What are you doing to better your coffee shop business?

by chee Leng (on coffee makers)

Location is so important that all your competitors are here!

Location is so important that all your competitors are here!

For coffee business owners, this is really tough times. Most of us in the business know that coffee is at all time high (some say the highest in 17 years, but it really depends on which day you are reading the chart).

And depending on which part of the coffee business value chain you are at, the process might also cost more, the delivery might be more, the rental might be more and in recovered economy, the wages might also go up!

Take Singapore as an example, recently government make some changes to the levy imposed on foreign workers (FYI-Singaporeans are averse to working in F&B because of the long hours).

Now, you have to pay more money even though your workers wages do not increase!

And in places like ION Singapore, where big names shops are closing down like nobody business, the rental is still sky high at more than $20 per square feet.

For a little shop of 1000 square feet, that would be $20 000.00 per month and that is excluding utilities bill and "marketing charges" or any other creative charges that landlord would be charging a coffee shop.

So, everything is going up, it is going to be more expensive doing business, and of course, you can increase the price of your products too.

Then again, your customers might just visit the shop next to you, because there is like hundreds of coffee shop similar to yours in that area!

What is the solution?

Remember what veterans used to say about "location, location, location"? So, you paid for the prime location, have tons of traffic -now what are you going to
do to manage the cost?

For this article, lets think about the conventional wisdom of "location, location, location".

1. If you are opening a shop in a high traffic area, does it even make sense to have sitting capacity where it would take longer to turnover your customer?

2. So, if you are a coffee shop with some sitting capacity, regardless how good your traffic is, you are restricted by the size of your shop.

3. A better model to tap high traffic is take-aways, where the turn over can be extremely fast.

4. Then what about the beautiful themed restaurants that you want to open in the busiest place in town? It is wiser to choose another spot to operate, in my opinion.

Many companies succeeded not because they are in the busiest street but because they have the right business model.

The biggest brick and mortar retailer Wal-Mart did not open their first outlet in town, but in some far away place where they can build it big and sell things cheap.

I am writing this in reference to what a reader asked me about the "best place".

And with this post, I am attacking specifically the concept of "location, location, location", it might have worked in the past, but it is not as effective now.

So, if you are opening an outlet or planning on expanding, there are many places to invest your resources but space, in my opinion is definitely not it.

The number one thing to better your business is to build it, making it stronger. Getting a better location, is hmm...only beefing up the pocket of the landlord.

My $0.02.

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