Tips to improve coffee shop profits

I was interviewed this morning from a writer for a coffee business trade magazine looking for some quotes for a new article on improving retail profitability. My notes looked like they would make a useful blog entry or perhaps can be expanded someday into an article of their own; for now, I decided to put my personal favorites on display, here:

  • Eliminate low-margin items that do not support your company’s core business of coffee sales, most often, food items that add traffic, but do not increase business profitability or promote coffee sales. On the contrary, these items usually project the image that your business does not specialize in coffee, which may weaken your brand image.
  • Retool your menu to focus on the most profitable products sold. Always draw customer attention to the most profitable products sold by your company. Marginalize low-profit items and emphasize higher profit items on your menu boards, promotional signage and in other customer communications materials. Train your customers to order the beverages that most benefit your company.
  • Raise prices to bolster your company’s brand image. Most independent businesses take the approach of undercutting the prices of local and national competition, which is a huge mistake. Prices communicate a perceived value of a product; if set too low, your customers assume that your beverages are not as good as your competition, even when your beverage quality may be superior.
  • Reduce or eliminate inventory – Excess single origin coffees and flavoring inventory ties up capital in your stock, requires valuable floor back room space for storage and slows the customer ordering process. Prune your coffee offerings to the best performing or a handful of seasonal options and consider reducing or eliminating flavoring stocks entirely.
  • Prepaid gift card program – Prepaid gift cards not only provide your business with immediate cash-in-hand, but also reduce credit card transaction charges and draw new customers to the business. EVERY retailer should offer a prepaid gift card program, networked to all company locations and ideally, also valid for on-line purchases.
  • Discontinue coupons and discounts – the most valuable customer demographic of daily coffee consumers are not influenced by discount programs or coupons, only infrequent drinkers or opportunists are swayed by the chance to save $.50 on “Deep Discount Tuesday.” Focus instead on promotions that draw customers to your retail location rather than discounting products.
  • Control waste and theft – audit sales and inventory reports to evaluate ingredient waste due to inefficient preparation, returned drinks and employee consumption. Retail locations can easily waste 20% or more of their daily sales these three key categories, which is a substantial and unnecessary loss.
  • Evaluate hours of operation – There is no need to be open during business hours when there is regularly no customer traffic. If, for example, Sundays are traditionally slow days for your business, trim your hours of operation for that day or remain closed. Be certain that your lease allows you this flexibility prior to signing, as many shopping center leases require that a business remain open during scheduled hours.
  • Eliminate bottlenecks in the ordering process – There is nothing more frustrating for a brewed coffee drinker than to wait in a long line of “double-non-fat-vanilla-chai latte – wait, make that half-caf” customers. Create a separate ordering line or other mechanism for quick orders, such as drip coffee, grab & go food items or whole bean retail bags. Evaluate the ordering process to find opportunities to avoid duplication, speed payment and beverage delivery to get more business through your tills during peak times.
  • Position add-ons and promotions at the point of purchase – As with the menu tips above, be sure that your current sales promotions are visibly advertised at the point of sale. Be sure to promote add-on impulse items that support your company’s brand image (even those gift cards!) when your customer is standing with wallet in hand.
  • Run employee sales contests – Your baristas are your salespeople and have a great deal of influence over the customer ordering process. All baristas should have some form of sales and customer service training to make each transaction active, rather than passive. Sales contests that emphasize high margin items or cross selling can be designed to be fun and engaging for all of your staff and will yield substantial financial results.

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Tips to improve coffee shop profits

11 Responses

  1. my coffee shop, now 4 years open has hit the wall! we need to increase sales by reinventing the shop or something any suggestions?

    January 31, 2009 at 5:29 am #
  2. Hi Tom, the plan to increase sales (and also perhaps reduce expenses) is something that will need to be specifically developed for your business. I suggest that you visit our company’s website at http://www.cafemakers.com and review our consulting services. We regularly evaluate existing retail and roasting businesses, then provide detailed recommendations on how to increase sales and profitability. This is something that must be done in person and requires quite a bit more involvement than may be discussed in writing on a blog or online forum. Please feel free to call or write anytime.

    Andrew Hetzel January 31, 2009 at 10:01 am #
  3. We are at the earley stages of a business plan. We have fantastic premises but alot to learn. Your information has been very helpful. We have lots of reserch to do and would appreciate any further advise you can give.

    Many thanks

    January 27, 2010 at 1:50 am #
  4. People will not buy an expensive coffee, no matter how nice it is. If you market a quality coffee at a reasonable price you’re onto a winner.

    January 3, 2011 at 6:58 am #
  5. Hi Mark,

    I agreed with you on providing quality coffee at a reasonable price..!!! At Purest, we serve organic coffee, and we make the effort to keep our house organic coffee affordable for the customers…and our customers do apperciate this…
    Happy 2011.

    Purest Café January 4, 2011 at 9:43 am #
  6. In our experience, there are no simple formulas because so much depends on clientele, location and perceived value. At Ground, we charge a fair whack for coffee and our sandwiches are all priced at the upper end of the spectrum, more than any other businesses in the area. However, we’ve focused on quality of presentation, technical skill and customer service, and we are very busy. Also, I think the success of Starbuck’s suggests that high prices do not necessarily put customers off as so much depends on marketing and design. Good luck everybody!

    Rick January 25, 2011 at 11:22 am #
  7. We are only 1 month old and looks like we have a long way to go.

    Thanks for the great advice and tips.

    Regards,

    Khawar

    Khawar Nehal January 30, 2011 at 9:21 pm #
  8. i am planing to open a Kiosk to sell coffe, any suggestion , thank you

    July 9, 2011 at 11:08 pm #
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