As of 2024, there were approximately 37,000 coffee shops in the United States, representing a total market size of $47 billion. But how profitable are coffee shop businesses? How much investment is required to start one? And what is the average turnover for a coffee shop?
In this study, we analyze the financial data from over 2,100 real coffee shops in the United States to provide you with accurate, up-to-date answers to these questions.
The data, sourced from 2024, includes revenue, costs, and profit data from some of the largest 6 coffee shop franchises in the US, representing a total of 2,100 coffee shops.
Whether you’re considering starting your own coffee shop business or seeking to understand the financial dynamics of the industry, this article offers a detailed look at the key factors that influence profitability.
We’ll be exploring several key questions:
- How Much Revenue Does a Coffee Shop Make?
- How Profitable are Coffee Shop Businesses?
- How Much Does It Cost To Run a Coffee Shop?
How Much Revenue Does a Coffee Shop Make?
When evaluating how much revenue a non-franchise coffee shop can make, using data from established coffee shop franchises can provide valuable insights.
Here is the detailed data from some prominent coffee shop franchises:
| Franchise | Revenue $ | Square footage | Rev. / sq.ft. | Business model |
|---|---|---|---|---|
| Summer Moon Coffee | $1,160,000 | 1,800 – 2,000 sq. ft. | $600 – 650 | Sit-in + takeout |
| PJ’s Coffee of New Orleans | $528,000 | 650 – 2,000 sq. ft. | $250 – 800 | Sit-in + takeout |
| Just Love Coffee Cafe | $613,000 | 1,500 – 2,200 sq. ft. | $300 – 400 | Sit-in + takeout |
| Dunn Brothers Coffee | $586,000 | 1,500 – 1,900 sq. ft. | $300 – 400 | Sit-in + takeout |
| Biggby Coffee | $676,000 | 1,300 – 1,700 sq. ft. | $400 – 500 | Sit-in + takeout |
| Scooter’s Coffee | $870,000 | 664 sq. ft. | $1,300 | Kiosk |
As shown here, coffee shops can generate significant revenue, with some franchise brands like 7 BREW reaching over $2 million annually.
Revenue depends on a number of factors, mostly the business model (sit-in vs. takeout) and size (square footage).
On average, sit-in coffee shops are anywhere from 1,500 to 2,000 sq. ft. and generate about $300 to $800 revenue per year per square foot for the most successful ones.
Instead, kiosk-focused models can achieve much higher revenue per square foot, up to $1,300 revenue per year per square foot, indicating a more efficient use of space.
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How Profitable is a Coffee Shop?
On average, a coffee shop makes about 15% in profit margin (EBITDA margin).
EBITDA represents the earnings from coffee shop kiosks before considering interest expenses, tax expenses, depreciation, and amortization, giving a picture of their operational profitability.
Cost of goods sold (COGS) as a percentage of net sales remains relatively consistent across all brands we analysed, around 40% (including discounts).
Consequently, Gross margin percentages are relatively stable across all categories (~60%).
Instead, EBITDA margin varies significantly from one coffee shop to another depending on the level of revenue. Indeed, due to operating leverage, the higher revenue, the lower the percentage of fixed costs as a percentage of revenue is, and consequently the higher the profits.
The impact of operating leverage is very obvious when looking at the 2 examples below where we showed, in addition to the average performance of all coffee shops, the performance of the top and bottom quartile respectively.
Coffee Shop Profit Margin Example: Biggby Coffee
| Metric | All Stores | Top Quartile | Bottom Quartile |
|---|---|---|---|
| Gross Sales | $833,063 | $1,155,835 | $555,140 |
| DiscountS | ($114,979) | ($166,826) | ($77,395) |
| Net Sales | $718,084 | $989,009 | $477,745 |
| Cost of Goods Sold | $221,594 | $306,321 | $147,236 |
| Gross Profit | $496,490 | $682,688 | $330,509 |
| Gross Margin | 59.5% | 59.0% | 59.4% |
| Labor | $223,248 | $290,297 | $163,199 |
| Operations | $14,536 | $18,944 | $11,597 |
| Administration | $40,551 | $42,045 | $38,080 |
| Services | $65,845 | $41,533 | |
| Marketing & Fees | $80,294 | $106,891 | $56,979 |
| Total Operating Expenses | $411,164 | $524,022 | $311,388 |
| EBITDA | $85,326 | $158,666 | $19,121 |
| EBITDA Margin | 11.9% | 16.0% | 4.0% |
Coffee Shop Profit Margin Example: Scooter’s Coffee
| All | Top quartile | Bottom quartile | |
|---|---|---|---|
| Gross Sales | $879,725 | $1,268,540 | $533,220 |
| Discounts | $71,012 | $104,879 | $41,179 |
| Net Sales | $808,713 | $1,163,661 | $492,041 |
| Cost of Goods Sold | $271,696 | $386,168 | $168,969 |
| Gross Margin | $537,017 | $777,493 | $323,073 |
| Gross Margin % | 61% | 61% | 60% |
| Labor Costs | $232,063 | $306,423 | $166,970 |
| Rental Expense | $39,089 | $37,533 | $38,283 |
| Royalty | $64,697 | $93,093 | $39,363 |
| Card Processing | $22,873 | $32,982 | $13,864 |
| Overhead | $48,000 | $48,000 | $48,000 |
| Total Expenses | $406,722 | $518,031 | $306,480 |
| EBITDA | $130,295 | $259,462 | $16,592 |
| EBITDA Margin | 14.8% | 20.5% | 3.1% |
How Much Does It Cost To Start a Coffee Shop?
