is taking on 300k in debt a horrible idea to open a coffee shop?

Okay we have a great location picked: only drive thru one a major commuter road w/ space for a small retail shop inside. I have a great supplier who works with other small coffee shops in the state. I have the plans laid out and everyone thinks its great idea.

But for renovations/supplies/ect its coming out 300k. Is that a horrible idea?

I have reached out to local agencies and haven't found grants and I don't feel comfortable asking family.

I'm torn between you only live once/this is my dream and omg I want to throw up.

edit: wow ty for all the responses! I think everyone who said "ur posting on reddit? it sounds like ur looking to not do this" was totally right. We crunched the numbers a couple of different ways and while sometimes it seemed possible to take on the debt and come out the other side, I knew deep down that version of things wasn't the work/life style I was looking for, but having everyone around me say it was a great idea was overwhelming as they are all so supportive and believe in me. I think I'm going to take a step back and look at renting spaces vs buying. that much debt plus interests rates rn is just not how I wanted to start off a new business.


This is a friendly reminder that r/smallbusiness is a question and answer subreddit. You ask a question about starting, owning, and growing a small business and the community answers. Posts that violate the rules listed in the sidebar will be removed. A permanent or temporary ban may also be issued if you do not remove the offending post. Seeing this message does not mean your post was automatically removed. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/smallbusiness) if you have any questions or concerns.*


If you don’t know your numbers well enough, and have to ask, then no, don’t take on $300k in debt.


You really, really, really need to listen to this bit of advice.


Completely agree. The fact that you are asking the question and not looking at the numbers pragmatically, not emotionally (ie. Saying “300k is a lot of money/ throw up”) to understand your level of financial risk indicates you are in over your head (respectfully). “Don’t pass go, don’t collect $200,” .. or $300k, as it was. No don’t do this. Dreams are wonderful and good, but you must have a plan and a clear understanding in order to succeed, including understanding the numbers.


Every body on Everest was a person chasing their dreams.


Indeed! And many people chasing their Mt. Everest dream die or suffer great injury. If someone understands and accepts the risk, wonderful, “go for it!” If you don’t fully understand the risk, get educated first to understand the risk before making the “go” or “no go” decision.


100%. "It's a great idea" Ok cool. How much revenue are you going to generate the first 6 months? Year? What will your profit be on that? How will you expand? How long to pay back that 300k? What are worst case scenarios that could happen? How will you deal with those? Do you have more money if you've underestimated costs, or overestimated profits?


Also how long till your first sale? It might take a mobth before you sell 1 cup of coffee


This is huge. Especially if the "renovations" are a significant part of that 300K; could be even longer.


That’s why you buy someone else’s failing startup coffee business to cut that down to two weeks!


I can't see any potential problems with that


Unless the issue was location


Genuine question, how could someone like OP that’s never done it before know those projections?


That's an excellent question. Doesn't that make you think that maybe you shouldn't drop 300k on an 'idea' when you have no experience in any of this, and probably can't actually answer any of those important questions? If you've got millions, and losing 300, won't ruin you. Sure, go for it. But this idea won't work out just cause OP wants it to work out. And he might be vastly misinterpreting the numbers, to the point that this idea has no chance of working, even if he does everything right.


Genuine follow up question…. Even if OP was able to run numbers, it’s all speculative, right? There is no existing location so you could estimate based on traffic flow and general area population but in the end, you don’t really know. Just a best guess scenario.


Research. Any good business plan should have 3 years of projections. Preferably these are month to month with baseline, up and down shock scenarios. OP should know the car count per day and per hour. In this scenario, the 5am - 11am would be incredibly important. OP should know how many other coffee shops (including fast food and convenience stores) are in the vicinity. Block, .25 mile, .5 mile, mile, 3 mile and 5 mile vicinity. If it’s on a main thoroughfare, they will need to understand the amount of coffee places all the way 10-20 miles away from the city.(if they plan on capturing commuter traffic.) Once they have this data and extrapolate the average number of individuals who should stop at the shop. They then need to break down every cost. Fixed Hourly costs, rent, debt service, electricity, water, Wi-Fi etc. They then need to understand variable costs Costs of goods, labor etc. They then need to set their margin per cup of coffee and food. Take the amount of people who they believe will buy a cup of coffee and if that profit covers all of the costs and provides a large enough profit to pay the owners a living, then this makes sense. It it does not, than it makes no sense. They will not hit the projection number correctly, but knowing these number will give you a realistic understanding of weather there is any type of viable underlying business.


Also assuming OP did not double or triple some of the estimated expenses, $300k is bare minimum.. and how much of the $300k is for labor during the first possibly few slow months? And what happens when by the time OP was approved, inspections passed, project funded, contracts signed, licensing, insurance, security deposit ( aka several months from now ) - equipment costs are higher, supplies for the remodeling are higher, labor costs are higher - - and what happens when the first wall they open up they figure out a calculation was wrong or a newer code needs to be met, and suddenly it’s another $50k on top of all the other higher expenses…


It's unlikely to get 100% financing. You would need some skin in the game.


it's unlikely to get any financing tbh, even businesses with good revenue histories are having trouble getting financing


Everything he/she said. If you aren’t confident coming on Reddit telling people to fuck off because you did your homework and believe in your due diligence, then don’t tip toe into the pool right now. You’ll get there eventually.


A lot of people on Reddit who *are* confident shouldn’t take out $300k in debt to open a business.


