Getting started

[streetracer395]

I have been just tossing around the idea of starting a coffee shop. I have been looking around and had a couple ideas for locations, one place was near a shopping center with lots of people, the other just opened up that was a comic book store that is near the college and center of town and use to be a coffee shop. The cost between the two over 8 years, the lease for the shopping center would pay for the building and land $189,000 is what they are asking . Also the one building by the college was built around 1900 and the 2nd story can be used for a apartment/office. The competition is 2 local coffee shops use to be three till the rent went up within three miles. There about 5 places total that include starbucks on the other side of town and around 60,000 people in ten mile radius. I've heard from people that someone should open up one that had the atmosphere that out preforms the competitions which would easy. I know i need to put a business plan together, i could use all the advice i could get and any questions i'll try to answer.

[vangogh]

Welcome to the forum streetracer395.

Hard to know exactly how to advise you given I don't know the area at all, but I'll do my best to offer a few thoughts. If I'm understanding right the issue is which location to choose. One is in a shopping center, which will cost more and the other is near the college and in the center of town.

You mentioned a couple of coffee shops going out of business in the college location. That doesn't necessarily mean a coffee shop can't work in that location, but it's probably a good idea to consider that the area may not be the best despite what some people say. College students typically don't have a lot of money to spend. It's possible they fill the place up and make it look busy without actually spending much money to keep the place in profit.

Is parking good at either or both location. I'm assuming the shopping center has better parking. Having worked in several shopping centers over the years many of the employees of the stores tend to shop at the other stores. I'd often stop into whatever coffee shop was in the same shopping center regardless of whether or not I liked the coffee best. The convenience was hard to pass up.

A college location offers some additional opportunities. For example it might be a place where local musicians could play (probably acoustic only) or where poets could come in for an open mike, etc. That could help keep the place busy at night and the acts might help fill the place with their friends. If your shop becomes a hot spot for performers you might even be able to charge a cover some nights.

One common feature of a coffee shop near a college campus is a free wireless connection. However that could lead to people taking up a seat much of the day without ever buying more than a single cup of coffee. It's unlikely you'd be able to charge for the connection and it would probably be expected.

Could you copy Starbucks in the sense of offering high end coffee drinks? That would help increase profit per sale. I've seen some coffee shops advertise themselves as the non Starbucks alternative since not everyone likes Starbucks.

If there's a way to talk to the owners of the shops that went under you might want to ask them some questions about why they eventually went out of business. They might just say the rent went up, but I would dig deeper. I would assume your rent wouldn't be much different so if that's the issue it would be for you as well. It's easy though for someone to blame a rent increase for business failure since it means they don't have to put the responsibility on themselves. I'm guessing you won't be able to talk to them, but if you can ask as many questions as you can about their experience. They may end up giving you some ideas about how to make it work in that location.

Hope something in there helps.

[billbenson]

I was reading an article recently about shopping centers dying. A lot of closed stores etc. According to the article, malls are trying to strategically reintroduce themselves by changing the theme from one location shopping to an entertainment center. Adding higher end restaurants, carnival environments for kids, whatever. The article wasn't optimistic about this in the long term. I would think very hard and do some good research before looking at a mall location.

I was in Berkley CA a few weeks ago which is a university town. A local sandwich / coffee shop was full of college kids and one guy that looked to be 50 working on differential equations with a coffee next to him. Don't know how much coffee he was likely to drink but I bet he was there for a few hours.

A coffee shop seems like a tough way to make a living to me. Sure there is probably good margin in a cup of coffee and I know Starbucks made it, but it seems to me you've got to have some other revenue stream to make it work.

[tylerhutchinson]

Location is everything. I would look at the demographics in each area and how you are trying to target. If you want to target younger (college kids) people then the shopping center is probably better. The better the location, the higher the cost!

I would think that a coffee shop is a hard business to truly make good revenue given the competition out there these days. I agree with a lot of what Bill said. I would try to add features to the shop to make it more appealing. Maybe offering good sandwiches along with it and create a unique and creative environment to stand out from the normal coffee shops. In my area we have two large chains (Starbucks and Dutch Bros) that are literally on every corner. They have VERY loyal customers. It is common to see Dutch Bros bumper stickers on every other car in the city. So here it would be tough to get in. Hopefully your area is more open to competition.

