Barista Camp 2015 | Andrew Tolley - Coffee Shop Economics

The speciality café business has come a long way in the last decade in Europe. We have seen huge growth in the number of cafes selling outstanding coffee, made by skilled baristas. Is this sustainable? What do the economics of a successful speciality café look like to give you the income and lifestyle you want, while also being true to your dream for the business? This is a talk about thinking big and saying yes to the right opportunities for the right reasons.

Transcript

1. Coffee shop economics Andrew Tolley Barista Camp 2015 Riccione
2. Who thinks it’s important for a coffee shop to be profitable?
3. Benefits of profitability (it is not a dirty word) • Grow business further – create new opportunities • Invest in people – professional development of baristas • Buy new toys - Invest in new technology • Pay back loans • Pay back initial investment costs in the business
4. Profit and loss model Revenue {coffee, food} – Expenses {labour, rent, cost of goods sold, overheads} = Operating Profit
5. Profit and loss model Labour 30% Rent/rates/taxes 20% Cost of goods sold 30% Overheads 5% Expenses Operating Profit - %NET REVENUE 100% - 85% = 15% Revenue 100%
6. P&L from Rent Labour 30,000 (30%) Rent/rates/taxes 20,000 (20%) Cost of goods sold 30,000 (30%) Overheads 5,000 (5%) Expenses Operating Profit {%NET REVENUE} Rev - Exp = 15,000 Revenue £100,000 = 20 %
7. So, what is a profitable coffee business? Revenue > expenses … but also where there is alignment between your personal and professional vision and values
8. Aligning vision and values with profitability
9. Not a : ) customer Poor customer service No good reviews Poor customer experience Doesn’t get to fully enjoy the coffee
10. Revenue= coffee Coffee is £4 a pop Barista’s paid £8 an hour cups of coffee to sell per hour, per barista 6.7 revenue £27 Labour at 30% = profit (£ 4.05) Labour at 67% = Loss (Labour + COGS +rent +overheads = 14.6) cups of coffee sold per hour, per barista 3 revenue £12 A. B. Not profitable
11. The final piece to our story is the customer • Know your market • Give them a reason to come back • Have multiple products that they want to buy Customer Experience
12. 1000 1000 MARKET SIZE AVERAGE TRANSACTION VALUE 2 REGULARITY 2 1 2 REVENUE 2000 4000
13. 2. BE TRUE TO YOUR VISION & VALUES =PROFITABLE BUSINESS 1. REVENUE GREATER THAN EXPENSES 3. LOTS OF HAPPY REGULAR CUSTOMERS
14. Some homework 1. Apply the profit/loss model above to your own café or a café you are thinking of opening. What is your target revenue? How many coffees do you need to sell, if 70% of net revenue is from coffee? 2. What is the highest number of drinks you can make in an hour, and over a day? 3. If 50% of these will be made in the first 3 hours of trading, how many baristas do you need? 4. How many hours will you be open? What is your daily labour cost? How much revenue do you need to make in order for labour to be 30% of net revenue? 5. What is your desired income from the café? Is this possible with the projected revenue?