How does a coffee make any profit

Discussion in 'Accounts & Finance' started by Tonys1, Jun 1, 2017.

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  1. Tonys1

    Tonys1 UKBF Newcomer Free Member

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    Hi

    I have been looking into a coffee shop business and i just can't see how they make any profit just look at my wage calculations

    3 staff £9 per hour 10h a day
    £9x3=27
    £27x10=£270 a day
    £270x7=£1890 a week

    £1890 x 4= £7560 a month
    £7560x12=£90720 that's £90,720 a year just on staff

    Can anyone help me am I missing something are my calculations wrong or are braistas just getting under paid to the max

    I love coffee have a really good coffee shop idea but why start a coffee shop of the profit margins are so small or not even there at all
     
    Posted: Jun 1, 2017 By: Tonys1 Member since: Feb 6, 2015
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  2. Mr D

    Mr D UKBF Legend Free Member

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    You are not factoring in the other costs but yes, they can and often do make a profit.
    Think of the sheer volume of sales in a day - when I'm at Starbucks at the NEC they usually have 2 tills going and they are taking payment every 10 to 15 seconds. Have never seen them without at least one till taking payment - think of say £4 purchase 4 times a minute that's £16 a minute, almost a thousand pounds an hour. Higher sales at lunchtime maybe.
    And that's if the average sale is so low - much of the time they are selling multiple items in an order.

    Look at the prices of the items at the coffee shop - the markups can be considerable. Though of course the costs of running one are also considerable.
    Not every coffee shop will make profit all the time. There is money to be made there though. As in any service or item where you can find a need to meet.

    Now as to the idea of a coffee shop, have seen retail shops with that few staff as well. Try doing that with a gift shop and higher staff numbers.
     
    Posted: Jun 1, 2017 By: Mr D Member since: Feb 12, 2017
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  3. Scalloway

    Scalloway UKBF Legend Free Member

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    Do you need 3 staff all day? What are the peaks and troughs in sales in a day?

    Could you do a shift yourself?
     
    Posted: Jun 1, 2017 By: Scalloway Member since: Jun 6, 2010
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  4. Newchodge

    Newchodge UKBF Big Shot Free Member

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    If you multiply a week by 4 to get a month, you need to multiply the month by 13, not 12, to get a year.

    365 days per year
    /7 = 52.14 weeks per year
    /4 = 13.04 (4 week) months per year.
     
    Posted: Jun 1, 2017 By: Newchodge Member since: Nov 8, 2012
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  5. Tonys1

    Tonys1 UKBF Newcomer Free Member

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    ???


    Also using a Starbucks in a place where they have events is the wrong way to look at it I mean making 90 thousand just to pay staff is a hard task I want to hear if it's possible for a average coffee shop
     
    Posted: Jun 1, 2017 By: Tonys1 Member since: Feb 6, 2015
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  6. Tonys1

    Tonys1 UKBF Newcomer Free Member

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    You get 93% profit on a £2.20 drink so £1.80
     
    Posted: Jun 1, 2017 By: Tonys1 Member since: Feb 6, 2015
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  7. S2K

    S2K UKBF Regular Free Member

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    You need to add employer NIC too at 13.8% above the primary threshold although you benefit from employer allowance.

    Three members of staff at all times is quite a big coffee shop. Recently a chain of cofeee shops considered to hire interns to limit the Brexit risks.

    You need to estimate how many coffees you can sell. The gross margins for a cup of coffee are quite high I imagine.
     
    Posted: Jun 1, 2017 By: S2K Member since: Apr 17, 2017
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  8. Tonys1

    Tonys1 UKBF Newcomer Free Member

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    You get You get 93% profit on a £2.20 drink so £1.80

    If my maths is not wrong again u need to sell average 3 coffees every ten mins assuming you make your coffee with £1.80 profit with out labour cost just to pay the staff/labour cost
     
    Posted: Jun 1, 2017 By: Tonys1 Member since: Feb 6, 2015
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  9. Scott-Copywriter

    Scott-Copywriter UKBF Legend Full Member - Verified Business

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    Very few baristas will be earning £9 per hour. According to some websites, around £7 p/h is the norm. You would also only need three staff if the demand was there. Some shops have one or two.

    Coffee shops do have a very healthy margin when it comes to their main product. A cup of coffee will cost no more than a few pence.

    But they also bring in a lot of extra revenue by selling cakes, biscuits and pastries. I would say that a sizeable chunk of customers don't just order coffee.

    Another factor, particularly in the case of the big coffee chains, is customers who stay a while to work, study or relax. Many people buy more than one drink and food as well, so the average revenue for that audience segment could be well over £10 in some cases.

