A coffee business trade magazine writer contacted me today searching for ideas about how to improve coffee shop profits. My notes looked like they may make a useful blog entry, so I’ve included them here:
Improve Coffee Shop Profits
- Eliminate low margin items that do not support your company’s core business of coffee sales. Food items that add traffic but do not increase coffee shop profits or promote coffee sales should go. 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. Emphasize higher profit items on your menu boards, signage and in other customer communications. Train your customers to order the beverages that most benefit your company.
- Raise prices to raise 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 drop inventory items. Excess single origin coffees and flavoring inventory ties up capital in your stock. It also 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. 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. Network the same system to all company locations webiste.
- 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 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 waste 20% or more of their daily sales these three key categories, which is significant and unnecessary.
- Evaluate hours of operation. There is no need to be open during business hours when there is regularly no customer traffic. If 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. Some locations like shopping centers 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 complex espresso drink 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. Test the ordering process to find opportunities that avoid process duplication and speed payment. This will allow more business through your tills during peak times.
- Position add-ons and promotions at the point of sale. As with the menu tips above, be sure that your current sales promotions are visibly advertised at the point of sale. 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 should have some form of sales and customer service training to make each transaction active, rather than passive. Sales contests emphasizing high margin items or cross selling can be fun and engaging for staff and yield results.