If you haven’t had a cup of coffee yet, now would be the time to take a sip, because we’re about to get detailed.
Let’s break down the cost of a coffee: the coffee beans cost .63 cents a cup, the cup costs around .13 cents and the lid costs .03 cents. The sugar costs .04 cents and milk costs .08 cents and labor is around .33 cents. In total, the coffee costs $1.24 to make. The average cost of a cup of coffee is $2.70 before tax, which means your profit rings in at $1.46 a cup.
And yet, the startup cost of a coffee shop can be anywhere between $25 000 and $500 000. So let’s take the median amount of $262 500. If you were exclusively selling cups of coffee, it would take 179,794.52 coffees sold to break even. At a rate of 200 cups a day, it would take a total of 898.97 days to break even on startup costs. That’s almost two and a half years!
What can we conclude from all of this? Something most coffee drinkers, sellers, and caffeine dependant people know well: we cannot subsist on coffee alone!
One Forbes article reported that the magical equation to ensuring your coffee shop is successful is, “coffee should be no more than 40% of your weekly sales and [there should be] two item sales per customer transaction.” But how do you ensure those numbers? Here are six strategies to use to increase average spend at your coffee shop.
1. Know Your Margins
First things first, you need to know your margins like the back of your hand. What’s profitable, what’s selling, what’s working, and of course, what’s not. The more insight you have into the products and campaigns that are performing profitably, the more energy and resources you can place into promoting those efforts, while eliminating the products and resources that have attached a vacuum to your wallet. Top of the line POS systems now have analytics features which allow you to create detailed sales and cost analysis reports so you can better gauge the profitability of your wares.
2. Add On & Upsell
The difference a dollar makes. Upselling flavor shots or an extra espresso shot can make a huge difference to your bottom line over time. According to CappOrders.com, even “free” flavor shots can make a difference if marketed correctly, enticing guests at a rate of approximately 20% more sales monthly. Not bad!
3. Work “The Pumpkin Spice Latte” Effect
With “treat yo’ self” at the heart of this strategy, pumpkin spice, candy cane, orange mocha, gingerbread, pine tree – ok, maybe not pine tree – but seasonal flavors in general have the power to up your profits. The big guns know it – Starbucks has reported profit increases of up to 10% over the holidays due to specialty beverages. Instead of your customer going for their old staple, they might just be tempted to spend the extra couple of dollars on a sweet indulgence, trading in their medium dark roast for a medium gingerbread latte because ’tis the season!
4. Creative Combos
What’s better than “peach pie and chai” for $10? Not much. It’s hard to resist a caffeine deal sweetened with an edible treat. Not only does creating food and beverage deals make the customer feel like they’re saving money, but it cuts down the choice effort. If they were going to just get a coffee, but a breakfast sandwich is on special with a coffee in tow, you can bet your bottom dollar if their stomach is even just a bit rumbly, they’ll go for it.
5. Leverage Self-Ordering Technology
Why leave it up to your cashier to ask, “Would you like a cranberry muffin with your latte today?”, when a Self-Ordering Kiosk, makes upselling automatic by nature? The kiosk’s visual menu can take the reigns on upselling by displaying all of your available menu items. This visibility will help increase the likelihood that your regulars who normally just grab a drip coffee and go, might be enticed to try that drool-inducing breakfast sandwich featured on your kiosk, ultimately increasing their total check size.
6. Keep Track of Trends
Whether it’s flavor trends, various iced coffee concoctions, or fun fizzy drinks, take care to keep track and cater to coffee shop trends. For years now (every single September), pumpkin spice becomes the rage, and the crowds go wild.
More recently, nitro coffee has become a trend. Nitrogen gas is infused into coffee in order to create a stout-like effect which makes for a creamier taste. Matcha green tea powder has made a resurgence over the last few years, while regular green tea has been cast to the wayside. Keep your fingers on the pulse of the latest trends in order to capitalize on the curiosity that will lead to an upsell, or put your coffee shop on the map.
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