
My coffeehouse nightmare (2005) - wallflower
http://www.slate.com/id/2132576/
======
simonsarris
I don't know why the title says from 2010, the story is from 2005, so take the
prices with a grain of salt. Even in New Hampshire $2 for a good croissant* is
very low.

I have a few close friends who are cafe owners in NH (and when the time is
right I will probably open one as a "side project"), and even here, getting a
low-volume cafe or a two-person cafe working well, with staff dedicated to
preparing food at bad margins is unlikely. Instead focus on coffee coffee
coffee or raise your margins until you're happy to sell every item.

I don't think he understands the leeway he has on prices. Imagine the article
his competitor (still in business) didn't write. It goes like this: "We
doubled the prices of food expecting demand to go down, but it went up!"

Humans, they aren't rational. And the "coffee buyer" breed of human, they are
hardly the price-sensitive crowd. At least in New Hampshire, you already lost
the price sensitive crowd to Dunkins. Forget them. Sell the amazing $3.50
croissants with pride. The people who crave it will come no matter the price.

* there are no good croissants in New Hampshire.

~~~
ido

        It goes like this: "We doubled the prices of 
        food expecting demand to go down, but it went 
        up!"
    

I've had that experience selling (small, cheap, non-critical) software* to end
users (i.e. not business or bespoke solutions). When I released at $10 I got a
lot of complaints about the price (including many "it should be free!"),
panicked, and lowered the price.

I later experimented with various price points (without announcing, just
changed the price on the home page) & lo and behold- I sold as many units at
$9.99 as at $4.99 and $6.99 (I didn't dare raise it beyond the launch price)!

The corollary is to not listen to customers saying what they _want_ , but to
observe what they _buy_.

* this was in 2011 and that particular market has changed since, please do not email me asking "how to make money selling software online" \- I don't know!

~~~
peteretep
Another anecfact: people who buy on the lower end of the market for almost
anything are the most difficult customers.

~~~
Spivak
* They're the most price sensitive customers.

~~~
coldtea
They're also often the worst, and will bitch for everything -- and not the
ones that can't afford to pay more either...

------
endymi0n
The coffeeshop fallacy (2011):

[https://news.ycombinator.com/item?id=3134322](https://news.ycombinator.com/item?id=3134322)

> Lots of people think they want to start a coffeeshop. They likely don’t.
> That’s like buying a minimum wage job for two hundred grand. What they want
> is to be a customer and sit in a cafe, drink coffee, be nice to people, and
> possibly curate an art gallery. [...]

~~~
resoluteteeth
> That’s like buying a minimum wage job for two hundred grand.

This is literally true.

If ignoring your own labor you calculate that you will make $20,000 a year on
a $200,000 investment for your business, it seems pretty awesome, until you
realize you could just work minimum wage and not have to put up the $200,000
investment.

I think is actually the most common mistake initially made by people who want
to open a cafe or similar small retail business: treating your own labor as
free and ignoring opportunity cost.

For the purposes of calculating return on investment, you should imagine you
are paying yourself whatever you would have to pay to have someone else to do
the same work in your business.

~~~
iamacynic
> _treating your own labor as free and ignoring opportunity cost._

this goes for any services business. people consistently undervalue/underprice
their own labor, especially when it comes to managerial work.

------
nwatson
When Highway Community Church settled on taking over the failing Red Rock
coffee shop in Mountain View CA in around 2007 or so (?) I thought it was an
unconventional move and likely to fail. But such institutions aren't supposed
to be rational ... what the heck. They wanted to provide an open community
space and to engage with the greater community. And there were many coffee
passionates there with expertise.

