Coffee franchises are springing up in almost every town and city worldwide. It is a tough business to be in when you consider the long hours, health and safety regulations and numbers of staff required.
When potential franchisees first look at this business they are blown away by the profit margins. Surely any business that has such high margins built in must be profitable?
In reality it is not as simple as that. For a coffee shop to be truly successful it needs to generate a huge number of sales to cover the fixed costs. The fixed costs are very high primarily due to the fact that business premises are required in shopping malls and busy high streets. This means that over half the turnover goes towards covering the rates and rents.
A coffee franchise needs a higher number of employees then most franchises due to the number of hours the business has to be open. The majority of turnover is done either before work starts, at lunchtimes, after working hours and during the weekends. Unlike some other franchises this is definitely not a nine to five business!
Staff costs are very high and then there is the problem with keeping them. Most employees in a coffee shop franchise are only doing this work until they manage to get a better job! This means that there is a constant turnover with staff and this can be a nightmare to manage. Most new members of staff will require some training.
A coffee franchise usually sells a lot more then just coffee. Most also supply sandwiches, cakes, pastries and other snacks. On a busy day it is far too easy to run out of supplies too early whilst on a quiet day some of the food might have to be discarded. The regulations involved with selling food to the public means that detailed records have to be kept.
Competitive forces are also at play with a number of new fast food franchises entering the scene as well as speciality sandwich makers. These are all conspiring to take away some of the regular trade from the coffee franchises.
It is still possible to make money with a coffee shop franchise and to achieve this needs careful planning and the right strategy. Premises must be found that are on busy thoroughfares for the right terms.
Only the best coffee should be served. Not all coffee shop franchises adhere to this simple rule! Some even restrict you into buying coffee beans only through their own supply chain. This can be troublesome especially if the tastes in your area are varied and different.
The ideal solution is if there is a right balance between the coffee you have to buy from the franchisor and the flexibility to source it elsewhere. This also helps to make the business more profitable as most franchisors charge a premium compared to sourcing and buying quality coffee beans elsewhere.
If you are prepared to work unsociable hours and have people skills especially with regards to dealing with employees, then a coffee shop franchise might still be the right business opportunity for you.
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