Coffee consumption continues to rise — up another 5 percent according to the National Coffee Association’s latest survey — making opening a coffee shop an attractive choice for many entrepreneurs.

But remember, there’s a lot of well-financed competition out there and a huge amount that can go wrong. With serious competition on virtually every corner, your coffee shop’s success relies on your ability to get the basics right. Here’s a quick guide to the fundamentals of opening a coffee shop.

Your customer

Long before you open the doors of your coffee shop, you’ll need a solid understanding of the type of customer you want to attract. Everything you do – from naming your company and designing the menu, to choosing a location, even social media – will be influenced by your target audience. When you’re starting a business, every dollar counts. Understanding your target customer allows you to get laser-focused in your promotional efforts, making your marketing spend much more affordable, efficient, and effective. The term ‘market research’ tends to scare a lot of entrepreneurs, but given the current state of the economy, it’s a crucial step that you can’t afford to skip. Understand the demographic makeup of your community and consider your ideal customer’s psychographics before opening a coffee shop.

couple opening a coffee shop

Your unique value proposition

Now that you understand who your target customer is, it’s time to consider how your coffee shop will stand apart from the local competition.Remember, you do not have the brand recognition of a large coffee shop chain or even some of your more established local competitors. What makes your coffee shop different? For example, if the coffee shop you are opening is located in a busy metropolitan area, it might be a good idea to design your coffee shop experience with the busy commuter in mind. One way you could do this, is by designing a business app that allows customers to pre-order their morning coffee. In the example provided, your business’ value proposition would be “coffee shop service on the go.” With this in mind, you would be able to put your best foot forward by expressing this benefit to your customers in everything you do.

Your business structure

The legal structure of your coffee shop affects everything from how it is taxed and managed, to its funding options and even your personal liability. Typical business structures for new coffee shops include sole proprietorships, partnerships, and limited liability companies. As your coffee shop grows, forming a corporation may become necessary – especially if you intend to open a chain or have plans to franchise your coffee shop business.

SEE ALSO: 4 Tips for Brewing Up Profits in Your Coffee Shop

Your name and branding

One often overlooked aspect of opening a coffee shop is choosing your business name. Your coffee shop’s name is its identity, it’s part of your brand. Get it right and your target customers will likely understand what your shop is all about, and become interested in what it has to offer. Get it wrong and they’ll likely be confused or uninterested. You’ll also want to make sure that your name is unique and doesn’t infringe upon the intellectual property of others. For example, Starbachs might be cute, especially if you designed your coffee shop experience with a classical music theme in mind, but you’ll likely hear from Starbucks’ legal team.

Your menu

Congratulations! You’re off to a great start with a clear target audience, unique value proposition, and a fantastic name that showcases your coffee shop’s personality. Now it’s time to make sure that your menu reflects all of the above. Always keep your ideal customers’ tastes and preferences in mind, and consider using focus groups to fine-tune your menu.

choosing menus when opening a restaurant

Your location

You’ve heard it before — location, location, location — yet location is probably lower on our list than you may have expected. Yes, location is vital when opening a coffee shop, but if you don’t know who you want to target or what makes your coffee shop business unique, how can you possibly choose the best location? Get those right first, then scout the perfect location.

SEE ALSO: You’re Just 10 Steps Away From Opening a Coffee Shop

Your role

You’re opening a coffee shop, so, of course, you know your role — or do you? Once the coffee shop is up and running, how will you contribute to the business? Are you the hands-on type who needs to be in the coffee shop day in and day out? Or would you prefer to hire a competent manager and better serve in an advisory role? Figure out your long-term position now, and you’ll be better able to set your coffee shop up for long-term success.

Your business plan

So far, we’ve asked you to do a bit of soul-searching. Now, it’s time to put it in writing. Your business plan covers your coffee shop’s legal structure, purpose and mission, business objectives, target audience, competition, financials, industry analyzes, marketing messages, coffee and menu guidelines, management plans, personnel plans, and plans for growth. Get your business plan right from the start and open the doors to your coffee shop business with confidence.

Your coffee shop design

Before opening the doors to your coffee shop business, it needs to be functional and comfortable for both the front of and back of the house. Work with a designer, preferably one with experience in coffee shop design, to ensure your floor plan is welcoming and accommodating for employees and customers alike. Coffee shop design is more than just floor plans and function. Your coffee shop design must also reflect your brand. For example, if your brand is all about premium coffee and gourmet food, the quality of your building materials and decor need to match.

man sitting in open coffee shop

Your POS system

Finally, your coffee shop needs a practical point of sale system, ideally one designed to accommodate the needs of a coffee shop owner. That’s right, not all point of sale systems are created equal. Coffee shop customers expect fast service and often have unique requirements.

Make sure to select a POS system that not only satisfies your customers’ expectations of speed and customization, but can also capture customer information, optimize staffing, manage inventory, adjust pricing, accept a variety of payment types, generate useful reports, and integrate with popular accounting systems such as QuickBooks. Get the POS system right before opening your coffee shop, and many of your coffee shop’s key management processes will become much more manageable.

Paul Nugent

Paul Nugent

Paul Nugent is a small business advocate who uses his background in the startup space, along with his POS system expertise, to allow small business owners to make informed decisions within their specific budgets.