After the success of your first coffee shop, the next logical step is to open a second café, right? You've built a loyal community around your first café, deliver top‑notch coffee, and are eager to introduce your brand to nearby neighborhoods.
But is opening a second coffee shop the best option for your business?
As many seasoned coffee professionals can testify, opening a second location on the heels of a thriving first shop doesn’t guarantee success. A lot of missteps can happen in the process of building out a second location, from cost miscalculations to inconsistencies in coffee quality.
But with the proper information, planning, and intuition, expanding to a second café is entirely feasible.
We chatted with Dave Delchamps, Customer Success Lead at Bellwether, at CoffeeFest New York to learn more about what coffee shop owners need to know before opening a second coffee shop. Our guide covers:
- Why business owners need a reason for growth beyond additional revenue
- How repeatable processes are the key to success at future locations
- How to know if you’re ready to open a second coffee shop location
Let’s take a look at what Delchamps had to say.
Define Your Motivation for Growth
Have you ever stopped to think about why you want to open a second location? Your reason for growth will drive the success of your new café.
For many business owners, the reason for growth is simple: additional revenue.
But as Delchamps points out, “Double the revenue means double the challenges.” You’ll need additional motivation to sustain you through the many obstacles you’ll face in opening a second shop.
A few examples of growth motivators include:
- Adding quality jobs in your local community
- Providing a community space for events, meetings, and the arts
- Expanding to new effective sales channels
- Creating opportunities for coffee professionals to advance their careers
While revenue is a perfectly acceptable motivation for opening a second location, pairing it with a deeper reason for growth further enhances your ability to open and operate a successful second coffee shop.
Are You Ready?
One of the most common mistakes eager business owners make is opening a second location before their business is ready to expand. There’s a major difference between wanting to grow and being ready to grow.
“At some point, your first coffee shop is going to level out in terms of gross revenue and growth will slow down a little bit,” Delchamps says. “You have to then ask yourself, are the incremental benefits of continuing to operate one café good enough—or would you like to scale?”
You can take a few different approaches to find out if you’re ready:
- Review the numbers — Sit down with your accountant (or QuickBooks) and take a good look at your numbers. Is your growth stagnant, despite trying every trick in the book? Perhaps your sales have gone up 50% from last year. Do you have a handle on your costs? Are your profit margins healthy? Being financially steady is key to the ongoing success of your entire business and will demonstrate if you’re truly ready for expansion.
- Think about your team — Will adding a second location further the careers of your core team members? Or will opening another coffee shop add significant stress to a staff that’s already stretched thin? If you don’t have enough team members in place, you might not be ready to grow. On the other hand, you may have a team that’s excited about expansion.
- Analyze internal processes — The trick to opening a second location is to have a playbook you can run with. This playbook includes processes and systems that were successful at your first location. If your existing coffee shop is still scrambling to manage inventory or retain staff, you can expect those challenges to continue over at a second shop. But if your shop runs like a well‑oiled machine, you might be ready to duplicate those processes elsewhere.
- Trust your gut (and get external validation) — At the end of the day, you know your business better than anyone. If your intuition is telling you it’s time to grow, then grow! But before you do, talk to trusted advisors, mentors, or even close friends. Have a conversation about your desired growth plan with someone who can be objective with you and either confirm or deny your gut feeling.
If you’re thinking about opening a second coffee shop, you need to be able to confidently say, “I can do this as good as—or better than—the first time.”
Let’s Talk Money
There’s a reason everyone says you need to know your numbers inside and out—because not knowing can cause a whole host of problems for business owners.
The first step in any growth plan is to thoroughly review your coffee shop’s sales, costs, and profit margins.
Sure, this advice seems straight out of an Intro to Business lecture, but it’s at the core of every solid entrepreneurial endeavor. Let’s break it down.
Revenue is a great barometer of a company’s health. If a coffee shop is driving a substantial amount of sales with a single location, this may indicate an opportunity for growth.
Look at sales for the last few years to determine the current state of your business and if growth is possible at the current location—or if growth to another location is feasible.
If you look at your sales figures and decide that a second location isn’t in the cards right now, don’t fret! You can still add new sales channels to an existing location by:
- Roasting coffee in‑house to sell online, in‑store, and through wholesale partnerships
- Selling branded merchandise and related products
- Collaborating with local businesses on aligned ventures
- Reaching new customers through online ordering and delivery services
Before diving headfirst into opening a second coffee shop, take time to realistically forecast how much revenue it will generate. Think about factors such as:
- Location — Is the proposed second coffee shop in a highly trafficked area? What’s the parking situation?
- Building design and layout — Does the potential building have enough space for everything you need to generate the same (or more) revenue as the first café?
- Menu — Will you have the same menu options at this location? Or will you experiment with new food and beverage options to drive additional income?
- Sales channels — Does the second location offer additional channels not available to the first, such as a drive‑thru system?
The amount of revenue necessary to feasibly open a second location will vary from business to business. But Delchamps shares a wise piece of advice:
“Don’t rely on cash flow from the first coffee shop to bankroll the second. A second location can kill both—make sure the second location can stand on its own and not bring the first one down too.”