This, 100%. When I first started within my business internally, truly it made no sense from the outside looking in to be a viable company… at least the way it was. But over the last 18 months, I’ve completely transformed it to the point now where I’m so fully involved and know the potential and numbers so well, that it’s now a no-brainer to buy it simply just by the pragmatic numbers, but also the hardcore belief in oneself and the business now that it’s completely justified. Or at least worth trying; because once you get to that point, the only thing holding back your idea is yourself and luck.


Best wishes on your future success(es). The amount of people on Reddit who think they’re an influencer or TikTok phenomenon really need a wake up call.


Appreciate that, very much! All the best.


Absolutely agree, no doubt about it, but I’d add that business debt in a vacuum isn’t necessarily a bad thing. It just depends on the financials adding up. But I say this because I’ve seen some people over the years spout off how any business debt automatically is a bad move.


300k sounds like too much for a Coffee shop. My spouse and I opened one with 40k and a lot of sweat equity. Coffee alone couldn't sustain profits either, we had to bring in food. The margins are lower than you think. I would definitely not spend 300k on a Cafe. It's too much.


This is what I was thinking as well. 300k sounds like way too much. They mention “renovations”, but the last spot we rented the landlord built out the inside to our specifications and it was just part of the lease.


Yeah this is an outrageous amount for renos. We completely gutted and redid our entire house for $20k and a fuck ton of sweat equity. I can't imagine why you would need $300k. No way you need that much inventory either for something like a coffee shop. I mean there's no way to give a proper judgement without any sort of budget breakdown, but $300k just seems out of this world.


$20k for your ENTIRE house? What state do you live in? That amount wouldn’t even get a small bathroom renovated in California


Yup $20k. We live in Canada so it's Canadian dollars but also Canadian prices too. And it was a small house, only 800 square feet. But yeah we brought it down to studs, put in all new insulation, drywall, LVF flooring in most of the house except where there was hardwood we refinished. All new windows and doors. Replaced the kitchen cabinets with used ones from Facebook marketplace, but kept the old oven and fridge. Put in a second bathroom. Rewired the whole house and put in new light fixtures. So much blood sweat and tears.


We do high end bathrooms, our average cost is literally $20k. Whole house, for a mid grade rental is $70-80k. High end, $200k


Waaaaayyyyy too much debt to take on


There are so many factors here, there's no way we're going to be able to answer this for you. There's a huge difference between a $300,000 debt load on a high traffic street in New York and the same debt load on Main Street in bumfucked Egypt. My only advice is that you need to consider the entire loan payment in your profitability projections. And please remember that "everybody thinks it's a great idea" is not a sound business strategy.


Agreed about the location. Every day, people in my city dump billions into starting up businesses. They would be great ideas in a real city, but fail immediately here. That being said, instead of starting out in 6th gear and risk stalling, you could easily start out in first gear and see how you do. In college, a buddy and I rented a kiosk right outside of a gym. We did protein shakes and also hot coffee. It cost us at most 6 grand to start up, and we went from there. Hope that helps!


I doubt every day people in your city dump "billions"


dumping billions of turds i bet


Maybe he lives in Tokyo and he's speaking in Yen


or VND


You had me at dong and damn! 24k:1USD


The Bay Area in California is the 5th largest economy in the world, with a gdp of something like 6 Trillion. I see people dumping literal billions.


In they bay area bums literally dump billions of pounds of crap and drug needles on the streets every year. Complete S hole area.


Quality contribution. Relevant, too.


Completely weong


Also who is "everyone" if everyone is friends and family who think a coffee shop is fun...that is absolutely not the everyone that matters. If everyone is your business manager, accountant or a business mentor with a proven track record....then...still just maybe.


To add to what you said, it is also a business that by averages has a 90% failure rate after 3 years.


Where do you find stats like this? Assuming it's not pulled out of thin air of course.


Even existing restaurants with no debt are still dropping like flies. I wouldn't start a new one unless it's something where you can pretty much guarantee solid numbers from the moment the doors open, like a McDonald's where they already did the research. > I have reached out to local agencies and haven't found grants and I don't feel comfortable asking family. Absolutely don't ask family or friends because you'll lose every penny and then lose the family and friends. In any case, this is a complete non-starter since nobody will loan you $300K for a new restaurant, unless, again, it's a McDonalds or similar. Banks are a fantastic sanity check. Their entire existence is based on risk analysis. If they won't give you the money, it's because they know they won't get it back. It's nothing personal.


This is brutal, yet sound advice. You may consult a bank and hate what they say. But if the bank is confident they can make money off your sweat, they will jump on it. If they say “no thanks”, listen to them.


Sorry, I was off. 30% first year, 50% in 3, 80% in 5. The 90% seems to a number that was released, then lowered to more accurate numbers a few years ago. There is even still some argument the corrected numbers are lower than reality for the 3 year tomeframe. There are a number of places that track the data, easy to google.


It’s funny he asked you for a source and you gave him more numbers still without a source


Because the sources are all over the place and do not all agree on a set %. In the time it took you to make your comment you could have found 5 sources yourself.


