The coffee shop business is a very profitable venture. According to an estimate, people drink approximately 2.5 billion cups of coffee every day around the world. Experts say that the figure would increase to 67% by the end of 2022. The interesting fact about coffee and other ready-to-drink business is that they’re resistant and can survive easily in the volatile markets.
Starbucks is a very good example of a coffee shop business. It has become a hugely successful brand by having 31000 coffee shops at different location points around the world. The annual revenue of the brand was 42.71 billion US dollars by the end of 2018, out of which the net income of the company was 3.88 billion dollars.
There are two ways to start your coffee shop business; first, buy a franchise from any famous brand and secondly create your brand. When you buy a franchise agreement from a famous brand, then you don’t have to work on the branding and advertisement. In return, you have to pay a certain amount annually to the parent brand.
On the other hand, creating your brand is also a good option if you want to be your boss. You’ll have the sole responsibility of your business. Today, we’ll discuss the swot analysis of a coffee shop business. Here it follows;
Table of Contents
Strengths of a Coffee Shop Business
High Service Culture
Although the coffee shop is a quick turned around small business. But its target market and customers require high-quality service like a clean place, washed cups, good sitting arrangements, nice seats, and clean waiters and staff. It’s because all of these little things give the impression of a healthy environment.
If the environment is neat and clean and smiling staff, then customers would love to visit the shop and drink coffee. It’s not just a coffee, it’s the place to make you feel good and change your mood.
Coffee is such a small item that people can make it at home. But they would like to go out with friends to have coffee at some outdoor place. That’s why customers keep coming and going throughout the day, whenever they get time.
Quick & Motivated Staff
The work routine is so simple that the staff knows the steps they have to perform over and over again. Since a variety of customers keep on coming and going all the time, all these things make the staff motivated. They know that they have to be quick to serve their customers.
Running a coffee shop business isn’t the job of one person. The number of members in a team varies on the size of the business. If it’s a small shop, then there’ll be 2 or 3 people. If the shop is big, then there’ll be more people. When these people work together towards the common goal, productivity multiplies.
Clear Work Values
Everyone in the coffee shop business knows the whole functionality of the business. They know that their work values are to serve the customer with better quality and a smiling face.
Direct Relationship with Customers
Customers physically come to the shop to have coffee. Therefore, it’s a great opportunity for the owner of the staff to connect with the customers and make him/her a regular client.
Highly focused Niche
The coffee shop business is a highly niche focused venture. It’s a general store, where you can offer a variety of things for a different brand. It’s focused on one thing, and that is serving coffee.
Quality Product & Service
When you offer quality products and services at your shop, it would create a positive image for the customers. If you keep on providing the same quality service every day, the number of customers keeps on multiplying.
The focus of the coffee shop business is to serve the customer better than competitors. This strategy couldn’t more focused than that.
If you’re providing quality service than competitors, then it wouldn’t only attract new customers. But it would also give you a competitive edge in the market. After that, you’re in a position to charge premium prices to your customers. They would be willing to pay for it.
Positive Attitude to the Brand
When you greet customers with a smiling face, then it would attach a positive attitude to your brand. It would help your brand to attract new customers in the new geographic region if you’re expanding your business.
Weaknesses of a Coffee Shop Business
Less Market Data
When you’re launching a coffee shop business in a new market, then you need data to check the statistics. It’s very difficult to collect the market data, especially in this niche.
If you want the quality product and service, you have to do things manually. When we talk about manual processes, it’s good but time-consuming and costly.
Difficult to Estimate Capital & Profit
Profit in the coffee shop business comes in the form of bits and pieces. Therefore, you have to be very vigilant in accounting and math. Only then you would be able to keep your accounting books in order.
Less Market Share
There’s a limit to acquire a market share in this business. It’s because you’ve limited seating arrangements and limited supplies to serve several customers. You can’t go beyond that. Therefore, you can’t have the market share at a certain limit.
Difficult to Make a Name
Almost every coffee shop provides some unique taste, and that becomes its reputation. Of course, you’re providing a quality service. But it doesn’t mean that you’re the only seller in the market. That’s why it’d difficult to make a unique name in this category.
When you open your coffee shop in a certain market, it’s not something that people can’t copy and create the same product. Competitors can easily enter the market and you’ll have no option but to share the profit with them.
There’s a very slight margin between the profit and cost, and you have to manage everything in between. You also heavily rely on the supplies of suppliers. If they keep on providing you the ingredient on time at a cheap price, your business would keep on running well.
Opportunities for a Coffee Shop Business
Developing a Direct Relationship with Customers
The good thing coffee shop business is that it provides you an opportunity to establish a direct relationship with customers faces to face.
Innovation & New Techniques
Since you have to do things manually, therefore, you should keep on trying innovative techniques to increase the performance of your business. It could in the form of a new product’s taste, different seating arrangements, changing work routines, etc.
Develop Brand Loyalty by Offering Rewards
You should offer rewards and discounts to regular customers. Such offers would help you to not only increase brand loyalty but also to attract new customers and retain old ones.
Better Customer Experience
By offering reward programs, new offers, and launching new techniques would help you to develop a better experience for customers.
Increase Product Line
You can increase the product line by offering some cookies, snacks, cakes, and other similar items to your customers along with Coffee. It’ll be a nice addition to your product, but it would also earn you some extra profit.
Increase the Target Geographic Area
You can increase the target market by launching new franchises in the different regions under the same brand name. That’s how you can increase the target market and market share as well.
Advertisement to Build Brand Awareness
You can also use a paid social media advertising tool to target a new market if you’re opening a new franchise in the new region.
Mobile Application & Home Delivery Service
If your business is running well, you should launch a mobile application to give an additional option to your customers. When they’re using your mobile application, you should also provide a home delivery service.
Threats to a Coffee Shop Business
Difficult to Maintain Cash Flow
It’s difficult to maintain the same cash flow every day in the coffee shop business. It’s because of several reasons like weekends, holidays, strikes, protests, pandemic, etc. If customers keep visiting your shop for coffee, it’s good business. But every day isn’t the same day in this line of work.
Low Profit Margin
As we have discussed earlier that profits come in the form of bits and pieces, and out of which you’ve to cover a list of expenses. You can have your share of profit after that.
Price Sensitive Market
Coffee is such a product that you can’t raise the price at a certain limit. If you do that, people would stop coming to your shop for coffee at being too expensive. Soon you’ll run out of business.
Suppliers know that your business completely relies on their support. It gives them an upper hand, and they raise the prices of daily supplies whenever they want.
The Low Price of Competitors
Sometimes competitors lower the prices of the product to attract the market. It’s a loss for your business either way if you lower it or not.
After a detailed swot analysis of a coffee shop business, we have concluded that it’s good and it can run well in the volatile market. If the owner of the coffee shop is smart and knows how to capitalize on strengths and take advantage of the opportunities. Then it’s good. But threats are also real, you should have a plan to overcome threats.