Assuming you open your cafe on a viable commuter path, you can take advantage of this subsidy and your economics can work out. You can improve your economics even further with the tactics a lot of cafes already to nudge behavior at the margin, some of which you've already noticed (e.g., less-than-stellar wifi, thermostat at slightly cold temperature, limited actual seating space, only 1-2 customer-accessible wall sockets, etc.).
On the question of charging-by-the-minute: the marginal profit you can earn on coffee is higher than marginal profit you can earn on real estate. That's why Starbucks (which sells coffee and gives away real estate) is a better business than WeWork (which sells real estate and gives away coffee). Therefore instead of charging by the minute, you might consider raising your coffee prices and/or controlling the average amount of real estate you're giving away per unit of coffee sold.
you don't need to institute limits, subscriptions, nudges, or any other customer-hostile action. just price well, and provide value beyond your costs. one pro-customer option is providing food (beyond pastries) for the lingerers, which adds some marginal cost but adds significant marginal revenue.
In most competitive markets you cannot compete (i.e. not lose money) when you have costs that a competitor does not have the bear. For instance, if 20% of your customers are money losers, a competitor can cut those customers out and make a higher return. Everything gets priced in. So that means that person can charge X% less for coffee, or pay X% more for real estate, or have better coffee or better service etc.
Ignoring the trade off doesn't make it go away
Starbucks did what you’re suggesting to increase turnover and profit at stores — but the opposite happened: sales dramatically dropped, even though the time to serve a single customer and the average customer stay both dropped.
The issue is that Starbucks doesn’t just sell coffee — they’re a cafe. And cafes are in the business of selling thirdspace, where you create fun memories with friends and family. So when they provided a substantially worse version of that product, it sullied their brand and lowered their overall profit, because people no longer associated coffee at their chain with good times.
Similarly, the owner of a small cafe I used to work from loved the three or four regulars who would come near open and stay all morning — us being visibly chatty in the large storefront windows would draw in more of the nearby joggers than if the store was empty. We were a free living ad that getting coffee there was a fun time and popular with locals.
I think you’re ignoring a lot of ecosystem complexity with your “optimization”.
Can you show me where starbucks revenue dropped (besides 2020 pandemic dip)?
2021 $29,061
2020 $23,518
2019 $26,509
2018 $24,720
2017 $22,387
2016 $21,316
2015 $19,163
2014 $16,448
2013 $14,867
2012 $13,277
2011 $11,700
2010 $10,707
Or maybe you mean same store sales! Oh wait, those have been up every quarter except one since Q4 2009.
I never understood why people online make shit up. People spout very easily googleable statements like "their revenue went down" so confidently, without bothering to check. They live in fantasy land where they pretend like the goal of a coffee shop is something akin to "serving the community" or "being a third place" when in actuality the point is to sell something for more than it costs to produce. You may want your coffee shop to be a third place. But it doesn't make it a viable business model.
MBA types get a lot of shit on this forum, but MBA types are good at some things. And those things include running a pretty simple business like a coffee shop. It's pretty simple math, you can set clear targets, estimate demand and balance trade offs like what to have on the menu and how much to charge. Sure there's things like investments and long term planning, but they do that as well, just without the romanitization.
https://twitter.com/jonathanmaze/status/1255246119128444930
https://www.macrotrends.net/stocks/charts/SBUX/starbucks/rev...
But sure, I just made it up because my story (in simplified form) didn’t match the numbers you quickly found about global aggregates.
> They live in fantasy land where they pretend like the goal of a coffee shop is something akin to "serving the community" or "being a third place" when in actuality the point is to sell something for more than it costs to produce.
I think it’s interesting that because you couldn’t verify my personal anecdote on public data, you made extremely negative assumptions about me:
- I’m a liar.
- I don’t know about business from spending a decade in marketing, econ, and finance.
You also seem to not even understand the term “thirdspace” or realize that’s a product cafes, bars, and restaurants sell and from where they gain part of their value by being fun and social. Whoa!
> MBA types get a lot of shit on this forum, but MBA types are good at some things. And those things include running a pretty simple business like a coffee shop. It's pretty simple math, you can set clear targets, estimate demand and balance trade offs like what to have on the menu and how much to charge.
Except that this is untrue and a reflection of your own lack of information — though I agree MBAs get an unfair treatment around here.
However, you’re dead wrong about running a coffee shop being simple maximization or “simple math” — but I hope you keep it up. Small minds like yours causing problems keeps me employed to fix them.
Just a thought.
