It’s a well-established fact that the coffee business is a pretty competitive one. If you need evidence, consider the fact that more than half of all independent coffee shops fail in the first five years.
Those are some pretty bleak statistics. However, your shop doesn’t have to be one of the ones that go under.
To take valuable lessons from the others, you’ll need to look at the causes. So why do coffee shops fail?
Keep reading, and we’ll show you several reasons behind this failure.
Top 10 Reasons Why Coffee Shops Fail
Poor Planning and Preparation
A survey of shop owners found that being unprepared to own a business was the top reason for failure. Too many people get caught up in the romantic idea of having a trendy café without realizing just how much work goes into it.
It’s not as easy as opening your door and sitting back while the customers roll in. Experienced owners of any type of business could tell you that.
So before you throw yourself into the business, do your research.
Visit coffee shops and observe how they are run. Talk to local business owners and discuss what some of the challenges are of running their companies on a daily basis.
You’ve also got the whole internet at your fingertips. Spend some time diving into industry marketing trends and statistics to give yourself an idea of what it’s like.
Everyone has heard the saying before: location, location, location. For some businesses, the location might not matter as much, because they can be run largely online.
But this isn’t the case for coffee shops, which depend pretty heavily on foot traffic. They need to be somewhere that’s easily accessible to customers.
Every business wants a place in the trendier districts. The problem here, though, is that rent can be astronomical in those spots.
If you can’t be in the heart of the city, at least consider other aspects about your potential location. Think about parking and the condition of the overall neighborhood.
Also factor in what types of businesses would be around yours. If you’re surrounded by offices who will have hungry employees on lunch breaks, you’ll have found a pretty sweet spot.
Competing with Others
Competition is remarkably fierce in the coffee industry. With 70% of coffee sales dominated by the top 50 shops, it’s really no wonder that it’s such a tough market to crack into.
Many simply cannot keep up with the competition. They fall under because of it.
Depending on your city, there will potentially be a lot of competition. It won’t be easy by any means, but you can carve out a spot with your name on it by diversifying yourself.
Study your competition. See what they have to offer, and determine what possible opportunities they’re not filling.
If your competitors aren’t using any kind of customer loyalty programs, for instance, it’s your time to swoop in and impress customers with your own rewards.
Lack of a Unique Experience
Some coffee shops are indistinguishable from each other. Why should a customer go to a specific coffee shop if it’s just like any number of others closer to their home?
That’s why you’ll want to make sure that you have something to offer which customers can’t get in many other places. In this regard, it’s doubly important to get a feel for what your competition is doing.
With a better understanding of what is out there in your community, you’ll know what’s missing. You can fill that gap and give people a reason to check you out.
One thing you could do is think of a unique theme to style your business after. As an example, consider the HP Lovecraft-themed horror bar in Oregon.
It’s such a unique experience, that there are quite a few articles about it online. Because it’s so singular, many people aspire to take a trip to visit it someday.
High Rate of Employee Turnover/Burnout
Employees who aren’t happy at their jobs don’t do their best work. At the worst, they might even leave their companies in droves.
And the bad news is, it can get really expensive to replace employees who walk out. A handful of studies discovered that, on average, it can cost anywhere from $4,000 to just under $8,000 to hire a new employee.
Now imagine having to spend that amount several times a year. The cost adds up.
The solution is making a workplace that your employees won’t want to leave. Make sure they feel heard and that you legitimately listen to their concerns and feedback.
Help them develop professionally. Also think about providing them work perks, like a free meal and drink during their shift.
Providing a Bad Customer Service Experience
Customer service is undoubtedly a massive part of our experience with businesses. Think about all the times you’ve dreaded having to call a company because of subpar customer service, or the times your mood was improved by a representative who really cared.
Your baristas are the people that provide customer service to your guests. As the frontlines of your company, consider how many times they have to make that invaluable first impression on every person who walks in the door.
Word of mouth is essentially free and priceless advertising for you. Poor customer service skills can do just the opposite, with 62% of consumers saying they would tell others about their own lackluster experiences.
Nip this problem in the bud by training your employees well. Make sure they understand the importance of wowing your customers.
If you don’t put yourself out there, you can’t expect people to find you. Part of your job as a company is to make yourself as visible as possible.
It can be hard to figure out where to start. But trust us, there are plenty of ways to turn your coffee shop into an attraction.
Hosting events is one great way to get people in your door. Having a coffee shop happy hour is another great route to take.
Missing Sales Opportunities
Which one are you more likely to do: go to a store where you can get most of what you need, or stop at several different stores to get everything?
Most people would probably say the former. That’s why stores with a range of goods tend to attract a lot of business.
Likewise, if you restrict yourself to just coffee, you’re limiting the number of reasons why someone would walk in your door. There are plenty other things you can sell, like various beverages and even merch.
Falling Behind the Times
It’s fine to go for a vintage look in your business – but you don’t want to be old-fashioned in your company practices. In other words, don’t fall behind the times by sticking to outdated methods.
Shops that don’t have credit card machines, social media accounts, or partake in other modern trends get left in the dust. Contactless payments are starting to catch on in the United States now, too, so this also something to pay attention to.
The more convenient you make it for someone to buy from you, the more they’ll want to buy. If you’ve ever been somewhere that required cash, you’ll understand how much of a hassle it can be.
Similarly, everyone has social media accounts these days. Not having one will make you stand out, but not in a good way.
Make use of the increasing presence of social media in our daily lives to keep in touch with your customers. This will keep you from being forgotten.
Low-Quality Equipment and Ingredients
Equipment is a vital part to your business layout. A good espresso machine and grinder will both last you a long time and help ensure your drinks each taste as delicious as the last.
Settling for something on the lower end of the spectrum simply because it’s cheaper could be a terrible detriment. Replacing or repairing cheap equipment quickly becomes more expensive than simply buying higher quality pieces in the first place.
It’s a recipe for a disaster that can be easily avoided.
You’ve probably heard the expression “dog-eat-dog world” before. It’s definitely applicable to the world of coffee.
If you’re not prepared for the cutthroat competition, you can too easily find yourself being quickly forgotten amidst a world of competitors. But that’s no reason to be disheartened.
With some common sense, hard work, and extremely careful planning, you can raise your business above others.