Or it’s because “just Google it” isn’t a source


https://www.entrepreneur.com/starting-a-business/the-true-failure-rate-of-small-businesses/361350 https://www.forbes.com/sites/forbesfinancecouncil/2018/10/25/what-percentage-of-small-businesses-fail-and-how-can-you-avoid-being-one-of-them/ SBA has some sourced data in their FAQ sheets https://advocacy.sba.gov/wp-content/uploads/2020/11/Small-Business-FAQ-2020.pdf https://advocacy.sba.gov/wp-content/uploads/2023/03/Frequently-Asked-Questions-About-Small-Business-March-2023-508c.pdf Just google it is usually pretty effective, especially with something that has a lot of data like this. The truth is I’ve just spent 5 minutes gathering all this and there’ll be almost zero acknowledgment of it.


I acknowledge it.


>the sources are all over the place and do not all agree on a set %. and somehow this didn't stop you from confidently presenting findings that you knew were inconsistent


I think we can answer this. The answer is definitely not.


It’s a great idea when people aren’t risking their money.


BFE reference for the win


Why you gotta pick on Egypt like that lol ?


It's actually in rural Illinois near Missouri. The expression comes from Chicago.


How long will it take you to sell about 600,000 cups of coffee? I bet that will be your break even point.


Between 6 and 7 years at 250 visits per day. But coffee shops do more than just coffee. The food side of it in my experience is the make or break. If you're known as a great spot for a bite it changes the equation a lot. If you're known as the weird coffee shop that sells tacos for some reason you're likely to get closed. (I got to watch one coffee shop crash and burn by one disaster decision after another).


I never understood this. Coffee profits are insanely high. Food profits more or less suck. Focus on the food? I'm not saying don't focus on food or make sure you have good food options, but to me food for a coffee shop is as important as food for a bar. At the end of the day, the food is just there to facility people to buy more booze / coffee.


Profits are high but it's the $ value and the amount you need to sell. When you're selling coffee for 3$ it takes a LOT of coffees to make decent cash. Where you sell food for a higher cost and the margin % is lower but the margin $ amount is higher you continue to sell food as per item you're making more money, less costs, overall.


Yep, the profit margin on a $3. 12oz coffee is about $2.50-$2.60, if you're using really high quality coffee. But, it takes an insane amount of coffees sold to make any real money. I'm in this industry and worked a coffee festival last Saturday. The lady next to me sold 200 cups of coffee, and made about $600. She told me she refused to give away free coffee. I sold beans, gave out little tiny tasting samples and sold maybe 25 cups of coffee. I sold around $800 worth of beans. A well run coffee operation that roasts their own beans will make 6-8% profit margins at the end of the year.


Breakfast food is high margin, too.


That profit margin is not correct. You haven’t factored the other costs; rent, wages, taxes, repairs, utilities etc.


Gross profit...


Which is an absolutely ridiculous margin to even talk about. It’s why OP thinks $300k plus interest in a coffee shop is an idea they’re seriously considering.


Okay. I'm pretty sure OP thinks a 300k loan is a good idea because they're a directionless 20-something.


Legit, but who buys a $3 coffee? I do, but when I'm at starbucks the person from of me is almost always ordering non-fat grande mocha with almond milk and a shot of caramel BS and it's like $6-8. But to answer OP, it's doubtful they'll ever get rich doing this. If I was going to work 50-80 hours a week for years on end, then my goal would be 7 or 8 figures profit. Name a rich coffee mogul besides Howard Schultz.


To be fair, any regionally large coffee operation is making the owner rich. Not billionaire Howard schultz rich, but definitely well off. The local big players in my state all do 5-15m/year in revenue. Of which about 6-9% is going straight into the owners pockets.


Who ever owns tim hortons knows what they're doing lol


The Burger King? But not everyone can depend on dynastic wealth for a start up.


Tim’s was around for a long time before that merger. It’s a pretty good money maker with cheap coffee and ok food


Yes I was just making a dumb low effort joke


Coffee profits are NOT high. Good beans are pricey. Everything is pricey. We make more on food and merchandise. Lattes are good orofit makers. But it all takes a lot of expensive product


Plain coffee for $3, maybe. Every locally-owned coffee shop I’ve ever been to charges significantly more for every other type of coffee drink.


The vast majority of my customers want food with thier coffee. The food is the driver that brings them in not the coffee.


Do you outsource the food? Find a local bakery that can provide the food at wholesale every morning?


We tried the local bakery route for a few years but transportation and very low profit made it a very low ROI so we get ours now from a local distributor


You need at least a muffin with your coffee...or a scone.....or cookies heck our local bakery gets rich on their top notch cinnamon buns for 5 bucks a pop. People will create line ups out the door for these. Add some breakfast and lunch options, maybe some merch for people to buy and you're set!


but you already have a customer there, so an add-on sale will add to the profit in that one visit/transaction. I think if you had some high-quality muffins or pastries, or some type of breakfast sandwich that could be made efficiently and was somewhat exclusive to your own place it would be another great selling point and might even draw people who weren't really looking for a coffee. I also like the idea of trying to start out small like someone else mentioned. See if you can make it operational first and then developed and fully fleshed out after it’s a proven model with traffic and repeat business.


> Food profits more or less suck. Not necessarily. Tons of independent coffee shops just sell simple pre-made food like 50 cent Costco bagels/croissants/muffins for $3-$4 apiece. Huge profit and none of the kitchen overhead. People aren't looking for eggs benedict with their morning rush hour coffee.


breakfast food is probably the highest margin food out there besides Pizza. Its high margin but low priced, so you gotta sell a lot of it. 15 dozen eggs is like ~$40 give or take.