    Even if the target was £200,000, and you assume that the average spend per customer is £4, that's only:

    - 137 orders per day
    - 11 orders per hour over a 12 hour day
    - One order every 5 minutes

    Now just imagine the coffee shops with near-constant queues for most of the day churning out one every minute (or less).

    And that average spend might be on the low side. Could be £5, could be more, depending on what is sold along with the coffee.

    But this isn't a given. Some coffee shops do extremely well, whereas others make losses and close down. Location and footfall are key.
     
    Posted: Jun 1, 2017 By: Scott-Copywriter Member since: May 10, 2006
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  10. S2K

    S2K UKBF Regular Free Member

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    93% of £2.20 is £2.06.
     
    Posted: Jun 1, 2017 By: S2K Member since: Apr 17, 2017
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  11. Tonys1

    Tonys1 UKBF Newcomer Free Member

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    Cost: 8p (coffee) + 6p (milk) = 14p

    Sell for £2.20. Take off the VAT first resulting in the NET sale of £1.83.

    Gross profit = £1.83 - £0.14 => £1.69 => 92.3% profit margin

    Am I am not sure £4 is a average spend in a coffee shop I am going on the bases people buy one drink like I always do
     
    Posted: Jun 1, 2017 By: Tonys1 Member since: Feb 6, 2015
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  12. Tonys1

    Tonys1 UKBF Newcomer Free Member

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    Ok my maths was a little off but to make 90,000 is a hell a lot of coffee sells
     
    Posted: Jun 1, 2017 By: Tonys1 Member since: Feb 6, 2015
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  13. S2K

    S2K UKBF Regular Free Member

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    Scott provided a very comprehensive answer.

    I don't pop into coffee shops very often and this is because the quality of the coffee they sell is very poor and I hate when they serve me very hot coffee. Last time I went into one it was in Kings Cross and they only had one member of staff serving. Three is too much.
     
    Posted: Jun 1, 2017 By: S2K Member since: Apr 17, 2017
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  14. Tonys1

    Tonys1 UKBF Newcomer Free Member

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    I am basing 3 staff of a business that is a business not business where I have to be there 24/7 and

    Also my business will be a high street coffee shop. I went to coffee island in central London they had 4 staff. Ok you could get it to 2 staff in a good location it 1 in pants location both not including yourself
     
    Posted: Jun 1, 2017 By: Tonys1 Member since: Feb 6, 2015
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  15. Tonys1

    Tonys1 UKBF Newcomer Free Member

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    I am going to the London school of coffee for a business start up course so I might find my answer there lol
     
    Posted: Jun 1, 2017 By: Tonys1 Member since: Feb 6, 2015
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  16. Newchodge

    Newchodge UKBF Big Shot Free Member

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    If you can't do basic arithmetic you will struggle running any business.

    There are 7 days in a week
    There are 52 weeks in a year
    There are 4 weeks in a lunar month (28 days)
    There are 13 lunar months in a year (4 x 13 = 52)
    There are 12 calendar months in a year, which vary in length from 28 to 31 days.

    You have taken your weekly staff costs and multiplied by 4 to give your 'monthly' cost, then multiplied by 12 to get your annual cost. That leaves you just over 4 weeks short of the real annual cost.
     
    Posted: Jun 1, 2017 By: Newchodge Member since: Nov 8, 2012
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  17. Tonys1

    Tonys1 UKBF Newcomer Free Member

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    Maybe I just need to focus on getting groups of people in the store
     
    Posted: Jun 1, 2017 By: Tonys1 Member since: Feb 6, 2015
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  18. Tonys1

    Tonys1 UKBF Newcomer Free Member

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    Oh I never new but still it add up to over 90,000 with 3 staff
     
    Posted: Jun 1, 2017 By: Tonys1 Member since: Feb 6, 2015
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  19. Newchodge

    Newchodge UKBF Big Shot Free Member

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    Are you selling cold coffee? If not you need to add the cost of the machine and the fuel to heat it. Are you selling it out of the tap of the machine? If not you need to factor in the cost of some kind of vessel, like a cup. Do you have premises from which you sell the coffee - rent and rates, do you have lights in the shop - utility bill. Do people come into your shop to buy your coffee? Public liability insurance.

    Oh and sugar. You forgot sugar

    Oh and water rates - you'll need water to mix with the coffee powder.

    Do I need to go on, or have you finished your homework assignment yet?
     
    Last edited: Jun 1, 2017
    Posted: Jun 1, 2017 By: Newchodge Member since: Nov 8, 2012
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  20. Mr D

    Mr D UKBF Legend Free Member

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    93%?
    Good quality coffee then?

    £2.20 has VAT at 20% included?
    OK 5/6ths of £2.20 is £1.83. Your coffee is for some reason 40p to buy. So £1.43 gross on a £2.20 sale.
     
    Posted: Jun 1, 2017 By: Mr D Member since: Feb 12, 2017
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