juice bar nearby offering healthy breakfast options and they target the same customers as you. In this scenario your target customer has multiple choices. Juice bar becomes your direct competition even though they do not sell coffee.
So, what can you do?
- Visit neighbouring businesses as a secret shopper. Check their menus, seating capacity & atmosphere.
- Think about what you can bring to the area that other businesses are not offering.
- Your competitors will always match what you offer. Be flexible and creative in making changes at this stage.
- Stay focused on what the customer needs in your location.
- You can also become a complimentary product to your neighbouring businesses.
For example – the sandwich bar nearby can offer their customers your coffee at a discounted rate and vice versa.
5. What do you need to know about regulations & licences?
Before signing your lease documents, you need to make sure your business location complies with any licences that you need to apply for.
Your site may need to be verified by a local authority for food safety, fire safety, general health & safety.
Certain licences have specific infrastructure requirements. For example, availability of multiple gender specific rest rooms may be a requirement when you apply for a liquor licence.
So, what can you do?
- Obtain floor plans & check thoroughly to see is there is any restrictions is obtaining permits that you need.
6. Is your landlord difficult to deal with?
In spite of having selected the best location, sometimes unfavourable lease terms can hinder your success. Your lease terms are legally binding and changing or opting out might be difficult once you have signed.
Commercial rents steadily increase every year, with many lease terms including a fixed annual increase or market rate valuation (CPI). Keep in mind that as your rent increases, you may want to increase your product prices to survive (can your target customer afford this? Think about their income bracket).
It is common for landlords to own multiple properties in the same location. In order to minimise risk from competition, it is common to add in a lease clause that prevents direct competitors leasing one of their other properties nearby.
Choosing a landlord who owns multiple properties, or hires a property management service, ensures that they have better (and faster) systems in place for ongoing repairs and damages.
So, what can you do?
- Talk to neighbouring businesses who may lease from the same landlord and find out how easy they are to deal with.
- In a highly desirable suburb you may be pushed out of the market by your landlord being tempted by a higher price offer. Ensure your lease terms protect you from unfair rent increases.
- Ensure you are clear about who is responsible to any repairs and damages to the property, to avoid surprise costs in the future.
Check your lease for any demolition clauses. These clauses usually allow the landlord to demolish their property within your agreed lease term.
- Data is king. Count the cars and pedestrians that have easy access to your desired location and fit into your target customer. Compare this number to their expected average spend in your store and calculate your potential daily revenue.
- Consider how visible you are to these customer and what kind of signage could make more potential customers aware of your offering.
- Shop in your neighbouring stores. Check their menu and services to better understand your local customers and what value your business could add to the location.
- Think about what makes you different from your competition and focus on your target customer’s needs. Think about complementing other businesses in the neighbourhood, instead of competing.
- Make sure your premises complies with any local authority regulations that may affect your business plan.
- Ensure your landlord has systems in place to support your ongoing business, not hinder it.
- Set yourself up to win! Personally introduce yourself to neighbouring businesses and residents, offering them loyalty discounts or special coupons for when you start operating.
Once you’ve found your ideal location, you’ve already set yourself up to have a successful coffee shop business!