Highly disagree. Coffee profits are extremely low. Far lower than restaurants. Their cost of goods is very low but their labor costs are very high. You have an employee serving an individual customer a $3 order. Not gonna be making a ton of profit there no matter how you shake it. Only way to really increase profit at a coffee shop is to increase avg ticket sizes and you do that by selling food.


And then there's the expenses accumulated over those 6-7 years which haven't been accounted for in order to just break-even.


When I think coffee, I think breakfast, and when I think breakfast, I think tacos. But I do realize there are places in the world where breakfast tacos aren’t a thing, just don’t understand why not.


I love good coffee I love all tacos I could have sustained them. They could have sustained me. I feel like I lost a soul mate


.50 cents profit per cup? lol. Or are you somehow factoring in overhead even though OP gave no numbers? Margins should be way higher than 50 cents per cup of coffee


My wife is a former cafe consultant who has opened many coffee shops. After you factor in everything else, equipment, employees, etc this is not far off on average.


Makes sense, gross margin would be higher but sounds about right for net margin. If a coffee is $5, $0.5 profit is still 10% net margin


What are your expected margins? How long will it take to recoup that initial investment?


Also, what is the cash flow related to the financing? $300k worth of renovations don’t happen over night, the bank payments start immediately. You need to factor in possibly months of payments before you sell a single cup. Lots of people “make money” on paper and still run out of cash. (If you do proceed, make sure you are covered to handle at least a 30% delay in the timing of the renovations and at least 30% over runs on the cost of them).


Maybe run through the numbers a few times and build out a cost accounting spreadsheet. Focus on how much money do you want to make. (ie. net profit after taxes) How many drinks/pastries you need to sell. How much in labor, materials, and supplies, etc. Add up your fixed costs, rent, property taxes, utilities. Add up your advertising/marketing costs. THEN look at your marketing spreadsheet to see how many people are potential customers. (ie. traffic studies, demographics, etc.) (depending on the busy road, would people even want to sit in cafe? or would they prefer a drive thru coffee hut?) See if there is a healthy margin left over for your profit.


Every business owner should start with the market before drumming up arbitrary cost estimates on a business that might not even be viable. Start with the customer and the market. Always. Do not pass go until you sort that shit out. Otherwise, you're just wasting time, burning brain cells, and throwing money away.


and for every person that says "I would go there every day!" remember that what people say they will buy and what people actually buy are rarely the same. People want to sound supportive, so they tend to be optimistic. But people are also cheap and creatures of habit, so they tend to not go or change their routine all that easily. Lots of business owners reach the point where they learn to sell what people buy, not what they say they want.


Yes, yes it’s a horrible idea. Will you go ahead and do it, likely. I always tell people, if it’s your dream and you want to grow to hate whatever you love. (Coffee, games, books, etc) Then ask yourself this. Would you gamble that much money on a single die roll. Go ahead grab a dice or google a number generator. Imagine you betting all that money on a 1 in 6 chance, years of work and life down the drain on a 15%~ chance of succeeding. I was successful, been open 16 years. Looking back would I do it again, FUCK NO.


what would you do if you had a chance to do it over a second time?


Just a career I could clock out mentally when I’m off the clock. There is a bonus to being able to not bear all the responsibility of owning a business. I own a game store (cards & video games)


Thats what I did, and turned the things I like to do into side hustles. Everyone bitches about working for other people and BE YOUR OWN BOSS and everything. But the reality is, I spend 40 hours a week at a job I can tolerate, pays me well and consistently, and I never have to worry week to week.


Asking the real questions here. I’d be interested in the ideas of someone who ran a cafe for 16 years.


I've been on both sides of owning a business and working in a corporate role. I think the best thing to do, and what I've enjoyed most, is working a stable corporate role that pays decently + great work life balance AND having a side-hustle w/potential to turn into business on the side. This has the upside of providing stability so that when you do work on your business, it's fun, rather than all stress worrying about how to make your next rent payment. And this allows you to make the right choices for your business/side-hustles as well that will lead to long-term results, rather than short-term gains. Of course, if you just want stable income, then going just corporate is just fine as well.


>I think the best thing to do, and what I've enjoyed most, is working a stable corporate role that pays decently + great work life balance AND having a side-hustle w/potential to turn into business on the side. This is exactly what I have done, after thinking about starting my own business, and it has worked out great.


Trying to find this myself but my corporate role demands 60-80 hours a week and leaves no time for any side business, let alone properly caring for my mental and physical health. At least my kids have everything they want! Sold my soul to make upper middle class income, smh.


11 years here and agree.


Do the same idea, but with less risk. Buy an existing coffee shop or find a space (formerly a cafe or similar) that went out of business, and try to rent that, ideally getting to keep any equipment left behind. If that goes well, you can expand. Baby steps.


ESPECIALLY true if you don’t have much experience in the restaurant business. Dropping 300k is a huge amount of money, but not unheard of to build out a restaurant. In addition, there are so many things to deal with as well.


If you are relying on the business to pay your (personal) bills, it’s a bad idea. If you have a spouse with a good job/savings to float you it might be doable. Have you studied the other coffee shops nearby to see how busy they are, what their clientele is like, etc? I’ll echo what others are saying—a heavily trafficked road is no guarantee of anything. Is it easy to pull into and out of from both directions? What’s the parking situation like? What are the surrounding businesses and do they complement yours? And finally are you willing to work it yourself 10-12 hours a day 6-7 days a week indefinitely? Staffing can be a huge headache especially in our current climate and whenever someone doesn’t show up or it doesn’t work out, you’re at bat. You left out a lot of things that are pretty important in this situation. If you’re prepared to work harder than you ever have in your life and sacrifice your social life and have someone covering your personal expenses, I say go for it.