[streetracer395]

Well the the college location the first time it just changed hands and the manager that ran it took it over from the owners, they let it go because they had lots of other properties. The manager fired all the employees and changed everything. The atmosphere was a lot darker the drinks were good, but it failed 2 years later. Everyone i knew hated the changes and the firing of the employees and most people never went back. I am still in touch with at least one person that use to work there when it was the first shop, they also worked for starbucks and a few other coffee shops. I have been to all the coffee shops in town, i have found the more lively the atmosphere and staff the more people tend to come back. The shopping centers compteition is a books a million and mcdonalds, also the shoppin center is about about 3-4 miles from the center of town and starbucks is the same distance in the other direction. The location there i have watched for about 5 years, me and my friend had called about lease and it was $2100 a month for 1500 sq ft then, now they say it's negotiable. The other plus besides being very busy is there a two schools one going either way past the center. Right now there is a mall but there is only one store left in it and it's holding out. The land around the area from what i've heard can not stand having a new mall likemost people want built on it. My main issue is getting the startup capital, but i would like to have a well planned business proposal. any advice would be useful and appreciated.

[streetracer395]

A unique atmosphere was what i had in mind, food, sweets and maybe a few other drinks besides coffee because it would help with profits second i know that not everyone likes coffee. There is a game stop in the shopping center few stores down from where i want to put the coffee shop i know most gamers like caffeine and they tend to have midnight releases. Starbucks is very new to our city and there is only one around.

[vangogh]

Sounds like the failed shops at the college location didn't have anything to do with the location then and rather poor management. Good. That suggests your good management could succeed. I think both locations can be viable. You'd probably have a different atmosphere and each and hence different marketing, but I think both could work.

The non-bottom line part of me would go for the shop near the college, because I'd enjoy working there more I think. It's hard to say definitively which location is better for the bottom line. Here in Boulder there's a big university and plenty of shopping centers. There are successful coffee shops in each not names Starbucks.

Do you think you'd be a better fit for the customers at either location? Does your personality fit better with a college crowd than with the shopping center crowd. You can probably build a successful business at either though each would certainly require different things to make them successful. Maybe the best way to approach it is to think about which one you'd enjoy more. Assume it's 5 years from now and your shop is successful. How do you picture it? What are the decorations inside? What do the customers look like?

[streetracer395]

I would say the shopping center would do the best, the location is in the corner of the big L shape of buildings that's why i believe no other company would set up since it was built. I see the opportunity to have a shop in the location and be able to market it well with building on either side on the location and always full , the college is about 3-4 miles north , center of town is 3-4 miles north east form the shopping center. There are three open spots one 1500sq ft i would like and two 100sq ft ones wich could be good for expansion. The lease is negotiable but i would like to know if the stuff listed above could give me the advantage to negotiate for even better price ? plus it would be a local shop with no big chain of companies.

[vangogh]

I'm not entirely following. Which things are you thinking would give you leverage in a negotiation? The fact that there's another place you can lease or is it something else?

[streetracer395]

Sorry i was in a rush when i typed that, the first thing was it was in the corner between all the buildings that are in a L shape layout where the 1500sq ft building might be able to have a sign people can see if you were walking down the main line of stores and the other two 1000sq ft buildings you would have to go to the end to see. Second i know they have not leased the three buildings in the past 5-6 years and i doubt they have since they built it. Finally i would be a new local business that would just be starting up and i need to make profits, plus why not take a offer rather then have a empty space making no money for another 10 years. They say it's negotiable now but i want to be able to pay everything and be able to expand business if it dose well not keep the status quo. So could any of this really factor to my advantage ? Are they good enough points to even mention ? Any idea what i could negotiate the rent price for ? As far as i know they are asking $2100 a month for 1500 sq ft or about $16.80 a sq. ft.

[vangogh]

If they've been having trouble leasing buildings in that shopping center then I would think it would give you leverage. You're right that they're going to want to fill the space instead of letting it sit empty. Of course the fact that they haven't been able to lease the buildings could be a sign that either that shopping center isn't such a great location for a business. It's possible they've simply been putting too high a price on the lease of course, but it is something to consider.

I wish I could offer specific advice about what rates you might get. Are there other empty buildings in the area? If there are maybe you could find out what they're going for. It would probably give you a better idea what to offer.

[streetracer395]

Far as i have seen it's just those three spots that haven't been filled at all, high price for what i'm sure most businesses would consider just bad location. Another spot opened up near the three about 1 month ago but they just moved a couple spots down. Then 2 more businesses opened up as well in the past 3 months, so it's full except for the four spots in the corner. One of the new stores i read did a 10 year $600,000 lease for 4,000 sq ft. so they pay about $15 a sq ft. a year in the more desired location.

[vangogh]

What makes the corner an undesired location? Is it hidden from the rest of the shopping center, tucked away in a place where foot traffic doesn't naturally pass?

[streetracer395]

I believe any business that has lots of stores would want the best spots, not these buildings the one i would pick might be able to have a sign people could see from the main row of bigger stores. Thats where i would use marketing to draw more people in, the other two smaller buildings are tucked away behind the larger buildings on the main row so you would have to be very close to the end to see. They have good traffic every day, but any business that would go there would have to be small as well.