If you’re planning to start a coffee shop in the USA or anywhere else and want to understand profit margins and startup costs clearly, this guide has everything you need.
You’ll learn the actual costs involved, average profit margins, and practical tips to boost your coffee shop’s profitability.
Let’s get started:
If you’re thinking, is a coffee shop a good business? Then take an idea from this research: Coffee isn’t just a beverage; it’s a part of people’s daily routines. Around 63% of people in the U.S. start their day with coffee more than any other drink.
If you look at the interest past 5 years, it’s never been down:
And we look at the search volume of ‘Coffee shop near me’ keyword, which means tens of thousands of people search for new coffee shops every month, giving new businesses opportunities to attract these customers.
This is why coffee shops are such a popular business model.
Some people come in simply to grab coffee in the morning, have a break in the afternoon, or simply find a cozy place to work. Many of them come back every single day, which is not something you find in most businesses, and this is a powerful reason coffee shops can be a great opportunity.
But the real questions that every entrepreneur has in mind are:
- How much do coffee shops actually make?
- Is owning a coffee shop really profitable?
- Is this a sustainable business?
In fact, there is no straight answer to these questions because all these questions may have an answer ‘Yes’, but the problem is that you still need to take care of many things that we will discuss here.
On this page:
How profitable is a coffee shop?
A well-managed coffee shop can be a lucrative business. The average gross margins range from 60% to 70%, while net profit margins range from 10% to 20%. This means a well-run coffee shop can make an excellent profit after paying rent, salaries, food, and other expenses.
Coffee is something people purchase daily, and often several times a day. Unlike stores that use occasional shoppers, coffee shops maintain a successful business based on repeat customers from day to day.
Great experience, drinks, and atmosphere mean that customers will always come back.
Moreover, there is more than one way to generate income.
Here is what successful coffee shops do:
Some shops sell pastries, sandwiches, and other branded merchandise. Premium drinks, such as specialty lattes and cold brews, are offered at a premium price, which yields an even better profit margin.
Upselling—for instance, offering a muffin, an extra shot of espresso, or getting them to sign up for your loyalty program—is also a great revenue enhancement.
Some coffee shops work on loyalty programs, as well as seasonal discounts, which also help keep sales consistently strong throughout the year.
Thus, the more you sell, the more you make profits!
Profitability completely depends on the size and model of the coffee shop.
Statista reported that the coffee shop and snack industry in the United States was valued at over $68 billion in 2024, with 77,500 businesses and 900,000 employees in that sector.
Starbucks, the largest single-chain coffee retailer, garnered close to $30 billion in revenue in 2023 and has over 16,000 stores in the U.S.
This doesn’t mean independent coffee shops ain’t successful or that these big giants are giving them a tough time. Everyone has their own audience.
While these large chains dominate the market, independent coffee shops have found successful areas of niches in selected demographics and regions.
If we look at the data, we find that an average small independent coffee shop earns revenue ranging between $450,000 and $500,000 annually. Then, after the cost of the rent, no matter if it’s the location, wages, and other direct and indirect costs of ingredients, the owner takes home anywhere from $60,000-$160,000 annually.
Similarly, most small coffee shops in the UK earn anywhere from £100,000 and £150,000 revenue per year. Of the surveys, 22% of coffee shops fall within that average. While 12% take in £250,000 or more, there are smaller businesses that see a turnover of £25,000 or less.
Regardless of location, the success of a coffee shop is a mixture of smart operations, great service, and customer loyalty.
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Revenue potential and profitability breakdown:
A busy coffee shop certainly brings in revenue. In fact, the average small coffee shop in the U.S. brings in approximately $1,000-$2,000 daily on average. That’s about $30,000-$60,000 per month, or $360,000-$720,000 a year.
However, revenues can vary based on certain factors.
Location is the most important one.
A café on a busy street in a city has the potential to do much more than a café located in a small town with less traffic. If a coffee shop is near offices, schools, or transit stations, it can see steady business during the day.
Sales is another crucial aspect.
A shop could sell 200 cups of coffee each day, priced at $5 a cup, and make $1,000 revenue solely from coffee.
Then, when you throw in items like pastries, sandwiches, and other add-ons, that would increase very quickly.
Pricing is another factor that matters.
If you do it right, you can increase the revenue easily.
For instance, upscale drinks like cold brew or flavored drinks like lattes with vanilla or chocolate can be marked up, simply increasing the revenue per drink without changing the customer count.
But revenue is only one side of the story.
There are profit margins and costs that need to be taken into account before deciding to open a coffee shop.
Profit margins:
You know, revenue doesn’t mean profit.
Most coffee shops will have a net profit margin of 10% to 20% after expenses.