I've moved away since but every time I drop inn during a visit to work HQ I
can't help but be amazed at how well they continue to do with Red Rock. A lot
of people worked on the concept in the initial years without recompense.

~~~
keithpeter
Oikos Cafe in Erdington, Birmingham is similar.

Run down shopping centre in a working class area of the outer ring of the
city. Quite a large space. Sandwiches at lunchtime and cakes all day. Coffee
is standard expresso on the steam machine. They use the space for community
activities in the evenings. Well patronised on the two times I've been in.

------
alexc05
I had to smirk at this one:

> none of us would ever consider opening a Laundromat or a stationery store

I've actually fantasized numerous times about selling it all and buying a
laundromat or two. The dream was all around the "virtually passive income"
fantasy. The guy who owns the laundromat I use stops in a few times a week,
and counts his money.

That isn't to say it isn't completely free, he's got issues with local
homeless people (one guy lit a fire in one of the driers and turned it on),
he's got ongoing maintenance. But for the most part he isn't around. People
come to his place, drop off money and leave.

I could imagine having a job where you spend a couple hours a day or maybe a
day or two a week, then spend the rest of your time pursuing hobbies and
hanging out with family and friends. Or volunteering & playing with fancy
technology.

------
hourislate
It's a tough business. Even Starbucks couldn't make it just selling coffee.
They had to start selling sugar drinks and bad food.

I could tell you stories but the article covers it well. A cafe/restaurant
will destroy the most savvy of business people. I don't care how successful
you were at what you did. The food business is a different level of insanity.

If you are going to open up a coffee shop, you better own the building, roast
your own beans, and have a location where 1000's of people walk by everyday to
work or public transportation. Even at that your chance at success is
marginal.

It all looks romantic until you're in the hole 150k with no end in sight.

Great Article.

~~~
Theodores
I used to commute into London from an unremarkable train station that had a
remarkable coffee 'hut' on the platform. I was aware that he and his helpers
had a 5 a.m. start but their day was not anywhere near as long as the
customers with their commutes.

In chatting with the guy I realised he had more money, time, friends, trips to
the country and holidays abroad than me. Unlike every other platform coffee
place en-route his 'hut' was not part of a chain, the coffee was essentially
unbranded. Okay, captive market, known footfall, no opportunity for growth,
however, I think that Neville was getting the economics right. He also does
customer service and remembers everyone's name. So by the time you get to the
front of the queue your drink will be made to your normal specifications
already. As well as working back the queue he also keeps an eye on time, so he
will give you a wink or a no if there really is no chance of you getting your
drink and the train.

There is no branding, no lifestyle to be sold, just what you want for your
commute. Prices are not overly cheap but certainly not expensive for London.
So you pay a fair price for a fair product.

His helpers are family members as well as his daughter's friends. So it is a
team of two on site with his other half dropping off supplies. Despite the
dawn starts they have nothing to complain about, job satisfaction is high.

I respect the business acumen and hard work that goes on at this particular
owner operated place, it is a business I want to support. I don't feel I have
to though, I would buy from the nearby Costa if that was the only option and
pay the 50p surcharge with delay.

I don't believe Neville is waiting for Starbucks to buy him out for millions
and I doubt that he cares that his kids go into the business, since he hasn't
even 'expanded' to the other platform yet - 'branched out' \- I doubt he wants
to take on the world with some mission statement to deliver excellent coffee
(with everyone's names remembered). There is no romantic love of coffee, the
business is just what it is, there is no struggle, it is all under control.

Edit...

P.S. What happened to Slate, why are they no longer a thing?

~~~
tome
I would estimate that Neville can sell about 100 coffees per day with a profit
of about £1 per coffee, so he earns around of the order of £100 per day.
Surely that can't be more than you, unless I'm nearly an order of magnitude
too low in my estimates?

~~~
Theodores
That is a low estimate for an hour, I am too focused on getting the train to
get the stopwatch out and count cups served, but there is a queue and a lot of
fast action behind the counter. Unlike Starbucks there is also multi-tasking
and multi-threading going on. But yes, I will have to ask him the direct
questions on how it works as a business one day.

~~~
tome
I'd be very interested to hear the response!

------
morsch
_The house brew too cold to be sold for $1 a cup was chilled further and
reborn at $2.50 a cup as iced coffee, a drink whose appeal I do not even
pretend to grasp._

That's because they're doing it wrong: for a tasty iced coffee, don't use
stale cold coffee, make a fresh (double) espresso (or any other strong coffee,
I suppose) and immediately chill it with ice.

