What Should You Know Before Joining a Coffee Shop Franchise?

Coffee entrepreneurship has drawn more office workers who want to run their own shop, and franchising looks like the easy route. Advertising promising zero threshold and an easy path to being a boss oversells it. In practice, owners still face site selection, promotion, staffing, and equipment decisions, and the main franchise models differ widely in what the brand actually provides.

The upfront investment covers franchise fees, store build-out, coffee machines, and working capital, and the total varies by model and city. When choosing a brand, the practical checks are what support is included, how long the contract runs, and whether the promised marketing help is written down. Some coffee knowledge of equipment and daily operating costs helps before signing anything.

In the past year or two, the enthusiasm for coffee entrepreneurship has continued to rise, and many office workers have entertained the idea of opening a shop and becoming their own boss. A coffee shop that seems to have low barriers to entry, modest investment, and an artistic atmosphere has become the ideal project in many people's minds. But when they actually start, they discover they have no idea where to begin, from site selection to promotion, so brand franchising has become a popular option. All kinds of advertising like "zero threshold" and "easily become a boss" are everywhere—but is the reality really that wonderful? This article sorts out several main models of coffee franchising today, helps you calculate the upfront investment clearly, and gives key points to note when choosing a franchise brand, hoping to offer some reference for those of you still hesitating.

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"Young people don't know what to do to start a business? Join xx coffee shop! Zero threshold, easy to learn, easily become a boss." Recently, the franchising success of a coffee brand made this writer unable to sit still!

In the past year, the topic of coffee entrepreneurship has become increasingly hot. Many young people who feel exhausted in the workplace have begun to pay more attention to and feel more impulse toward starting their own businesses. But for people who are not wealthy in funds and have no relevant industry experience at all, how easy is entrepreneurship?

As a result, a coffee shop that appears to require little technical skill, involves relatively little overall investment, does not need much management, is not too intense in workload, and is relaxed and artistic has become a key focus for many people.

But although it looks easy, when it is truly time to roll up your sleeves and do it, you simply do not know where to start, nor how to promote it, so joining a coffee brand has become something many people seriously consider.

Because such demand is growing, more and more coffee brands have started doing franchise business. As the article title suggests, some emphasize zero threshold for franchising, and some emphasize that joining means easily becoming a boss. No matter how much fame they have, everyone's pie can be drawn bigger and rounder than the last.

Is reality really as easy as what everyone reads in the text? For this reason, the writer looked into several current models of coffee brand franchising :

Well-known brand franchising is divided into two types:

① A storefront that meets the area stipulated by the brand owner, with a certain franchise fee charged, an operating deposit paid, cooperation with the brand owner's store renovation, equipment required by the brand owner, and use of the materials and menu stipulated by the brand owner.

② A storefront that meets the area stipulated by the brand owner, with 0 franchise fee, an operating deposit paid, cooperation with the brand owner's store renovation, equipment required by the brand owner, and use of the materials and menu stipulated by the brand owner. The brand owner distributes the franchisee's revenue in the form of returned gross profit. (That is, all the franchisee's income belongs to the brand owner, and then the brand owner returns a certain proportion to the franchisee after deducting costs.)

For brands with average recognition and newly established brands, franchising also comes in two types:

① A storefront that meets the area stipulated by the brand owner, with a relatively low franchise fee charged, an operating deposit paid, cooperation with the brand owner's store renovation, equipment required by the brand owner, and use of the materials and menu stipulated by the brand owner.

② A storefront that meets the area stipulated by the brand owner, with 0 franchise fee, an operating deposit paid, cooperation with the brand owner's store renovation, equipment required by the brand owner, and use of the materials and menu stipulated by the brand owner. From the start of business, the brand owner will take a few percent of turnover.

A brief overall summary:

If a franchise fee is charged, the store's profits belong to the franchisee, but the franchise fee usually needs to be more than 100,000.

If no franchise fee is charged, either all the store's profits belong to the brand owner, who then returns gross profit to the franchisee after deducting costs; or part of the store's profits must be shared with the brand owner.

The biggest cost of joining a coffee shop is not the franchise fee!

Store rent, deposit, store renovation, equipment investment, material costs, labor costs, utilities, etc.—all of them are big money!!