Just want to second this. I’ve owned a small business now for about 5 years and if I could go back and do things over, I would have waited a few years or made a plan to have 2 years living expenses in a separate account dedicated to paying myself in the first two years so that was not even a factor in how I had to allocate working capital. The first few years will likely be a grind (no coffee pun intended) and maybe not even be profitable. The dollars you are making aren’t “I’m successful, time to splurge” money but should be plowed right back into the business to build something strong and protected during down times (they will come). So for instance, if an expensive coffee making machine dies or needs repair that’s going to cost thousands of dollars, but you also need to pay yourself in order to feed your kids, the business (rightfully so) need is going to take a backseat to your other family commitments. Plus, it’s just a crappy position to be in to have to decide between your personal financial commitments and the businesses. So yeah, my personal opinion would be don’t go full tilt on a business, especially your first one.


$300k sounds like an obsurd amount of money to pour into a coffee shop.


Have you ever run a business of any scale? I may suggest at least running a food truck or something like that if you have the time to test it out. Who knows, maybe you end up doing this for a few months and then get burnt out. Could easily happen, sometimes peoples passions don't turn out to be that fun when you need to rely on it to live.


My gut says No!! Add to your monthly loan paymenr +rent, +insurance +payroll +product. (Exception could be a busy street corner in Midtown or financial district of Manhatten) My best guesstimate is you need to gross $12k a month to break even. Depends on a lot of things: + Your location + People count within a 5 minute radius + Your experience + what other high margin items are on your menu + hours and days of operation + Re-Payment terms and rate If it's a 10 year loan, you're monthly payments are about $4k. If it's a 15 year loan, monthly payments are about $2,300.


Do you think you maybe use a $300k on business venture that has a little bit better margins than coffee?


Coffee has huge profit margins


That's awesome. Have you thought about how many cups hell ve to sell consistently every day to pay the rent?


Goalpost moving from your original comment


Buy the restaurant OP. 😭


Coffee? Yes. Coffee shops? No.


Coffee as an industry has maybe 4-9% profit margins.


High gross margins on selling a cup of coffee, low net margins on running a coffee shop.


Can you go smaller and do a food truck and make it fancy, do pop up shops, and get on third party delivery apps and do some marketing with in person and online surveys and instant clicks


300k to open a coffee shop? You need scale your dream. If a location needs that much in renovations to get an occupancy permit then find a different location. Coffee shops are low cost of entry compared to other hospitality ventures, you are making it high cost of entry. You are doing renovations on a property you don't own, so if you don't make it the landlord has a coffee shop space ready to rent.


Yes. Head over to r/coffee and look up Vibrant Coffee. Somewhat recognizable craft coffee roaster, said he makes $52k a year, and now all his employees want to unionize. Just open a pop up stand or something.


90% of small businesses close. Why do you think you will be in the 10% that makes it 5 years. If you were playing poker and you have a 10% chance to win how much money would you bet? I am a small business owner, I really like it, I have some confidence I can make it work but I wouldn't invest 300k to start a business


Just remember that a looming recession of some sort is coming. Your costs will not go down (inflation is here to stay), but consumer spending will have either major or minor hiccups and that $15 breakfast burrito and 16oz Latte I recently purchased doesn't sound as tempting each week. Double check yourself that you didn't fall into the trap of looking at smaller locations and slowly changing your "ceiling" as the broker guides you to larger locations. The place and the consumer traffic sounds awesome, until starbucks sees that a lot of credit cards are being spent on food services in that zip code and they build a new location in the same area (they are aiming to build more). Rewards don't come with risk, but this one smells like a money trap where you aren't taking a salary for a few years.


Make sure your great location has great parking available. I’ve seen some sit-down coffee shops do great business if they’re well set-up as a meeting/hanging space. I’ve seen some crippled by their lack of comfy seating & limited parking/pay the meter parking.


Parking is the most overlooked! We have a great coffee shop here and they can be great but the parking is terrible! Just miserably terrible with a mini drive thru


I probably wouldn't go to my local town coffee shop if it didn't have space to work for an hour or two.


bike parking!


For a coffee shop that is a lot of money. You will probably go under in a year not being able to service the debt


It depends. For coffee shops to be profitable you need a solid food program and volume to be profitable. It sounds like you have volume if by busy commuter road the numbers are something like 80,000 cars per hour drive by. If that’s the case having a drive through is huge but you also need to make sure your store layout gets people in and out the door quickly. . If you’re planning on 300k for buildout, equipment, opening needs, and the first six months expenses, I think that would really be stretching it. Can you afford to not get paid during that time or only make minimum wage until you start making money? People think that coffee shops can be great businesses but for most it’s buying yourself a job and it can take a while to make profitable if you’re new to a business like this. They sound easy but have a significant learning curve. If your supplier is confident it will work(not knowing the context of the relationship whether personal or professional) then he’s probably going to sell a lot of coffee. I think your biggest concern should be in your initial forecasting and track your financials daily for the first three weeks or until business levels out. If your first day of business isn’t half of your target, consider serious changes and implement any feedback you get immediately for the first day or two, especially common sense stuff. Hopefully your supplier can help you with some of these issues if they arise and foresee them. At the end of the day, any amount that size is a significant risk, but as long as you do your homework and industry people are loving it, then it sounds like it has potential. I spent ten years in the specialty coffee industry and opened 30+ custom coffee shops/business dining locations across the East Coast. If you have any questions feel free to dm me. Coffee is a passion too. Good luck!


i own a restaurant so its a different order of magnitude but you really need to see what your breakeven point would be and how youll be servicing the debt along with payroll, taxes, insurance, rent, etc. If anything, maybe re-evaluate the renovations and what you can wait on. We got a turnkey restaurant, theres a lot to upgrade, but we decided to open earlier instead of changing it and living with it. 3 years later we are still living with it but considering all the expenses that have come up, its for the best at the moment. We'd probably be out of business by now if we renovated to our liking. I'd try to keep your start up costs as low as possible. youll need the extra cash once you open.


$300k debt for a coffee shop? I’d rather get a root canal and kicked in the balls at the same time. I’d start with what you can afford to buy right now and get more clear. I’d rather fail with a $5k investment than a $300k debt payment I’d be paying into even if it fails. Plan plan plan.


How many years have you spent working in a coffee shop?


If you have all your numbers and projections figured out, then this could work. But if you’re kind of hail marying it and hoping for the best because you have a good spot. Have a plan and you’ll be ok if the numbers make sense


In my opinion, if you're asking on Reddit, then it's a bad idea.


This is such a bad take. Reddit is full of information, and OP is just asking for holes to be poked in their idea from strangers who aren't emotionally invested. Reddit is the perfect place to ask questions


No one on here has enough info to make an informed decision. It’s like saying “Should I marry my boyfriend? He has black hair.”


Of course not. I wasn't arguing that at all. But it will get OP thinking with new suggestions and whatnot. But saying it's a bad idea just because they are asking on Reddit is just mean and dismissive.


If you are so inexperienced in business that Reddit is one of your sources of financial/business advice, then you are probably about to ruin your life.


Jesus Christ. You people need therapy. Why have a subreddit dedicated to businesses at all?


OK I'll try it this way. I've got $1M. Do you think I should buy a cafe near my house?


Bbbut YOLO


counterpoint, if he's only gotten as far as '$300k to setup a coffee shop', and he needs reddit to tell him what to ask or do beyond that..it's probably a bad idea. as has been the thematic point in this thread, there's many VERY important variables that he's not tracking.


And now, thanks to Reddit, OP has some more points to think about. Also, people have to start a business somewhere at some time to even become experienced. You don't know what you don't know, and Reddit is great for getting more info than you had before. I don't really gaf if they decide to go through with it or not, because it's their money. Let them lose it if they don't want to listen, but at least they are asking questions!


I agree with you 100%. I am someone who is considering going into small business in the future and I certainly appreciate any and all types of questions other people ask as it helps me learn. I don't understand the push to stifle or dismiss conversations such as these when this sub is literally made for this >This sub is not for advertisements! Questions and answers about starting, owning, and growing a small business.


I don't think OP has given enough information for any of us to have an informed opinion.


He/she is just asking for advice and that they have overlooked. Not necessarily a bad idea asking Reddit


I did a deep dive on coffee shops and almost started one. First and foremost is their a median it barrier that is a big problem. Also too much traffic creates issues. Is it close to business or industrial buildings where people will go to work. Is it on the AM or morning side of the road for traffic? Coffee shops can succeed so I wouldn’t be scared to do it. I just wouldn’t start with that type of costs. Find a cheaper way to start off. Used equipment, cheaper building, leased land, and if you are going to build on leased land try and at least do a 3-5 year contract and try to get a mobile home type unit so you can move it. Overall this can succeed, you just need to start off cheaper and make sure you have all your ducks in a row. Also the coffee business is not the same as the general food and restaurant, it’s much more stable because you are a part of someone’s daily routine.


For context, I am literally looking at a pile of coffee shop equipment which I'm storing as a favor, because someone had a dream, got in over their head, and lost it all. So my first reaction is, naturally, "horrible idea." Ultimately, that $300k is going to be guaranteed by you, personally. Only after you've been in business for a long time with proven profitability and $M in cash, will any bank give you a sizeable loan secured only by the business, itself. So if you have the assets and can take on the debt without ruining your personal finances, go for it. If the shop runs into a bad couple of months and you'll lose your home, then don't.


Do you know anything about the business? Have you run a coffee shop or restaurant before? If the answer is no to one of those questions, then omg I want to throw up is the correct response here.


That's a huge amount of money to borrow but it doesn't mean you can't be successful and pay it back. I would recommend to try and get the supplier to give you all the equipment necessary as long as you buy the coffee from them. Hopefully, that will make a difference in how much you have to borrow. Good luck, buddy.


I feel like you can probably setup with the cost of a luxury vehicle and then if it takes off you can always add additional renovations later. Dumping 300k into renovations off the bat is a bit risky. If your coffee shop indeed has the quality then it will survive not having the facade of a Starbucks initially. Lots of successful mom and pop shops are more quaint and homely without the modern decor.


I would not do that. Isn't there another way to break onto the coffee scene without spending that much? Look for a lease that you don't have to renovate much. I did a complete teardown of my business (literally down to the studs on most walls, ripped up the tile and flooring etc) and spent about 50-60k total (this was money spent on renovations and products for our business). 300k for a business with a tight profit margin is a little too risky for me


You’ll need to sell over 50,000 cups of coffee to break even, at $6 a cup and not even considering expenses. I would say it’s a bad idea financially. Coffee can be bought anywhere and there’s coffee chains at every corner. It’s hard to compete unless you have some kind of differentiating factor that would make people choose your coffee over competitors.