I never said they did it everywhere and crashed the company — which is what would be required for top level numbers like those to change.
Unless the all-dayers are actually blocking space that other customers could use, they are likelier to profit the business than harm it.
the biggest problem is almost always reaching their target segment--like the people already sitting there with laptops--to drive enough transaction volume to be sustainable, which is squarely a marketing problem. rent and labor costs (operations) are usually the next biggest problems. competition ain't the issue.
If the owner has people sitting there and wants them to purchase more, that's more increasing average revenue per user which is limited. How much coffee can someone drink? If someone drinks a plain coffee, getting them to upgrade to a higher margin sugary drink is hard. You can push food and snacks, but that's also limited since you're not a restaurant and the person can only eat so many pastries or dry goods. For every one customer sitting down there are likely 10 customers that come in during that time. Why focus on the person sitting down?
Getting more people in the door is probably an easier way to get more revenue. Especially considering the amount of people that can sit around all day versus the amount of people that can walk by and pick up a cup of coffee to go. In that regard, competition is definitely a huge factor. If a coffee shop has a 15 minute wait while another one is 5 minutes, I would likely pick the faster one. You can prefer one brand to another, but service is a huge factor.
Before I got an M1 laptop, this was a real issue for me. Now, it really doesn't matter. My battery will easily last the entire time I am in the cafe without really thinking about it.
Mouhaha!
This does only really apply in shops in areas with decent foot traffic though.
Important to note that the second feature they list is: "comfy seats." It seems that many coffee shops try to fight the over use problem with uncomfortable seating.
I think this is an important point. I occasionally work in a Panera near me during the weekday (I usually order a soup or sandwich) and I don't feel bad about taking up a seat for an hour or two since the place is practically empty, and would be a little irked if someone asked me to order something at that point.
I would feel bad and wouldn't mind at all with leaving or ordering something more frequently if I wanted to do the same thing on a Sunday afternoon since the place is often very busy.
Some signage similar in tone to what I see with metro buses and wheelchair seats seem appropriate (roughly worded as "it's perfectly fine to sit here, but if you see someone who needs this spot, you should give it up").
I'm reminded of Ziferblat [1] and other similar "anti-cafes" [2]. They shut down their local one here though, apparently due to not being able to meet the cost of skyrocketing commercial rents.
[1] https://www.ziferblat.co.uk/Coventry/discover [2] https://en.wikipedia.org/wiki/Anti-caf%C3%A9
The usual killer, as you've identified, isn't people sitting at the tables but the rents. Possibly you could do a quite "successful" cafe as a non-profit that owns the building it is sitting in.
Also it seemed the more people who where actually there the more business it received.
Because real estate prices and thus rent have gone through the roof compared to the historic average.
Coffee used to be expensive relative to wages and rent ultra-cheap. Now that's flipped.
There's a couple a few blocks from me but I've never tried them, as I just make coffee with an aeropress at home. When I was younger I'd hang out at coffee shops and pretend to be getting work done, but not so much as an adult.
[1] https://www.blankstreet.com/
[2] https://www.forbes.com/sites/douglasyu/2021/10/13/blank-stre...
It's only uneconomical if enough potential customers leave because they can't sit down or I guess if they use a ton of power. Business Internet is not usage based, right? and you're buying that anyway...
One place near me instituted a "co working packages" which you were expected to pay a certain fee and that got you drinks, maybe a pastry and let you sit down for some amount of time.
I would go in there for a pastry from time to time and the place sometimes had one or two people on laptops in there, and had plenty of seats both before and after having this co-working policy. It's not a surprise, there are tons of cafes in walking distance and this was the only one that cared about charging people to sit there. They were all pretty similarly not at capacity regardless of "scarcities".
Then there's the cost of enforcement - what happens if someone causes a scene and doesn't want to leave? You have to pay staff for that that you might not have to otherwise. Same with software tracking minutes of wifi used.
You'd think that's the case but really, it depends.
It depends on what connection type you have, what country you're in, and how remote you are or aren't. Business grade fibre in a big city? Probably not going to be metered and you'll have bandwidth to spare. ADSL in the middle of nowhere? Almost certainly going to be metered and you'll have very little bandwidth.
On the other hand in the old days you used to pay $x for 30 minutes of time on a computer. I don't see a problem with 30 minutes free with a coffee, then charging extra for time.
Maybe there needs to be an office space + cubicle + coffee shop rental thing ... but I'm not sure you could charge enough to justify it / folks would probably save money and just go camp at a coffee shop.