According to what is known, the store location positioning can be chosen by the franchisee, but the premise is that it must comply with the brand owner's rules. Usually the storefront size needs to be more than 30 square meters. You can learn about the rent of eligible shops based on your current area.

Regarding the deposit: in order to ensure the brand's image and prevent franchisees from doing things that damage the brand during operation, an operating deposit starting from 10k is required when joining. Generally, when the franchisee ends cooperation with the brand owner, if no operational problems have occurred, the brand owner will return the deposit.

Store renovation is usually divided into two parts: in order to ensure the brand image, the brand owner will uniformly implement the renovation design. The franchisee needs to pay the related design fee (starting from 1k), and then the renovation cost is calculated by square meter (starting from 20k).

Regarding store equipment: including coffee machines, grinders, ice machines, water purifiers, refrigerators... According to what has been observed so far, the minimum equipment investment also starts from 70k (all domestic brands), and the highest reaches 100k+.

Material and supply costs: the first batch of materials and supplies basically starts from 50k, including the costs of materials and supplies needed for the operation of the whole store and drink production. Subsequent material and supply costs depend on the store's actual operating situation.

Labor costs: whether or not you hire people, even if the franchisee does it alone, each person must be calculated at at least 4.5k per month. Then there are utilities and other miscellaneous items.

Not counting the franchise fee, how much does the upfront investment for a franchise store require?

With such a rough calculation, for a coffee shop from joining to starting business, regardless of the brand's recognition, the starting costs excluding the franchise fee: deposit 10k, rent calculated at 6k + labor calculated at 9k (it is impossible for one person to finish all the work), design fee calculated at 1k, renovation calculated at 20k, equipment calculated at 70k, materials and supplies calculated at 50k, plus utilities, etc., already nearly 170k, with the franchise fee added according to the actual situation.

Do products from franchise brands make money?

Many people choose franchising because franchise stores have mature store-building production and sales processes as well as the brand's own traffic, so they think business will come immediately after opening. In fact, even so, because the product materials and supplies are all stipulated by the brand owner, the product's gross profit is also fixed, and the profit the franchisee can earn is actually very little.

What should be noted when choosing a franchise brand?

Judging only from the upfront investment of a franchise store (not counting the franchise fee), such an amount is already enough to create a brand-new coffee brand yourself. At the same time, you would not be subject to various constraints from the brand owner, and you could better choose and adjust product making as well as the cost of materials and supplies.

But franchise brand stores still attract attention, which proves that many people actually have no concept of running a business and hope to learn more knowledge through cooperation with the brand owner. Therefore, when choosing a franchise brand, you should note the following points:

1. Pay attention to whether the company is large and legitimate, and the credit situation of the company's legal representative/brand founder/boss.

2. A brand's vitality and stable recognition. (Do not trust newly started brands too much, or ones that suddenly explode in popularity online. Some brands look very popular now, but may disappear before long.)

3. Whether it has a mature business model. (Not the kind that draws you a pie: the brand and franchisee growing together.)

4. Whether it has a classic, mature product line. (Do not focus only on a hit product line from one period. When these products cool down, can the brand change and adjust its product line plan in time?)

5. When signing a contract, you must carefully read each clause and pay attention to word games.

6. Remember to ask what else is charged, such as the cash register system, online operations, etc.

7. Whether timely and practical help will be given to franchisees during operation.

8. There is no free lunch in the world, so you must not be greedy for small gains.

9. Record all conversations.

Entrepreneurship is not easy, and being a boss is not relaxing!

Whether creating your own coffee brand or joining a franchise, it will not be zero threshold and also easily make you a boss. Being a boss is not easy, and the responsibilities you need to bear are very many.

Especially once you need to hire employees, you not only need to consider how to keep the store from operating at a loss and how to turn customers into loyal customers, but also how to support, train, develop, and retain staff... These are not things that can be solved by leaving them to chance.

A boss can be said to be a 007 job, with no rest and no true clocking off, and you need to be on call 24 hours a day. After all, it is your own business, so it is impossible not to worry.

I hope everyone can think clearly before starting a business: why you want to do it, what responsibilities you need to bear after starting, and what problems you need to face.

If any readers of this article have relevant entrepreneurship/franchising experience, you can share and add to it in the comments section~

Acting on impulse is the devil; calm thinking is very important!!!

Images are unrelated to the text, source: internet.

The above content is compiled by CoffeeHunters, a coffee news website.