 This is why 75% of coffee shop fails in their first year. In this video, I'm gonna cover the top five reasons why coffee shop fails in their first year so that in that way you can avoid them at all costs when building out your coffee shop. Make sure you guys keep watching. Hello friends, my name is Wilson, your friend in helping you build a profitable, small business and a thriving food business. How many of you guys are looking into creating a coffee shop right now? Let me know in the comments below. One of the biggest dreams out there for everyone is to create a coffee shop. They think it's easy, they think it's simple and they think it's laid back to do so. However, creating a successful cafe is way more than creating a good cup of coffee. You need to write business fundamentals and that's the reason why you have to pay attention to the top five most common reasons why coffee shops fail in the first year. Let's dive right in. The number one reason why coffee shop fails is because of poor management. When it comes to management, we're talking about management of staff. That means people are hiring other staff based on just availability. They're not hiring people based on values. When you don't hire based on values, what do you do? You end up inviting bad apples, which poisons all your good apples. That means that you're inviting people to come in to steal from you. You're inviting people to come in to comp their friends and thus jacking up your cost of goods sold. That means it's coming money out of your pocket. In addition to that, you're inviting a toxic environment in your culture. That means that these bad apples, they're gonna start talking and spreading rumors and that turns into higher turnover. What does turnover mean? That means these people are quitting because they don't enjoy the culture that they're in. They don't enjoy the place that they're working in. And this would cost you thousands of dollars in hiring new staff, training new staff, and it is just a really, really big reason why coffee shops fail in the first place. In addition to that, when you hire based on the wrong culture, what happens is that your staff is not happy. When they're not happy, when they're not fulfilled and satisfied, this translates to their interaction with your customers, thus giving your customers bad experience. All in all, when you invite the wrong people in your organization, specifically the ones that don't match your culture and your values, that's a really big problem why people fail in the first year. The next problem when it comes to management is the poor management of inventory. When you don't order enough ingredients, you don't have enough to sell, thus limiting how much you can make. Vice versa, if you over order, you're gonna have a ton of spoilage which increases your cost of goods sold. That means decreasing the money you take home in your pocket. That's the reason why having proper good inventory management is so important to make sure that you are making money in your coffee shop. And finally, when treating vendors, a lot of people mismanage their vendors because they see them as people that they pay. They don't see them as partners that they can grow with and thus they don't build a relationship with them. They don't treat them with respect. And thus, when these vendors have good stuff, they're not gonna send it your way. When you need help with them and when you need favors from them, they're not gonna help you out. And that's the reason why having proper vendor relationship is so important. Case in point, we have a very, very good relationship with our vendors who are supplying us with cups. A few years back, there was a strike within our own area and thus a lot of different bubble tea places didn't have cups to supply and to sell their bubble tea. But because we had an exceptional relationship with our vendors, the remaining stock that they have, we were able to get some of it which allowed us to keep selling our products. That's the reason why having a great vendor relationship is everything when managing your coffee shop. The second reason why Moe's coffee shop fail is because of bad location. When it comes to a coffee shop, it is really about the right location. A lot of times when you can secure a good location with high traffic, then the chances of likelihood of success is definitely much higher because with a coffee shop, this is all about a volume game. You're selling a very low ticketed item and that means you need a lot of traffic in order for you to be profitable, in order for you to pay for rent and labor. So if you do not have the budget to be located in a high density, high foot traffic area, then it really comes down to the characteristics of the neighborhood that you're in. Some characteristics that you need to pay attention to is the accessibility. Let's say if you're targeting high school or university school students, then you must be located near public transit. Let's say if you are targeting families, then you must be located in a place that is relatively safe. Let's say if you're located at a space where not a lot of residential people are, then who can you sell to? That's the reason why, especially in today's age, you must choose a location that has a high residential density. That means that a lot of people are living around that area, even though you don't have a lot of walk-by traffic, there's a lot of people living around that area. Thus, you can cater to them through third-party delivery apps. All in all, the secret to the right location is understanding the characteristics of your location and being able to play that to your strengths. If you have high foot traffic, then play that to your strengths. If you're in a neighborhood, then definitely play that to your strengths. So understanding this allows you to build the right product and allows you to serve your customer that much better. If you guys enjoyed this video and find value in this video, make sure you guys smash the like button and let me know this is the type of content that you enjoy. Now, back to regular programming. The third reason why most coffee shop fails is because they have no uniqueness. What do I mean by that? When they come into your coffee shop, what makes you different? Now, a lot of people are thinking about, hey, what makes us different is because we're convenient. We're cheaper. Well, I'm telling you, if I were to want cheap, if I were to want convenience, I can make instant coffee at home for only 20 cents. Why would I want to come to your coffee shop? You must provide an experience for me. You must provide something