~~~
bbarn
There are three ways I know of, your americano on ice method, the brew cold
overnight method, and their method.

All three produce varying acidity levels of the same horrible drink, IMO. Most
people I see drinking iced coffee either A. drown it in sweeteners and cream,
or B. just slam it down black for the fastest caffeine intake on a hot day.

I'm sure many people disagree with me, but I've tried it in probably every
form there is, and it's just a waste of coffee to me.

~~~
robalfonso
Finally a sane man in a sea of sycophants! I love coffee, I absolutely do not
get cold brew. Its the worst thing you can do with those beans. I read a while
ago on a hot day a hot beverage actually helps cool you[1] making cold brew
even make less sense.

[1]
[http://www.npr.org/sections/thesalt/2012/07/11/156378713/coo...](http://www.npr.org/sections/thesalt/2012/07/11/156378713/cool-
down-with-a-hot-drink-its-not-as-crazy-as-you-think)

~~~
SirensOfTitan
Two remarks come to mind here:

1\. A great cold brew has so much more flavor to me than hot brewed coffee. It
also is significantly less acidic, which helps my stomach a lot.

2\. If I ever consider the weather while ordering beverages, I do so strictly
to avoid an uncomfortable carrying situation (carrying a cold drink in an even
colder environment). My warm bloodedness gives me a lot of agency to drink
what I want and not what the weather tells me.

------
hoodoof
I've spoken to various friends over the years who start businesses doing
something that they love.

They aren't ready to hear the tough realities until they have hit the hard
downside and possibly gone out of business. After that point, they get a real
understanding of why the most important thing in business is how much cash
comes in. Before that point they tend to be not much interested in
understanding cash.

------
logical42
TLDR; 'How do you make a million dollars in the coffee shop business?'

'It's easy, just start with ten'.

~~~
stevenwoo
I wonder if Andy Rubin and his wife are subsidizing their cafe or if it stands
on its own merits since it's been open a few years now.
[https://www.paloaltoonline.com/news/2015/01/29/all-aboard-
th...](https://www.paloaltoonline.com/news/2015/01/29/all-aboard-the-pastry-
train)

~~~
hkmurakami
Prices are quite high there but it's not a superbly highly trafficked place.
Revenues do not seem super high, though the place is seemingly never empty
(unlike PA, VdT seems to be the only good cafe in downtown Los altos; Satura
doesn't make the cut esp after ownership change).

They seem to be experimenting with their offerings, which is either the
proprietors satisfying their whims or searching for a winning formula.

Also I imagine they bought the land from Maria's Antiques so it'll take
forever to recoup costs there (though I guess the land will just appreciate).

In any case I'm happy they're around. Sad that they changed their macaroon
recipe.

The real question is how Area 151 in downtown Los altos possibly turns a
profit. Is that one of Sergey's toys?

------
cyberferret
The story is the same the world over. No matter what business it is - be VERY
careful starting a business around something that you are passionate about,
love as a hobby, or that people tell you you are good at.

There is a BIG difference between doing something part time because you love
doing it, and doing it all day every day (including weekends) because you HAVE
to. The excitement of 'being your own boss' is quickly ripped away when you
realise that you have a thousand bosses - EVERY SINGLE customer of yours is
essentially your boss for a short time.

Not that it isn't rewarding, but as others have pointed out in here, you have
to go into it with the right expectations. I highly recommend that anyone
looking to start a business reads Michael Gerber's "The E-Myth Revisited". It
will outline a different way of looking at your business at the outset.

Back to the coffee shop though - unfortunately, a lot of lay people still see
the romantic notions around owning a coffee shop, and they all assume that
business owners are raking cash in and are out to rip off the poor workers.
Here in Australia there was a big backlash recently when conditions around
weekend overtime rates were changed, affecting a lot of people in the
hospitality industry. Coffee shop, cafe and restaurant owners were castigated
by the media and the public for not deigning to pay staff time and a half or
double time on weekends etc.

Nothing against paying workers fairly, but I know many friends who run such
establishments. For many of them, opening on a Sunday or a Public Holiday is
mandated by the mall or premises they are in (written into their lease), and
for most of them, weekend trade actually COSTS them money, rather than makes
them anything. Unless of course they reduce staff and work weekends
themselves, but staff calling in sick or not turning up for shifts mid week
usually means they work 7 days a week.

Nearly every cafe in my town closes at around 2 or 3 pm, after the lunch rush
because demand is so low after that that it is economic suicide to try and
keep the doors open and pay wages etc. for a handful of customers. Bad luck
that I tend to try and arrange meetings and do work outside my home office in
the late afternoon...

~~~
eternalban
> EVERY SINGLE customer of yours is essentially your boss for a short time.

A fallacy. The other day I signed an employment agreement and among other
unreasonable matter (aka normal employer employee relations in US) enjoyed the
bit about their version of extended at-will agreement having the additional
meaning of changing the pay, position, and responsibilities "without notice".
:)

Your customer may be your "boss" but she is not your employer.

~~~
cyberferret
I can guarantee that pretty much EVERY business owner has at one stage, or
more than once, had to work extra time after hours for no compensation in
order to resolve a customer issue or fix a bad situation. Sometimes even do
the job of another employee who is unavailable.

One of my customers owns a multi million dollar food wholesale business with
nearly 50 employees, and recently one day he had to drive the delivery truck
himself to one particular defence site to meet the terms of their contract
because one of his drivers called in sick and everyone else was out.

If that doesn't constitute change of pay, position and responsibilities
"without notice", then I am not sure what does. Granted, not a permanent or a
legal change, but they have (and will exercise) that privilege over you from
time to time.

I've run my own business for over 30 years now, and many time the very
survivability of my business hinged upon just a single large customer making
their payment on time or renewing a massive contract.

Pretty much the same as if you had a boss and your future employment hinged
upon getting this particular project just right.

~~~
dnh44
Also at least no one has to give their employer 90 credit terms.

------
VLM
The lesson is, with no secret sauce, you're competing against everyone else
with a home equity loan and some desire.

Any secret sauce would have helped. Not literally caramel flavoring syrup but
anything at all that makes the business special or unique. Fund all your capex
off kickstarter. Hybrid model "hacking" the local zoning codes by putting
software devs in the back room and having meetings with amazing coffee in the
front. Offer non-traditional food, maybe coffee and gyros or coffee and bbq.
Organic and healthy is massively oversold, how about molecular gastronomy
coffee that tastes like watermelons or stinky cheese, or is florescent orange.
A lot of cash based local retail is only in business long term because of
money laundering, you can't compete with a guy stuffing $25K/month of weed
growing cash into his register when you're not growing $25K/month of weed, so
I'm not saying you have to do something illegal, but if the numbers don't work
out if you do everything legally, that's because the successful competition is
doing it illegally, so you'd be a fool to compete solely legally, and in some
cities that means you simply cannot compete in cash based walk in retail
unless you're willing to grow weed on the side, find another city, find
another market, learn some gardening skills, but if your competitor has an
extra $10K of cash revenue that you don't, you can forget about it.

A job looking fun cool and trendy means you'll have the local divorced dentist
or ER doctor funding it as a hobby to be cool and meet people. Again you can't
compete unless you have a similar funding source. You can't sell coffee if a
local NBA player thinks financing his mom's coffee shop or antique store or
froyo shop would be oh so trendy and cool. Very few NFL players or CEOs think
that their wives should operate a septic tank pumping business as want-
raprenuers to keep them out of trouble, therefore you can make great piles of
money going into exactly that kind of work.

"We're gonna be just like everyone else" is in good times and bad, and the bad
times are really, really bad and business lifespan is extremely short, so with
a strategy like that, they're doomed like every other cookie cutter that
fails.

~~~
HeyLaughingBoy
Just had to make this comment :-)

 _operate a septic tank pumping business as want-raprenuers to keep them out
of trouble_

My local septic service wanted $75 to deliver a new tank cover to my house 7
miles away.

"Can't the driver just drop it off when he comes to pump the tank?"

"No, he's not set up to deliver items. It has to come on a different truck."

[Sigh] "Never mind, I'll come pick it up after I get off work."

"OK. We'll be closed by then, but we'll leave it outside the front door. It's
heavy enough that no one'll steal it."

Point being that there are many profitable, unglamorous, businesses that most
of the HN crowd will never think of entering.

~~~
VLM
Uber for septic tank pumping. Hey he's out in the tanker truck and your tank
needs pumping, swipe right or swipe left, either way its a business more
likely to survive than most, as long as humanity continues to poop.

Another strange idea... rural monthly delivery boxes, today you get a new
bespoke artisinal flypaper. Or .22LR ammo monthly gift box, do I get the
frangibles this week or the varmint hunting high speeds?

~~~
HeyLaughingBoy
Awesome. I like the way you think :-)

------
fit2rule
I knew a guy who ran a famous coffeehouse once. He made so many mistakes,
truly glorious fuckups, and came out of it with barely any skin left on his
ass.

He's a multi-millionaire now, having built a major tech company. I always look
back on his coffeehouse days and wonder just how incredibly valuable it must
have been, to be able to suffer such colossal screwups and come out of it with
enough knowledge, tenacity and sheer willpower to continue in the capitalist
game.

One of the conclusions from this thought process is that he must really have
learned to deal with customers, principally, as his business grew/failed, in
spite of it all. And, I think, that's really the only good reason to
own/manage a coffeehouse: you really like the customers.

------
amitutk
The article almost hits on the rule of 30-30-30-10. 30% of revenue to rent,
payroll and goods. You take home 10%.

If you have a restaurant or a coffee house with a revenue of $1 million, you
take home $100K per year. Ouch.

Food is not an easy business.

~~~
falcodream
What sort of tax do you pay on that $100k, in the US? Would it be taxed as if
it were salary?

~~~
dboreham
Short answer: yes it would.

Slightly longer answer: there are various ways allowed under the US tax code
to receive income from a business and have it taxed not as salary; some of
those ways have significantly lower marginal rates than if the income were
salary; none of those tricks is going to do you much good at the $100k tier
though. May as well think of it as salary for tax purposes.

What you could, and likely would do as this business owner with $100k in
profit, is you'd arrange for the business to buy things that are legitimate
business expenses but also make your life nicer and/or cause you to need to
spend less money from your personal finances. e.g. you need computers, phones,
tablets to conduct your business so now you don't need to buy any of those
things with your own money. You can't do this with cars, fwiw.

~~~
HeyLaughingBoy
_You can 't do this with cars, fwiw_

Since when? I've known a number of people who bought their vehicles with
business money for a business writeoff. The least likely to survive audit was
the carpenter whose Corvette was a "company car."

Yes, he had a separate (junky) work truck.

------
golergka
Author went on to right an enjoyable novel about the whole affair:
[https://www.amazon.com/Kofemolka-M-
Idov/dp/5271245489](https://www.amazon.com/Kofemolka-M-Idov/dp/5271245489)
(not sure if there's an English version). He later went on to become the
editor-in-chief of Russian GQ, and I think, got the return on his investment
in some way as his literary career progressed.

~~~
jdsampayo
It is the same?
[https://books.google.com.mx/books/about/Ground_Up.html?id=Pl...](https://books.google.com.mx/books/about/Ground_Up.html?id=PlgIa8BN85gC&redir_esc=y)

------
nommm-nommm
Following your passion can also make you blind to your mistakes. I know a guy
who failed at an Irish pub. Guy was totally blind to all his mistakes that
where extremely obvious to both me and (at least some of) his staff. He was
too busy living the dream of meeting patrons, hosting his friends, and singing
for strangers to really see where he was going wrong from the business
perspective. His business practices were just all over the place - no actual
concrete plans. He seemed to have a "fun first, business second" attitude.
When he closed he blamed it on "the market," guess he didn't notice that every
other place on the same street was busier than ever.

------
wyclif
I have forwarded this piece to dozens of people I know who told me they wanted
to open a nice little local coffeeshop. Some of them might have thought I was
a killjoy at the time, but I know for a fact at least a few of them are glad
they never did it.

------
efriese
I own a coffee shop in addition to my tech work. Most people know having
runway is important to any startup. If he had to declare bankruptcy 6 months
after opening he wasn't set up for success.

If you make good coffee, choose the right location, and do a decent job of
marketing you can get cash flow positive with time. Acquiring customers can be
slow, but once they taste good coffee they will come back.

Much of the other comments here are true, you don't open a coffeeshop to get
rich. The only way you can make good money is to scale into multiple
locations.

------
zafka
So true! The worst part is, I am rebuilding my capital in a cube farm to make
up for all the fun I had running my Art Gallery/Pottery shop -- but I still
dream of doing it again.

------
nslindtner
Anthony Bourdain, who wrote our epitaph in Kitchen Confidential: "The most
dangerous species of owner ... is the one who gets into the business for
love."

------
matt-attack
Thank you for posting this. I'll never forget reading this article when it
came out, and I've been searching for it for years.

------
Broken_Hippo
In a way, I think the main problem was lack of research. I've dreamed about
opening a small cafe or coffee shop - as simple of one as possible - and
worked in one such place with a chef (It was only me and him most days, save
weekends).

Restaurants are a bit unique. They are horribly expensive to start up. Coffee
machines, kitchen equipment that meets state regulations. In Indiana, this
includes getting certified by the board of health as well (You have to have
someone certified on sanitation and food safety working at all times).
Location is really important, and folks often work really long hours.

Many many close within a year - I've read many similar stories. Folks are
doing exceptionally well if you make any profit the first year, and the second
year can be a loss as well. Even after you get some profit, margins tend to be
thin.

I still think it would be gratifying, but the risk is rather high.

------
sAbakumoff
His novel "Ground Up" that describes this coffeehouse nightmare in details is
one of my favorite modern books. Can't recommend it enough!

------
Overtonwindow
Wait. The guy who wrote this lives in Moscow. So was this coffee shop in
America, or Russia? Huge difference.

~~~
Naritai
He said in the first sentence that it was in Manhattan.

------
praptak
So, how do the chains like Starbucks or Costa manage to sustain their
business?

~~~
bbarn
Because the coffee has a ridiculous markup on it, and they are brilliant at
marketing. Microwave breakfast sandwiches with names like "Double smoked bacon
and egg". Frozen pound cake for 3 dollars a slice. Lattes for up to 5 dollars
each.

And a constant flow of customers and it being just uncomfortable enough for
people not to stay too long.

~~~
pm90
> it being just uncomfortable enough for people not to stay too long.

OMG this is so true. I suspect their tables and arrangement may also be
designed for this, as I've never felt too comfortable working from any
starbucks (they are usually too small for me).

Another factor I've found, at least in Austin and outside the collegy areas:
they're filled with Teenagers. This isn't bad in itself, except that they're
often loud when in groups.

~~~
Naritai
I noticed the coffee shop near my university replaced their tables with tiny
little things that cannot properly hold up a laptop. I'm quite sure that was
the intent.

------
rileytg
lulz too cheap. my local shop sells coffee+pastry for 8-10$. solid traffic
from 7:00-19:00. two staff.

~~~
intopieces
The number in parenthesis after the title indicates the year the story takes
place. In this case, the prices are from 2005.

~~~
rileytg
right, my shops still here because they got on the fancy spency coffee game
early on (2010). sold to blue bottle, opened another 10 blocks away with even
higher prices (the one i described)