While a coffee shop may drive significant sales, expenses can quickly kill the dream of expansion.
Aim to keep your cost of goods sold (COGS) and labor expenses equal to 60% or less of revenue. The more control you have over your costs, the healthier your business will be and the more ready you’ll be for expansion.
If you look at your P&L (profit and loss) sheet and find that costs are out of control, consider a few ways to reign them back in:
- Optimize labor costs — While having a large staff of part‑time employees offers flexibility, it tends to result in frequent turnover and endless hiring and training costs. Instead, invest in a smaller full‑time staff who desire to grow alongside your business. This will benefit the company far beyond the P&L sheet.
- Switch suppliers — If the cost of coffee cups, food ingredients, and other inventory is rising, shop around for new suppliers providing the same quality at a better price.
- Roast coffee in‑house — “At some point, the revenue you drive from roasting coffee will outweigh the costs incurred,” Delchamps explained during a CoffeeFest NYC panel. “What many business owners like about roasting in‑house on a product such as the Bellwether Roaster is the ability to achieve this growth at a lower scale.” Roasted coffee is one of the most important—and often expensive—elements of a successful coffee shop. Rather than relying on a partner to roast, package, and deliver the coffee, you can take control over the costs and roast in‑house.
Think back to when you opened your first café. Aside from any necessary construction, what was your biggest expense? Equipment.
The same will be true for your second location. However, you now have the knowledge to guide you in purchasing the right equipment for coffee shop #2. These upfront purchases may tip the scales toward a smaller net income in the beginning, but purchasing the best equipment for your second shop will pay off in the long run.
While a healthy gross margin is anywhere between 60‑80% depending on the product, coffee shops can effectively improve profit margins by increasing revenue and controlling costs.
Basic business principles, right? Now the question becomes can you do it at a second location?
Studies have shown that those who choose to become a coffee roaster‑retailer enjoy the highest gross margin on each item sold (65%
) and an industry‑high profit margin of 8.79%. And, when you add wholesale sales channels to the mix—increasing your company’s revenue in the long run—profit margins make a substantial leap to an average 11.92%.
Consider Your Growth Path
Coffee shops have a few different options for opening a second café.
The first and most obvious choice is to retain full ownership and open the shop under your brand. With this path, you retain total control over the entire process—from inventory fulfillment to staff training and beyond. The sales, the challenges, and the successes all rest on your shoulders.
Or you can explore franchising. Don’t be fooled—franchising isn’t an easier option. But, with a significant amount of upfront work, it can lead to a multitude of future growth opportunities through streamlined operations and managed costs. After opening a few cafés, some business owners find that franchising allows them the growth they need without the added headaches of day‑to‑day management.
While either direction can lead to growth, it’s best to determine what path suits your company and personal goals.
Define Your Non‑Negotiables
As you navigate the challenges of opening a second coffee shop, your to‑do list will pile up. This requires coffee shop owners to prioritize aspects of the build‑out process and develop a list of “non‑negotiable” items.
Non‑negotiables are the aspects of your business that you refuse to compromise by opening a second location. These can include:
- Brand identity
- Coffee quality
- Company culture
- Internal processes
These non‑negotiables not only give you direction as you plan your second location, but they also provide a solid understanding of what’s of the utmost importance to your business.
For instance, if your company prioritizes coffee quality, find ways to standardize quality processes in your second location. This can be accomplished through standard reported metrics such as TDS (total dissolved solids) or dial‑in recipes or by equipping each location with the technology they need to produce top‑quality coffee.
“Pick a couple of details you believe embody your brand,” Delchamps explains. “Focus on that and make it really special and stand out for customers, rather than trying to do everything.”
These non‑negotiable elements or standards of your business will drive loyal customers to visit the new location and encourage new customers to try your coffee.
Develop Repeatable Processes
Coffee shops that have successfully opened a second location have done so through the power of simple repeatable processes. “Anything that you want to be consistent, you need to have a process that makes it repeatable and simple for your staff to adhere to,” says Delchamps.
Examples of repeatable processes include:
- Shop opening and closing procedures
- Coffee brewing and signature drink recipes
- Inventory stocking
- Customer service protocols
Develop and document these processes at coffee shop #1 and immediately implement them at your new café.
Recognize the Challenges and Forge Ahead
Chances are that opening your first café helped you take off the rose‑colored glasses. Owning and operating a coffee shop is tough, but rewarding, work. The same is true for opening a second location.
Leaping from one to two shops is a significant challenge. From maintaining the same company culture with a second staff to ensuring coffee quality adheres to company standards, you’re effectively doubling your workload.
Understanding the challenges you’ll face enables you to plan ahead. While there will always be little surprises along the way, you can tackle each obstacle with confidence knowing you have a solid growth plan in place.
Keep in mind, there’s no one‑size‑fits‑all approach to growth. What’s right for one coffee shop may not be right for another. One café may choose to add a second location that’s only a takeout window, while another opts for a full‑fledged coffee shop and bakery.
At the end of the day, growing to a second location is dependent on your company goals, motivation for growth, and financial position. When your gut tells you it's time to grow and you have the numbers to back up your plans, go for it!