Opening a Coffee shop: DIY vs. Franchise
Julius Pankoke | July 5, 2016
Coffee Shops make for great startups. They are relatively straight forward and can be a good source of income and entrepreneurial experience. By requiring little training, the limitations on who can open a coffee shop are quite small.
Having direct contact with customers can be very fulfilling as an entrepreneur. This goes especially for those who left a stable office job behind to begin their entrepreneurial adventure.
Apart from these things and the limitless supply of excellent coffee, there is one major thing to consider before opening a coffee shop: Will you do it yourself or will you franchise? Like so many answers in life this one is: It depends. To find out what it depends on and which one is the right one for you, we are going to take a look at the pros and cons of both sides.
Challenges of a Franchise
First and foremost, Money. Franchise coffee shops require a substantial investment on your part. In addition to the normal investments like space, interior equipment and employees, franchises usually require you to have a certain amount of money as a guarantee and will take a fee for using their brand. These fees can come in many forms such as a percentage of revenue, mandatory training for you and your staff as well as branding fees.
Next to money, the level of standardisation is what concerns entrepreneurs most, when thinking about franchises. It lies in its nature to have pretty strict rules for the internal processes of their franchisees. This is done so an equal level of quality can be guaranteed. On the other hand, it also limits the creative freedoms you have when designing your coffee shop. For some people, who have no interest in designing or being creative, this is actually a bonus.
One of the lesser challenges is the fact that franchises usually have set suppliers you are contractually obligated to use. Again, this is done to ensure identical quality. But it also means that, if you have a local supplier, who could sell you the same items cheaper and fresher, you will not be able to prefer them over the mandated one. If you have a problem with the supplier, there might be a lengthy, complicated process of addressing these issues through the main company itself.
Challenges of the DIY coffee shop
Not a lot of people, who decide to open a coffee shop are actually trained to do so. This is an industry with a high percentage of lateral entrants, and semi trained entrepreneurs. If you are lucky you already held a job in the industry. This will at least give you the basics, but you will still need to learn a lot about the business detailed and rules that come with opening a coffee shop.
Although it can be fun, designing your coffee shop and everything in it can be rather difficult. You have to always keep in mind, what your customers are expecting from a good coffee shop and then put that in relation to your own vision. After you have designed your shop you will have to move on to an even bigger challenge. The menu. Competing coffee shops have a set menu that has been tested and proven to work. You will have to start from zero. To get some inspiration you should go to coffee shops in your area that cater to the same group you are targeting and see what they are offering. Now you at least have a baseline to start from.
Your menu and you shop are ready. Now you need the ingredients to actually create the dishes and drinks from your menu. You will need to find a supplier. Depending on your region and its infrastructure, there could be a large number of options to choose from. To ensure that you will have no starting pains because of a subpar supplier you should inquire about prices and quality. If you have them, use connections to other coffee shop owners from that.
Now comes the complicated part. While the franchisee can build on an existing brand, you are unknown. Taking steps towards getting your name out there and providing great service to customers will slowly but steadily build you the reputation you need to be successful.
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Advantages of a Franchise
While your DIY competitors are still struggling to get their name out there, you are 50% along, making a profit. No need to design any marketing campaigns or stand in the street slinging flyers. Headquarters is already providing excellent marketing through their big marketing department.
While your DIY competitors are slaving over their menus, you are brewing the first espresso. No need to be afraid that your menu is out of balance or too full. Several other cafes are making a profit with the menu and so will you. The concept has already been proven.
While your DIY competitors need time to establish a network of business contacts, you have a network of other coffee shops at your disposal. You can benefit from their experience and get help if you need it. If push comes to shove, there is always the headquarters to help you with your problems.
Advantages of a DIY coffee shop
You are free to design everything in your business just the way you see fit. No strict processes out of a corporate office. Don’t like the design anymore? Change it. Your imagination is the limit.
You are 100% in control of your situation. Every decision will be made by you or someone you appoint. This not only gives a sense of accomplishment, but also lifts one’s self-esteem.
You are going to reap all the rewards. All the revenue is yours. No fees will take a cut out of your hard earned money.
You are independent and so is your brand. Although it is tougher to create an independent brand, your customers will be far more loyal to you for not being a sell-out.
After all of this the answer is still: It depends. It depends on your craving for creative freedom. The answer to that you can only give yourself. Both models certainly have their pros and cons. Take the way you think will most fit you and your customers. You, do you. Or not. It depends.
UPDATE: The coffee experts of Espresso Works send us a cool infographic to give you another point of view and some additional information. Have a look: