On average, the markup on cups of coffee sold in a coffee shop is 80%. The markup dollar amount is determined by taking the selling price and subtracting the cost to produce the cup of coffee.
Calculating Markup Percentage
The markup percentage can be calculated with an equation: [(Sales Price – Unit Cost)/Unit Cost] X 100 = Markup Percentage. The true cost includes all indirect expenses, not just the coffee itself.
Depending on the variety, it will take 3 to 4 years for newly planted coffee trees to bear fruit. The fruit, called the coffee cherry, turns deep red when ripe and ready to harvest. There are three main roasting stages: drying, browning and development.
The coffee shop profit margin is very high, making it lucrative. With relatively low startup costs you can expect a gross profit of up to 935% on each cup sold. This makes it a great return on investment.
You should separate coffee sales from food sales when calculating profit margin. Typically, your margin will be 15-20% on regular coffee and 12-18% on specialty drinks. The margin is leftover after expenses to produce the sale.
Coffee is convenient and enjoyed daily. Starting a catering business can cost $5,000 to $12,000. A coffee truck business can cost $20,000 to $90,000. Startup costs for a shop vary by size and type.
The average price for coffee across restaurants is $2.99, up 8 cents. At gourmet shops it’s $4.24, up 8 cents. The gross margin for a cup of coffee is 70 to 80%.
Specialty coffee has higher quality beans, often prepared using complex methods. This can drive up the cost. Specialty coffee is often sold at small independent shops which have higher overhead costs and markups.
Coffee shops have a typical profit margin of 25%. Factors affecting profit margin include green coffee bean costs, equipment expenses, and marketing costs.
Specialty coffee shops tend to have higher margins as they use quality beans and complex preparation methods. This allows them to charge more per cup. Independent specialty shops also tend to have higher markups because of larger overhead expenses.
Larger coffee chains can leverage their size for lower expenses. But smaller independent shops can still be very profitable with good management. Location, customer service, and product quality also impact success.
The coffee industry is lucrative. Profit margins are far higher than most food and beverage categories. So a well-run coffee shop can provide reliable profits for years to come.
Potential revenue depends on size. A small shop selling 250 cups daily could make $215,000 yearly. That’s about $18,000 per month or $600 daily.