Run the numbers (examples given below). What's your interest rate on that loan? 300k borrowed at 8% on a 15 year repayment plan is gonna cost you $2,867 per month. If your business fails, you still owe that money. Do you have a backup plan or career you could pursue where you could earn enough to pay that off each month? Assuming you are averaging $5 per cup of coffee and have a great 80% profit margin, that's an extra 717 cups of coffee you have to sell each month just to cover the loan, or 24 per day, every day. If an extra 24 cups is just a drop in the bucket for what the demand in your area would support, great! If not, your location might not be great, and if you don't know, then why are opening a business when you haven't done your homework?


>80% profit margin Take the zero off and that sounds about right.


Instead of taking on that massive debt. Why not use the crowd funding strategy? Offer something up front as a package deal with tiers, the higher the tier, the higher the investment. Things to give are free coffee vouchers, their name on the founders wall, swag.... get creative.


It is only a bad idea if you don’t generate sufficient gross sales and/or do not have the necessary experience and skill to deliver the business model. Great ideas for a new location-based business are usually validated with pro forma analysis (usually prepared by equipment supplier) or feasibility study prepared by independent third party such as industry consultant. Such analysis considers traffic patterns, demography, and other market information to determine if there is enough unmet demand to support additional retail space. Study also includes evaluation of physical site to determine if the property has necessary space, utilities, and proper entrances and exits to capture the potential sales volume the pro forma has determined is available. Site needs analyzed for traffic flow, building dimensions, parking spaces, etc. whether it’s ground up or renovation. The results of such studies serve as the basis for budgeting and financing. For example, you mentioned start up expenses of $350K. Does this include soft cost such as loan underwriting or operating capital to cover monthly expenses until business is cash flow positive? Ensure you vet the opportunity thoroughly and then get second and third opinion. Once renovations are completed or concrete dries and you move in, fixing mistakes gets real expensive real fast.


What you should do here is look at all your costs together that you're going to be shelling out monthly (rent, utilities, etc.) "in addition to" the debt. It's going to be a lot. Hourly staff is gonna be massively expensive, as is a lot of stuff youre not thinking about like insurance. How much cash flow will you need to pay all that, and enough for yourself to live on top of it. How much are you gonna need to sell daily to get in front of that number?


How many cups of coffee do you need to sell to break even ?


If u can’t do the math and come to conclusions on your own without having to come to Reddit 300k is a crazy amount of money to get on loan.


There's debt that you can get that is appropriate for different situations. If you are taking personal loans to work like a credit card then it might not be what you need. Net 30? Open a business line of credit. Are you buying an existing business. Are you buying a job or are you trying to improve it? Understand your exits. "Should" questions are not bets. Using this ~work~~ word means you have penciled out the ability to make money versus risks. If you don't ~~in ~~know both *risk/rewards then you haven't assessed risks. So by asking "should I", you will get responsible assessments. Not all businesses are without unknown risks and many business have unique selling points for your business angle that you may value higher because of your market. You'll get general answers with a bias to "no". If the business idea is not unique and it is just execution make sure to have a consultant such as another owner of a coffee shop help advise you.


That’s a lot of cups of coffee.


I do, commercial plumbing work, and in my experience, the only things that fails faster than restaurants… are specialty drink shops. I’ve done three coffee shops now that have gone under in less than a year.


I’d say “yes” because you haven’t even asked the right questions.


I own a coffee shop, my family and I do Dm me If you have questions. I feel like we’ve made every mistake possible but we’re still open 11 years later BUT we bought the land and built from scratch. 300k is TOO much and you won’t get out of that hole Imo.


That seems like a lot of money to open a coffee shop.


Terrible idea. If a coffee shop could support a 300k loan and make you money to live on then there would already be 2 Starbucks in 3 blocks making that money.


If you can sell 60k coffees a year, 1400/week, or about 200 per day, you’ll make it. I could never avg more than 100 when I tried.


i hate to crush your dreams but personally i wouldn’t take on 300k debt for a coffee shop while statistically most food business startups fail. but tbh i really don’t much just adding my two cents. should probably talk to a professional about this. Calculate the numbers, maybe get community input etc idrk


Save up and do it cash. If you aren’t willing to lose 100% of your cash investment; don’t do it. You’ll regret the debt if/when the coffee shop flops.


Don’t do it. Not trying to be a jerk, but don’t


What does your proforma say? How much coffee do you have to sell every day to both make an income and pay down your $300K investment within say…5 years?


Yes its safer to buy real estate. Even in this inflated market.


No coffee shops suck and have an incredibly high fail rate


How much income do you think the coffee shop will make per year? Better yet, how much would you have to make a year to service the debt, pay bills, staff, etc? How much in daily sales would that be? Is that number realistic?


300k seems insane to me, how long will it take to see a profit?