It's an interesting dynamic.
This is essentially what co-working spaces like WeWork are. But they are quite expensive which is probably why a lot of people continue to use coffee shops (environment and location of coffee shop may also be preferable)
I guess that’s hard in the USA where commercial and residential spaces are so strictly kept separate and far away from each other. Where I’m from it’s not rare for a business to be in a place that used to be (or still is) someone’s home. This includes one of my favorite cafes (they make fantastic food) which seems to be the owner’s home lawn and first floor.
I don’t know the exact economics of this, but I can imagine not paying rent means this sort of customer stops being an existential threat and just becomes a nuisance if you want to maximize profits.
EDIT: do note I'm sharing this from the perspective of someone who would set up a café "for fun" and to "keep busy" when retired or something, not as someone who would want to necessarily set up a while operation with employees or live off of this café.
It's quite reasonably priced actually, and a bit more co-working focused than your average coffee shop.
(Costco being the only one I've been in that didn't provide store-wide free wifi.)
The solution to this is simple: A land line behind the counter.
Present a screen which provides a payment gateway to buy more time - or for less money - buy another drink.
I've been to cafes before which let you "rent" a security lock for laptops and all the tables had a loop which they could be attached too.
In many cafes I've seen signs saying "no tablets/laptops at the weekend" to make space for customers who want to socialise.
I went to a place like that a few years ago. I could never comfortably finish my drink within the time limit, so I'd get cut off wifi while still drinking, even if I was just browsing to relax, not spending hours.
Perhaps it worked for them: I stopped going there and taking up seating. Then again I stopped going there to buy anything as well.
The internet time limit was an improvement over their previous policy, of playing music way too loud, which staff told me was deliberate. That didn't actually push people away who had laptops - people like me wore earplugs with noise cancelling headphones over the top, to bring the awful sound down to bearable levels. But it stopped people who came in for a chat with friends from chatting.
I work a lot from cafes and being the lazy guy I am, I've a selection of 3 places that I go to regularly. The times I work are not their peak hours, so I'm not taking a seat from anybody, but I'm there a lot. Like, 3-4 days a week. I drink coffee, buy some cake, occasionally some wrap for lunch .. by now I've dumped 4-figures on each of my regular places. If I walk by places that I don't frequent regularly -- they also have empty seats, but they don't have those dollars in their pockets that I left at their competition. Why do I not go there? They are not as comfy/cozy. Less comfy chairs, unpleasant lighting, no good coffee, no good cake. Some of those certainly on purpose to repel customers like me. They certainly succeeded at that, but obviously didn't get my money in return either. Winning me as a regular customer is a big win (that's what I tell myself, at least).
The one I wanted to link to raised up the same concerns from coffee shop owners, and those that embraced a coffee shop/coworking space model, had their plugs + comfy chairs in the back where they could also offer a less noisy environment (without an actual separating wall or anything like that). If I recall correctly they also had one-day type of passes that included a couple of drinks/snacks.
That specific paper was about this model during the pandemic period, a followup study would be interesting now once everything is opened/opening up.
The inverse of this is that you want to have "stiff" chairs if you don't want people to linger for too long when they get a coffee.
Price out other people doing less lucrative things that would be in the way. Bloggers, starry eyed dropshippers, enlightened failed dropshippers Writing books on dropshipping, people trying to start an online jewelry store. Its too bad this can include coffee drinkers as well.
My M1 seems like it has infinite battery, I’ll tether if I have to
You'd have done well in Budapest at one time [0].
So, I guess this might or might be a burden. It depends completely on the cafe.
Or after an hour keep providing wifi but put up a guilt screen explaining that you have costs etc.
I think the reality of the situation is that it's WAY less of a problem than people make it out to be; most every coffee shop I've ever been in has been mostly empty.
I'll usually get up multiple times to order something. And the atmosphere of feeling welcomed makes me come back every week.
Members bring some kind of card to scan and enter.
This way, members have a safe place to come in, work, and read whatever they want to read.
Don’t do this unless you want to get shut down.
This isn’t just “the fun police” either. Pre pandemic SF was very sensitive about tech workers/offices crowding out other elements of the city. Work-friendly cafes would be immensely popular, meaning they would take up a lot of retail that could otherwise have more “character.” Now with so much commercial and retail vacancy it’s less of a zero sum game.
Don't have power though and I won't be around for long.
If my network slows to a crawl, it’s always because I’ve accidentally connected to some public wifi network.
And a fair number of people just work on their phones for a lot of purposes.