Coffee Shop Franchise Opportunities: Finding the Right Franchisor

The retail coffee market has been growing steadily in the U.S. for the past decade, with experts forecasting a steady increase of 3.5% annually through 2027. Whether they’re looking for a grande half-caff, double-blended vanilla bean frappe or a simple cup of joe, Americans are flocking to coffee shops in droves. If you’re looking to open a coffee shop franchise, now could be the perfect time.

The Benefits of Franchising a Coffee Shop

The first question you may be asking yourself is, “Why franchise?” If you’re blessed with an abundance of entrepreneurial spirit, you might be chomping at the bit to build your own independent coffee shop empire from the ground up. However, starting a franchise through an established brand offers a number of advantages:

Brand Recognition

Getting customers in the door of a new coffee shop can be a real challenge, especially when you’re competing with the 800-pound gorilla of Starbucks (which doesn’t offer franchising). However, a franchised coffee shop comes with its own branding and built-in customer base. For example, Maui Wowi is known for its cozy, laid-back atmosphere and healthy options, while Dunn Brothers is well-regarded for its small-batch roastings and community outreach. Even if you’re opening the first branch of a coffee shop franchise in your area, odds are your potential customers are already familiar with your brand.

Business Assistance

Depending on the terms of your franchise agreement, your franchisor may provide the equipment you need to get your coffee shop up and running — brewers, espresso machines, blenders, grinders, frothers and a refrigerator for perishables. Most franchisors will also offer assistance with store setup and staff training, as well as marketing campaigns and seasonal promotions. At the very least, your franchisor should provide you with the knowledge and wisdom that they have accumulated over the years, giving you a significant edge over starting your coffee shop from scratch. 

Buying Power

Your coffee shop franchise will be operating under the aegis of a parent company that can negotiate deals for bulk purchases on everything from coffee beans and condiments to cups, lids and stirrers. Compared to independent business owners, who often have to pay a higher price per item for their relatively small orders, franchisees benefit from a lower cost of goods, which means lower operation costs.

Choosing the Right Coffee Shop Franchisor

To ensure the success of your business in the long run, it’s important to research the coffee shop franchise options that are available to you. Here are some of the factors you should consider:

Franchise Fees

The franchise fee is your cost of entry — the price you pay up-front for access to the franchisor’s branding, support and proprietary business systems. Some franchisors, such as Aroma Joe’s and BIGGBY COFFEE*, have relatively low franchise fees set at $15K. 

Others, such as Maui Wowi, Dunn Brothers and Scooter’s Coffee, offer mid-range startup fees between $30K and $40K. For a national brand like Dunkin’, you could pay as much as $90K.

Initial Investment

Depending on the level of business assistance you receive from your franchisor, you’ll likely need to invest some additional money into your coffee shop apart from the franchise fee. This could include costs for equipment and construction, exterior signage, pre-opening inventory and supplies, point-of-sale (POS) system, security deposits and insurance. In addition, many franchisors have a minimum requirement for liquid assets to cover your employees’ salaries and keep your coffee shop afloat during its startup period.

The amount of this initial investment will vary significantly, depending on the franchise. Maui Wowi estimates an upfront cost of $63,900 to $554,000 while Dunkin’ projects an investment of $395,500 to $1,597,200.

Royalty Fees

These are the ongoing fees that you pay the franchisor, typically a specific percentage of your gross sales each month (although some franchises such as Xpresso Delight, may tailor a royalty fee per cup of coffee sold). Most franchises charge an ad royalty fee in addition to the standard royalty fee to cover their marketing efforts. For example, Aroma Joe’s collects a royalty fee of 8% and an ad royalty fee of 3.5% while Coffee Beanery has a relatively low 4% royalty fee with a 2% ad royalty fee. Odd man out is The Human Bean, which collects no sales-based royalty or marketing fees.

Agreement Length

By their nature, franchise agreements tend to be long-term deals. Most coffee shop franchise agreements are set for 10 years, but some (such as Dunkin’) may run up to 20 years. Once the agreement ends, you will lose the right to use the franchisor’s branding and products in your coffee shop unless you sign another agreement.

Reputation

A well-established coffee shop brand with a strong presence is usually a good indicator that the franchise is successful when it comes to attracting customers and generating trust. Reading up on reviews from customers and even other franchisees will give you a good indication of just how reputable a coffee shop franchisor’s brand really is. For example, Dunkin’ is a national and international mainstay with a proven business model, while The Coffee Bean & Tea Leaf garnered praise for its supportive and flexible company culture.

Is a Coffee Shop Franchise the Right Choice for You?

A coffee shop can be a rewarding venture, provided you team up with a franchisor who shares your vision and supports your efforts. Before making any franchising decisions, however, consider the pros and cons of each opportunity. Franchises can provide you with established branding and a built-in customer base, but they also require you to adhere to the guidelines and responsibilities set by the franchisor.

If you're looking to get into the fast-casual restaurant industry through a franchise, we can help! Whether buying your first franchise or building your portfolio, 1851 Growth Club will guide you through the buying process with honesty and integrity. Reach out today to learn more.