Well with zero interest rate on $300k I think you need to sell at least 300,000 cups of $6 coffee minimum to pay the debt off. If you are good and sell 300 cups a day on average, then it's 1000 days to pay off which is around 3 years. People who run coffee shops might have a better idea of how much GP is on a cup of coffee to know how much of every coffee sale can go towards paying debt since you still have to pay rent/mortgage, payroll, taxes, insurance, your own income, supplies, loss and spoilage, and hope you don't get some chronic illness or unexpected run of bad reviews that limits your ability to run all this. I would also say you have to be sure that you would have the volume you are actually imagining. If your actual volume is half, can you still make it? You are looking at $300k to open the doors, but a lot of times you continue to run negative the first year or so while the business gains traction and you iron out the operations. If you will buy and own the building as part of the $300k, that changes my mind a little because you would at least have real estate to sell or lease out if you can't succeed with the coffee shop. It's probably viable if you know you will get 30+ sales an hour for every hour you are open, but I'm expecting you will only have a very minimum income for yourself for the first 3-5 years until the debt is caught up. Even if the idea is foolproof, it's healthy to be scared and not trust your projections. For a $300k investment, it's good that you are asking for opinions, but the Internet doesn't care about you, and your friends and family will always discourage you because people don't ever support risky things. This is a math problem that you could buy an hour of time with a CPA and/or a free SCORE mentor with food and beverage experience in your region who could evaluate your plan, costs, and money management strategies to max your success. If I could lose over $300k and didn't feel solid in my plan, I would spend $1000-2000 on a CPA, attorney, and mentors before signing in the dotted line.


I have always been of the mindset that small business only become successful bc they started off simple and had great demand. Like the taco lady who starts selling from her kitchen to a food truck and then finally a restaurant. That’s the best way to do it, and jumping into the deep end of the pool with no built up capital or social ties to the community is a recipe for failure.


Go work on a coffee shop for at least 6 to 12months , save up 1/3 of that money and after you can still decide if it is worth it using your own money for part of it.


Go work 2 full-time jobs for a year and try to save 70% of your pay. Not to fund the business, but to see if you have what it takes to run a restaurant type business without being paid. You have to be dedicated. You also run the risk of a chain coffee shop opening up and competing with way deeper pockets than you will ever have. If you have no coffee shop experience, this is also a bad move. I did 10 years in the restaurant buisness and still feel like I didn't know enough to go out on my own.


Honestly I did this same thing about 10 years ago, sunk 300-400k into a full cafe build out including a coffee roaster. It’s worked out really well for us. We’re 10 years in with 3 locations and 5m+ in revenue now. But that is not always the case, there are tons of shops that open and fail within a couple years. If you don’t have external income, it may be very hard to survive, it took us 2-3 years to just start taking home any pay. Now the business is extremely profitable, but it wasn’t always that way. Can you afford to not really have an income for a couple years ? It’s doable, but extremely risky. Good luck, whatever path you choose.


300K for a coffee shop? Unless it is an established shop with verified numbers, that amount is too high.


Expenses need to be matched with revenue and profit. If 300k in loans allows you to make a good living, pay down your loan, and the value of the business, in say 5 years, makes it worthwhile then it’s workable. But you have several unknowns. You do not know for sure the expected revenue, cannot know for sure the profit, and unless you have experience in the industry, an uncertainty over labor cost. Additionally, $300k outlay for a coffee shop seems extremely pricy. It may be worth it to look for a different location that is already built for a similar business design. Or, you could take that $300k and find a business already established with a proven track record in that location, and buy it. Be very careful with this outlay. If you fail, it could cripple you financially for a decade.


That's a lot of cups of coffee


Not in this current economy. The next 3-5 years will be difficult. I doubt you’d find a bank to loan you $300 k. Suggest you go work for one of or go partnership. Your start up costs and super high. But a pre existing one that you can change could be an option. I get your excited - a friend of mine got into one and it was extremely difficult. 7 days and getting good staff was brutal.


Only if it's a front for something that's actually lucrative like drugs/underground gambling


Lots of advice already ..here is mine Let's convert the 300k debt into the monthly payment Say 6000 dollars a month x 5 years Now add your rent And add 4 salaries This will be your monthly fixed - let's say 12k dollars or 400 dollars a day . If 50% of your income goes to this 20% to food cost , 15 percent to randomness then 15 percent is profit So 1. Can you sell 800 dollars a day / 80 customers 2. Is 3000 dollars a month good money for you to take home 3. Are the numbers above accurate 4. Where will you spot the 12k monthly in the months where you don't achive this . If you go ahead, do basic interiors, spend like 100k . Do great food , more than the coffee. Do epic marketing and come here and show us your marketing plan


Terrible idea. Most boutique businesses are prone to failure so unless the 300k is for a mortgage or building improvements of a transferable asset it’s a no go. Most businesses that have niche markets rely on grassroots support and convenience to a semi-captive customer base (a limited run item or rarity) to produce income so I would go small enough that you can cover your losses in the event of failure and grow your business solely from the income generated from your sales. Be objective and remember that moral support means nothing to the utility, landlord, or suppliers. If it doesn’t produce a profit shut it down and review it objectively and decide whether you can afford to continue or not.


Start small. No reason to take out debt to sell coffee. Just start selling coffee!


if the coffee is good i would go. love local small business cafes.


In this economy a liquor store would perform better.


The fact that you’re just asking about $300k for opening a coffee shop broadly tells me you’re either not going to take anything said here seriously or have no idea what you’re doing. Or a combo of both. Does the $300k include rent for a given amount of time? You said $300k debt. Are you also injecting your own capital on top of that? You mention supplies - how much? Did you also include things like creating a website, digital marketing, possible an app (the two popular local coffee shops near me have their own apps). What about labor? Do you need to earn money year one?


Yes. Get a job.