Let’s now look at how much it (actually) costs to start a coffee shop.
Looking at the same 6 franchises representing together more than 2,100 individual coffee shops, here are the low and high-end estimates of the investment required to start a coffee shop:
On average, you would spend between $330,000 to $1,000,000 for a 1,500 – 2,000 sq. ft. coffee shop.
The range varies based on a number of factors: build-out requirements, quality of the equipment and furniture, size of the shop, location, etc.
Here is a table showing the low and high-end investment required for the selected coffee shop franchises.
| Franchise | Low-End Investment | High-End Investment |
|---|---|---|
| Summer Moon Coffee | $596,000 | $987,000 |
| PJ’s Coffee of New Orleans | $459,000 | $1,131,000 |
| Just Love Coffee Cafe | $470,000 | $711,000 |
| Dunn Brothers Coffee | $536,000 | $809,000 |
| Biggby Coffee | $328,000 | $591,000 |
| Scooter’s Coffee | $331,000 | $638,000 |
Types of Startup Expenses
Here are the main expenses you can expect to incur when starting a medium-sized sit-in / takeaway coffee shop:
Real Estate Lease Deposit for Premises
This is a security deposit required by the landlord to secure a lease agreement for the coffee shop location. It is typically refundable at the end of the lease term, provided there are no damages or breaches of the lease terms.
Leasehold Improvements
Expenses related to constructing or renovating the coffee shop premises to meet business needs. This includes plumbing, electrical work, flooring, and any structural modifications required to create a functional and inviting space.
Furniture, Fixtures, and Equipment (FFE)
This includes all the essential items needed to furnish and equip the coffee shop. It covers seating, tables, counters, kitchen equipment, coffee machines, refrigeration units, and other necessary fixtures to operate the business.
Opening Advertising
Initial marketing and promotional activities to attract customers to the new coffee shop. This could include digital marketing, local advertising, grand opening events, and promotional offers to build awareness and drive initial foot traffic.
Deposits, Licenses, and Various Permits
Prepaid costs required to obtain necessary business licenses, permits, and utility deposits. These are mandatory for legal operation and compliance with local regulations.
Opening Inventory
Initial stock of coffee beans, milk, syrups, pastries, and other consumables required to start serving customers. It also includes disposable items like cups, napkins, and straws.
Signage
Costs for designing, producing, and installing exterior and interior signs that display the coffee shop’s name, logo, and branding. Signage is crucial for visibility and attracting customers.
Small Wares
Smaller operational items such as utensils, plates, cups, blenders, and other small tools necessary for daily operations. These items are essential for preparing and serving food and beverages.
POS System & Backoffice Computer System
Investment in point-of-sale (POS) systems and computer software for managing sales transactions, inventory, employee schedules, and other administrative tasks. A reliable POS system is crucial for efficient operations and financial tracking.
Working Capital (Additional Funds)
A reserve of working capital to cover initial operating expenses and unforeseen costs during the early months of operation. This ensures that the business can operate smoothly until it becomes profitable.
Startup costs: The PJ’s Coffee of New Orleans Example
| Type of Expenditure | Low | High |
|---|---|---|
| Real Estate Lease Deposit for Premises | $2,500 | 12,500 |
| Furniture, Fixtures, and Equipment | $183,000 | $236,000 |
| Opening Advertising | $12,500 | $12,500 |
| Travel and Living Expenses While Training | $3,500 | $5,000 |
| Insurance | $2,500 | $5,000 |
| Other Prepaid Expenses, Such as Deposits, Licenses, and Various Permits | $2,000 | $6,500 |
| Opening Inventory | $10,000 | $14,000 |
| Signage | $7,000 | 18,000 |
| Free Standing Building or Leasehold Improvements (Not Including the Purchase of Land) | $175,000 | $725,000 |
| Small Wares | $9,000 | $12,000 |
| POS System & Backoffice Computer System | $2,500 | $5,500 |
| Legal, Accounting & Organizational Costs | $2,500 | $5,000 |
| Construction Drawings | $7,000 | $30,000 |
| Additional Funds | $30,000 | $30,000 |
| TOTAL | $449,000 | $1,117,000 |
Coffee Shop Financial Model
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Coffee Shop Financial Model
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