By Cathy Yen
A financially successful business needs volume and efficiency for the numbers to work. Lots of sales and as little cost as possible. The owner will spend as much as s/he can afford on marketing to drive customers into the shop. But, there may be additional opportunities for profit beyond selling coffee, one cup at a time.
In our third installment of "coffee shop economics," we'll identify some of those opportunities.
Parties provide a much-needed shot in the arm, especially during slow periods. On a typical cold night in January, a restaurant could see overall sales increase 50% from a single event. Catering is another good option. Although this is a different business with different challenges, catering can leverage the investment in space, staff and kitchen equipment.
Some restaurants sell a signature product. The coffee shop may roast its own beans, for example. It can sell them in the shop or wholesale to other businesses. Coffee, soup, hot sauce, barbecue sauce, bread, gelato, pastries, sausage, giardiniera, even pizza – these all are examples of products our local "retail" food businesses are making and selling to customers outside of their core restaurant operations.
The internet can help "brick and mortar" stores increase sales. Most retail businesses now have online presences, allowing them to ship out the back door sometimes more product than they sell through the front door.
Finally, managing multiple locations can be more profitable than a single store. Although this requires significant investment, it creates scale. Managers, software, marketing and back office systems that are too expensive for one store make sense when you have multiple stores. The average Dunkin Donuts franchisee owns seven stores. The same is true of Subway.
Small business is tough. Owners find it challenging to push sufficient volume through a single suburban location. Developing alternative sales channels, expanding product lines and even adding locations can grow a business into one that can sustain the owner and provide a decent return on investment. Margins are too thin to rely on a single source of revenue. It is hard to sell that many cups of coffee.
Answer Book 2019
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