In other words, if a coffee shop generates $500,000 in revenue, the owner will make from $50,000 to $100,000 in profits.
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Costs:
The start-up expenses can be substantial.
Generally, rent is often the highest expense. In prime areas of a large city, rent alone can cost $5,000 to $10,000 a month; in smaller towns, a cafe might pay $1,000 to $3,000 a month.
And equipment is not inexpensive, either.
An average espresso machine will cost between $5,000 and $20,000. When you add in grinders, refrigeration, furniture, and décor, the total expense for the barista set up is anywhere from $80,000-$300,000.
Additionally, there are business-related costs, such as permits, insurance, and branding or marketing costs.
Once the shop is operational, there are recurring costs that can add up.
Rent, utilities, and internet service can take away a good portion of revenue.
Employee salary is a different set of significant costs, as baristas and employees deserve fair salaries and coverage for training.
The quality of the ingredients matters too.
High-quality beans, fresh milk, syrups, and pastries all cost money.
Marketing and loyalty programs are also very important for bringing customers to the shop, but they cost money upfront.
In a nutshell, a successful coffee shop that manages expenses can be a successful venture. Most coffee shops do not see profit right away. In fact, it usually takes anywhere from a period of six months to a couple of years to break even.
Some coffee shops may achieve breakeven sooner, but it usually depends on a location’s foot traffic, local customer loyalty, and marketing techniques, along with pricing strategies.
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Coffee shop business models:
Not every coffee shop operates in the same manner. Some are focused on experience, while others are focused on speed and efficiency, etc.
Each model entails different costs, risks, and opportunities for profit.
Traditional sit-down café:
A sit-down café creates an inviting atmosphere for customers to relax, work, or meet friends.
They thrive on customer engagement and offer a full food-service menu featuring coffee, food, and desserts. Upselling, for example, selling a croissant with a latte, increases profitability.
Startup costs for a sit-down cafe can range anywhere from $80,000 to $330,000. However, this model has more costs, and more costs than other coffee shop models. Factors like rent, utilities, and staffing can mount up rapidly.
Notwithstanding the risks, a well-managed café in a prime location can build a loyal customer base and generate strong profits over time.
Coffee kiosk or mobile coffee cart:
A kiosk or mobile coffee cart has lower overheads to enter the coffee business.
According to Crimson Cup, startup costs for a kiosk or cart range from $60,000 to $125,000, making it an affordable option for testing the market before opening a full-scale cafe.
On the plus side, kiosks and carts have the unique advantage of being portable.
Kiosks can be placed in locations such as a mall, office building, or train station, while carts can be moved to a location with greater pedestrian traffic, such as festivals or business districts.
The trade-off? Limited space equals fewer menu items and lower profits per transaction. While a traditional café builds long-term asset value, kiosks and carts often operate out of temporary locations.
This business model is alluring for the low-risk entrepreneur since there is a meaningful possibility of returning a profit.
Drive-Thru coffee stand:
Speed and convenience are the keys to a coffee stand’s success. Consumers pick up their coffee to go, allowing for quick consumer turnover and repeat customer sales throughout the day.
Drive-thru locations also require less labor costs than traditional sit-down cafés because there’s no wait staff.
Although new start-up costs vary significantly depending on the location and the equipment, they can range from $55,000 to $300,000.
The Drive-Thru coffee stand model can be very profitable. One of the largest drive-thru chains, Dutch Bros has nearly 1,000 locations, and on average, each Dutch Bros generates $2 million each year in sales. That’s more than many traditional cafés make in a year.
Franchise vs. Independent Coffee Shop
Now, the next question is, should you start an independent coffee shop or go for a franchise?
Franchises demand a larger upfront investment to get started, but in exchange, you will gain an existing brand, training, and marketing.
For instance, the Beans & Brews Coffeehouse charges franchisees a fee to operate under their name but provides a proven business plan and marketing support.
While the franchise fee and royalties are an expense that cuts into the owner’s profits, many entrepreneurs select this style of operation since it’s a lower-risk model and has built-in customers.
On the other hand, having an independent coffee shop gives the owner complete control over their branding, pricing, and operations, but the owner’s success relies heavily on their ability to perform quality marketing, along with excellent customer service and quality products.
In that case, they must work harder to acquire new customers and retain old customers since having a known brand is no longer a factor.
In general, both ownership styles can be profitable, but having a franchise comes with more stability, while an independent coffee shop comes with more creative freedom and potentially more money long-term.
How to maximize profit in a coffee shop?
Great coffee is just the starting point. If you want to run a successful coffee shop, you will need to make the most of every sale.
Here are ways to take your business to the next level.