different that I cannot get anywhere else. What is that experience like? It could be something very magical when they come in. There's something new every time. It could be something that's like home away from home. You get this feeling of, wow, this is a very comfortable place, or this could be a very sophisticated place where you serve very specific coffee. At the end of the day, it doesn't matter what you choose. What matters is that you're occupying a specific mind space in your customer's eyes. And that's how you're gonna be able to get lots of customers coming through the doors. Now, when you're thinking about how do I create this mind space, and what are you talking about mind space? Well, we actually created an hour-long free masterclass which you can attend in the link below where I talk to you and share with you specifically how to create the mind space so that in that way, your customers will always choose you over your competitors. Definitely check it out in the link below. The fourth reason why most coffee shop business fail is because they don't know their numbers. So many people, they work super, super hard. They see money coming in, but at the end of the month, when they look at their bank statement, they're looking at $50 cash in their bank only, or even worse, in their reds. That's the difference between a successful businessman and one that is not successful, one that actually closes their coffee shop in their first year. Do you know your break-even rate? Do you know your turnover rate? Do you know your average order value? Just imagine for a second how many cups of coffee you need to sell if all you're making is 25 cents per cup of coffee. That's a lot of freaking coffee you need to sell. And that's the reason why you must know your numbers so then that way, you know which levers to pull on in order for you to make more money. As an example, you can introduce complimentary or replacement items such as bakery, spaghetti, food items, to-go items in order for you to be more profitable. That is one lever you can pull. As an additional lever, you can actually look at how much output per hour all your staff is doing. How much are they making per hour for you? And if you're not maximized, then definitely you can stagger their shift in order for you to save some money there. In addition to that, you can be a little bit more creative with your hours of operation. If in the first hour, all you're selling is only a couple cup of coffees and making a couple quarters, then perhaps you can actually cut those hours shorter. So then that way you are actually serving the people that are actually making you money. As an example, when we first started our ice cream shop, we were selling $7 ice creams, but when we started to introduce a $2 cone, our volume went up by three times. And on top of that, it is much easier for us to create. Now when we were talking about this, you might be thinking, $7 ice cream must be making a lot more money than my $2 cones. It is actually not true. The profits that we make from a $7 ice cream versus a $2 ice cream is exactly the same. Because with a $7 ice cream, there was a lot of cost of goods sold. We need to pay for extra packaging, dry ice, extra toppings, and all this amounts to a big sum, which in turn we were only making a $1.50 out of the $7. Whereas when we're selling a cone, all we were selling was the waffle cone and the ice cream on top, and that was it. Thus the cost was substantially lower, us making a $1.50 on this different item. When we're selling two different items, yet both of them making the same amount of money, which one would you want to sell? Of course the $2 one because it is much more profitable. This is just an example of the levers that you can pull when you know your numbers. So definitely you must know your numbers and this is the foundation of creating any types of business. You need that business plan of yours so then that way you can plan for success. And that's the reason why you should definitely check out this video where I dive deep into how to create a proper coffee shop business plan. We go through all the business foundation so then that way you can start off on the right foot. The fifth reason why most coffee shops fail in their first year is because of their mindset. The lack of learning and growth mindset that is required to succeed in today's world, especially with technology increasing and advancing so rapidly, we must always be in the forefront of seeing how we can serve our customers better, whether it's technology, whether it's menu offering, whatever the case is, we must always have that learning mindset. An interview that I highly recommend you to watch is my friend, Max Mooney, of how he started his coffee shop in Seattle. So definitely check it out. More things that you should learn from is to learn how to market. Learn the latest strategies to marketing and reaching your customers, whether that be email marketing, whether that be Facebook marketing, Instagram marketing, SMS marketing, these are all things that are constantly evolving so then that way you can better serve your customers. Another thing that you can definitely look at is to be involved in this industry and be involved in the communities, who are actually giving you tons of value. So definitely being in the right mindset for growth and learning is very important for you to succeed in this industry. So there you go friends, the top five reasons why most coffee shops fail in their first year. These are the items that you must avoid at all costs if you wanna create something that is successful, something that you and your family can be proud of. And that's the reason why we created this free masterclass in the link below which you can attend. This is a higher expansion of everything that we talked about today. We expand on how you can define your values. So not only are you connecting with your customers but you're also connecting with your staff. So then that way you can hire the right people for you and your operations. You can actually start to connect with your customers so whether you have a bad location, a good location, you can have people that support you over your competitors all the time. And lastly, we're gonna expand into digital trends. We're gonna expand into different marketing trends that is working in the world out there. So then that way you can explode in revenue. Definitely check it out in the masterclass that is in the link below. Once again, I really hope you guys enjoyed this video. If you guys do, hit the like button. Otherwise, I'll see you guys in the next video.