Why do 74% of independent coffee shops fail in the first five years
When coffee shops fail, it’s not because of their coffee, in my view, it’s the people.
Let me explain this with a brief story that’s going to conclude with number 1 reason to why most independent coffee shops fail in the very first year. Shall we begin?
While going to work, I’d pass a tiny independent coffee shop, named Sam’s Den, bustling with people every day. It seemed like a popular place amongst locals and for an entrepreneur-mind like me, I often thought that the owner must be making good business out of this tumult.
To my surprise, just last week, I noticed the “Closed” sign and on speaking to a couple of people around, I discovered that the owner had to shut the business because of a prolonged period of negative cash flow due to low sales. Apparently, he had to call it quits just after 18 months of beginning operations. Surprising, heh!
At the outset, Sam’s Den looked like a fun, profitable business. What I didn’t realize is that often independent coffee shops become a “hangout place”, where a lot of people spend a great amount of time with their friends, meeting their business associates, or perhaps, working on their computers — all day — with just one drink.
Based on what I’ve seen lately, people treat coffee shops like their living room, study hall or office, and don’t realize that these businesses make money from a constant flow of sales.
The math is simple — If you’re occupying a table or even a booth in a small, humble cafe, you’re potentially driving away the customer who would want to come in and have coffee, sandwiches, probably, a cake and a lot of conversations. They might have to look out for another place because someone had been sitting with a laptop for three hours sipping a cup of latte.
According to me, this could be just one of the many reasons that I fathom that the majority of small establishments simply don’t survive, and only a select few make it past the first year.
A recent survey conducted in April 2019 on 232 coffee shops in the U.S. observed that 50% — 74% of independent coffee shops fail in the first five years.
Sad, but true!
So what’s the fix?
To begin with, having a warning sign with house rules like, “this ain’t no place for freeloaders”. At least, that’s what I would have done, but in a discreet way. I’m thinking, wall art, a really badass one.
But if that’s not your way, there are plenty of ways to increase sales and prevent your name from getting listed under the “failed coffee businesses” category.
Basics, very important and non-negligible!
A few years back anyone could have opened a cafe without having a basic sense of customer satisfaction and retention. Even with terrible customer service, the untrained staff at the counter, no parking and absolutely no idea about the difference between a latte and a cappuccino, you’d succeed.
But today, with giant chains like Starbucks, taking over the world with their impeccable coffee and phenomenal customer service, customers expect special handling even from small, independent coffee shops. They no longer want to or have to endure bad business to get good coffee. If you won’t give them what they need, they’ll turn to your competition and never look back.
Many new coffee shop owners tend to skip out on understanding this basic element of business handling that would better position them for success.
In short, you have to offer a lot more than just good coffee.
Being the third place between home and work, a coffee shop should embolden a warm and inviting setting, where people can be themselves and unwind without running into hassles.
Ample parking space, great customer service, and high visibility are just a few points to start with. Acquiring new customers and encouraging the existing ones to visit your cafe over and over again is a whole new ball game. Click here to read tips on customer retention.
Unleash the power of emotional connection
A piece of advice I got from my mentor when I was starting my consulting business and I feel that it holds true for all kinds of businesses. Knowing how to connect with your customers is half the battle won. I also feel that owners need to be involved with creating an atmosphere that people want to be a part of.
To successfully run a coffee shop, one must possess genuine passion and enthusiasm to make excellent coffee as well as meet AND serve (REAL) people.
How about storytelling sessions at the cafe every Friday? Tell them how you came up with the idea of having your own cafe and what encouraged you to take the leap? Your regulars would be really happy to know your story and would be encouraged to share their experiences.
Connecting with customers on an emotional level will ensure that they ALWAYS choose your coffee house over others. Apart from this, be open-minded and take feedback seriously. Let them know that they are valued and if necessary, go the extra mile to keep them happy and satisfied with your services.
Online ordering is a norm, not a choice!
Yup, if you’re still thinking whether you should or should not take your business online, then you’re preparing it for insurmountable failure. How? Because, 67% of online users are placing their orders online and often due to lack of time, prefer to have their coffee, food and even milkshake delivered at their chosen location without delays.
In order to succeed in today’s fast-paced, digitally equipped world, being online is the secret sauce to keep the business moving. Implementing an online and mobile ordering solution allows your customers to browse the menu, place their order and pay — without the pressure of waiting in line.
A website and/or mobile app with a simple, attractive interface can adopt your brand image, as well as give your coffee shop greater visibility, that may or may not be possible with the uni-channel approach. Want to learn more about online ordering? Read here
Keep it Original and Consistent
When it comes to visiting coffee shops, people like predictability. They don’t like surprises. Opening late on a few occasions or tweaking the menu every season would only put off your customers. Having said that, originality and consistency are critical to your survival.
If Starbucks’ Avocado Latte is making a buzz in the industry, there’s no reason for you to tweak your menu. People coming to you every single day are looking for simple, classic and original coffee that can help them kickstart the day. So you have got to be consistent.
Apart from this, everything you make must have a standard recipe so that your coffees are 100 percent perfect every single time, regardless of whether they are being made by a head barista or an intern. Having a standard recipe also make the food cost predictable and foreseeable that help restaurant meets its financial goal. It is because all the quantities and qualities of ingredients that are going to be used will be the same every time.
So here you are! If you have been struggling to keep your business afloat, these tips should help you start selling in the right direction. Treat your coffee shop as a serious business and soon you’ll realize the potential of profitability. Remember, we all need at least a cup of coffee every day, sometimes twice a day, so if you provide your customers the ease of online ordering, exemplary service quality, and impeccable coffee, running a coffee shop can be the most rewarding experience.