Find your edge:
Not every coffee shop is created equal. You need to carve out your unique niche. Some coffee shops focus on specialty coffee, using high-quality beans and expert espresso skills, while others cater to eco-conscious customers by providing organic and vegan food and drink options.
Whether it’s a one-of-a-kind concept or a simply different business model, a niche helps you differentiate yourself from the competition and provides a way for customers to remember your shop—and come back.
Price with purpose:
A small tweak to your prices can increase your profits without any additional costs.
Cold brews and flavored lattes, for example, earn a higher margin than a plain cup of drip coffee or a basic latte without added flavors.
Seasonal offers can create a buzz around new beverage offerings.
In the fall, for instance, a pumpkin spice latte becomes a must-have, and during the summer, customers will pay for a refreshing iced matcha.
Additionally, limited-time offers add urgency to purchases. When customers know something will not be available for some time, they are more likely to purchase it.
Sell more than a cup of coffee:
A quality coffee house offers more than coffee. When someone orders a $5 coffee, pastries, sandwiches, and snacks can turn that into a $12 sale.
Branded merchandise, such as mugs and tumblers, generates an additional revenue stream as well as marketing the shop.
Coffee beans and brewing equipment let customers recreate their favorite drinks at home. That means sales keep coming in, even when they’re not in the café.
Keep costs low without cutting corners:
Being economical does not mean compromising on quality.
For instance, sourcing less expensive suppliers for beans, milk, and other ingredients maintains healthy margins.
Ensuring that you have the appropriate number of staff provides sufficient coverage during busy times while preventing overstaffing during slower times.
Developing energy-saving habits, like turning off equipment when it’s not needed, will lower utility costs.
Make customers feel special:
People don’t just come for coffee. They come for the experience. Here is what you can do to keep your customers coming back:
- A loyalty program gives them a reason to return.
- Rewarding them with a free coffee on the tenth or fifteenth visit works like a charm.
- Additionally, gift cards bring in cash upfront and encourage future visits.
- Personalized discounts or special perks for regular customers show them they are valued and help prevent them from going to a competitor.
Build a Digital Following
A great coffee shop exists beyond its walls. Social media is a helpful tool in attracting new customers.
Posting high-quality pictures, hosting giveaways, and sharing behind-the-scenes activities are excellent ways to keep customers engaged.
Additionally, delivery services open the doors to new customers. People will order their coffees and pastries for delivery and are willing to pay extra for it simply because it is easier for them.
This way, the owner can easily increase sales without the customers leaving their homes. The more connected a shop is online, the more customers it will bring through the door.
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The biggest challenges of running a coffee shop:
Owning a coffee shop is a dream many hope to live. In reality, it can be tricky.
From well-established competition to rising costs, here are some of the most significant obstacles coffee shop owners face.
Standing out in a competitive market:
Probably the first challenge of opening a coffee shop is that, in almost every city across the globe, coffee shops are plentiful. Independent shops compete against Starbucks and Dunkin’, and there are many new specialty coffee shops.
In a busy location, customers will have tons of choices.
The only solution for a coffee shop’s survival in such a competitive space is building a strong identity.
An independent coffee shop’s identity can consist of the combination of its menu, customer service, and environment that sets it apart from others! Without those key elements, it’s easy to get lost in the sea of coffee shops.
The cost of coffee keeps rising:
The cost of coffee beans is not fixed. It is determined by worldwide supply chains, weather, and politics within the coffee-producing nations.
When droughts, bad weather, or disruptions to supply chains arise, the price of coffee often rises overnight.
When costs go up, coffee shops have two options: raise prices and risk losing customers, or take on the cost and cut into profit. Neither is a great option to have to make.
Smart sourcing and supplier relations help a lot, but there is a price increase that will in some way affect every café.
Hiring (and keeping) great baristas:
A great coffee shop needs great baristas.
That said, getting reliable and qualified employees can be a real struggle.
Barista jobs are often viewed as short-term work, which leads to high turnover rates.
Many of the best baristas leave for higher-paying jobs, and it is difficult to keep a strong and experienced team that is reliable every day.
Additionally, training new employees takes time and costs the shop money. When employees leave, the service and the quality of drinks can become inconsistent.
And solution of this problem is that shops that provide fair wages, good training, and a positive work environment retain their best employees for longer periods.
Adapting to changing consumer preferences:
Customer expectations are constantly changing.
An increasing number of customers prefer healthier options such as plant-based milks, sugar-free syrups, and organic beans.
There are also heightened concerns about sustainability; customers are looking for shops that use recyclable cups, ethically sourced ingredients, and waste minimization.
As a result, coffee shops that do not evolve and match the evolving customer expectations will risk losing, if not already lost, business.
Meanwhile, those that do will attract loyal, eco-minded customers willing to pay a premium for quality and sustainability.