Barista Camp

2015
Riccione

Coffee shop economics

Andrew Tolley
Who thinks it’s important for a coffee
shop to be profitable?
Benefits of profitability (it is not a dirty word)

• Grow business further – create new opportunities

• Invest in people – professional development of baristas
• Buy new toys - Invest in new technology
• Pay back loans
• Pay back initial investment costs in the business
 Profit and loss model

Revenue {coffee, food}

–
Expenses {labour, rent, cost of goods sold, overheads}
=
Operating Profit
Profit and loss model
Revenue 100%
Expenses

Labour 30%

Rent/rates/taxes 20%

Cost of goods sold 30%

Overheads 5%

Operating Profit -
%NET REVENUE
100% - 85% = 15%
 P&L from Rent
𝑟𝑒𝑛𝑡
Revenue £100,000 = %
20
Expenses

Labour 30,000 (30%)

Rent/rates/taxes 20,000 (20%)

Cost of goods sold 30,000 (30%)

Overheads 5,000 (5%)

Operating Profit
{%NET REVENUE}
Rev - Exp = 15,000
So, what is a profitable coffee
business?
Revenue > expenses

… but also where there is alignment between

your personal and professional vision and
values
Aligning vision and values with
profitability
Not a : ) customer
Poor customer experience

Poor customer service

Doesn’t get to fully enjoy the coffee

No good reviews
Not profitable
Revenue= coffee
Coffee is £4 a pop

Barista’s paid £8 an hour

A. B.
cups of coffee sold per hour, per 3 cups of coffee to sell per hour, per 6.7
barista barista
revenue £12 revenue £27
Labour at 30%
Labour at 67%
=
=
profit
Loss
(Labour + COGS
(£ 4.05)
+rent +overheads =
14.6)
Customer Experience
The final piece to our story is the
customer
• Know your market
• Give them a reason to come back
• Have multiple products that they want to buy
 AVERAGE
MARKET REGULARITY TRANSACTION REVENUE
SIZE VALUE

1000 1 2 2000

1000 2 2 4000
 =PROFITABLE BUSINESS

3. LOTS OF HAPPY REGULAR CUSTOMERS

2. BE TRUE TO YOUR VISION & VALUES

1. REVENUE GREATER THAN EXPENSES

Some homework
1. Apply the profit/loss model above to your own café or a café you are thinking of opening.
What is your target revenue? How many coffees do you need to sell, if 70% of net
revenue is from coffee?
2. What is the highest number of drinks you can make in an hour, and over a day?
3. If 50% of these will be made in the first 3 hours of trading, how many baristas do you
need?
4. How many hours will you be open? What is your daily labour cost? How much revenue do
you need to make in order for labour to be 30% of net revenue?
5. What is your desired income from the café? Is this possible with the projected revenue?