Coffee Shop Startup Costs are Hard to Justify in 2024

Introduction

In the Food and Beverage industry, coffee shops are a big chunk of the industry. Whether it be a big chain like Dunkin’ or an upcoming chain like Biggby Coffee, it is tough not to see at least a couple of coffee shops on your commute to work or while walking downtown where you live. Stepping into the Beverage Industry – and more specifically the quick service coffee industry – can be a daunting task, considering the significant start-up costs and the increasingly competitive nature of the industry.

In this article, we are going to look at the startup costs for some coffee franchises – the table below summarizes costs for some of the brands you might run into when starting a coffee shop, and we will do a deeper analysis after that.

Coffee Shop Startup Costs

Let’s now do a deeper dive into some of these franchises:

1. It would be remiss to not start with Dunkin’. The franchise, also known as Dunkin’ Donuts and DD, is an American multinational coffee and doughnut chain. It was founded by Bill Rosenberg in Quincy, MA in 1950. It began rebranding as a “beverage-led company”, and was renamed Dunkin’, in 2019 with stores in the U.S. beginning to use the new name. The rebranding is to eventually be rolled out to all international locations. With approximately 12,900 locations in 42 countries, Dunkin’ is one of the largest coffee shop chains in the world. At the close of 2021, there were 8,000+ Dunkin’ franchised locations in the US. It is led in the US by David Hoffmann as CEO & President, and former CEO Nigel Travis in the role of Executive Chairman.

Based on the median sales provided by Dunkin’s Store franchise locations, at an average of a 15% profit margin, it will take around 5.5 to 8.5 years to recoup your investment. You may not get a 15% profit margin, which would elongate getting a return on your investment.

In 2020, Inspire Brands purchased Dunkin’ Brands. Other brands owned by Inspire include Arby’s, Buffalo Wild Wings, Sonic Drive-In, and Jimmy John’s. The purchase had a cost of $11.3 billion at a share price of $106.5 per share. This put Inspire Brands in the number two spot in the USA for food service companies by the number of locations and sales with 32,000 restaurants in 60 countries globally, making $26 billion in sales.

Dunkin’ Donuts offers people the opportunity to be a part of a business that has high net sales and is rapidly expanding. It is impossible to understate the brand recognition that Dunkin’ has in the US market.

2. Biggby Coffee is a community coffee shop chain with offerings of espresso beverages, sandwiches, baked goods, etc. Their franchise is generally operated from either a free-standing, store front or strip center location or a prefabricated modular structure. Biggby has a very high focus on community integration, which they credit for their economic recovery after COVID-19 pandemic. Robert P. Fish is a Co-Founder and Co-CEO of Biggby Coffee since April 2016, along with Michael J. McFall. Both of them are managing members of Global Orange, Biggby’s associates.

Biggby Coffee presents itself as an up-and-coming player in the industry focused heavily on community values and engagement. It is offering a chance to be a part of an industry that has been long present. While still in its early stages, Biggby Coffee’s growth seems to be accelerating.

3. Scooter’s Coffee is an American chain of coffee stores specializing in quick service of espresso drinks, smoothies, and baked goods founded in 1998 and has grown to about 250 stores in the United States. Boundless Enterprises, a Nebraska-based LLC, serves as the parent company for Scooter’s. The parent company also owns two affiliate companies – Harvest Roasting and Boundless Operations.

Both Average Gross Sales and Median Gross Sales among participating Kiosk and Coffeehouse stores have increased in each successive year from 2014 to 2020. In particular, Average Gross Sales increased by 34.7% for Kiosks and 16.0% for Coffeehouses in 2020, which represents the largest year-over-year percentage growth in the most recent six years.

While Scooter’s is a growing company and has seen increasing gross sales over the past six years, the 7-14 year timeframe that you could reasonably expect to recoup your initial investment may be a long period of time for one to wait.

4. Tim Hortons is a Canada-based company that sells coffee and other non-alcoholic beverages as well as baked goods, soups, and sandwiches. They were founded in 1984 in Ontario and have since grown, with 5,291 stores currently operating in the United States. Tim Hortons has recently pursued expansion into international markets, with 42 additional franchised locations in Latin America. With a large presence in North America, Tim Hortons is Canada’s largest quick-service restaurant chain.

A 15% profit margin would yield estimated annual profits of $158,144. This means it would take nearly 11 years to recoup your investment. While Tim Hortons is a growing company and has seen increasing gross sales, the 8-14 year timeframe that you could reasonably expect to recoup your initial investment may be a long period of time for one to wait.

5. Founded in 1978 as one of the original specialty coffee brands, PJ’s Coffee of New Orleans now brings the savory taste and experience of New Orleans coffee to the world and beverage industry. PJ’s Coffee utilizes only the top 1% of Arabica beans, sourcing 14 origin coffees from Sumatra to Ethiopia, Colombia to Papua New Guinea. This gourmet coffee is a small batch roasted in 300lbs or less by Roastmaster Felton Jones, who alone has over 22 years of experience with PJ’s Coffee.

PJ’s Coffee strives to deliver a unique coffee experience to all locations. With one step in the door, customers are greeted with the scent of our 100% Arabica beans, invoking the soul and unique experience of the original location on Maple Street. The franchise carries a complete line of espresso-based beverages, flavored coffee, and award-winning Original Cold Brew iced coffee, as well as a variety of food options. Fresh baked pastries & desserts are available for multiple day parts with a focus on supporting sustainability. PJ’s Coffee is the industry leader in sourcing methods; from farm to cup.