Starting your own coffee shop

Ben Dinsdale
by Ben Dinsdale July 9, 2020 / No Comments

On the Season 2 premiere of Ratehub’s Real Money Talk Podcast, Tyler and Ratehub.ca Content Strategist, Tim Bennett, sit down with Justin, owner of Black Cat Espresso Bar. After working in the Toronto restaurant scene for a few years, his entrepreneurial spirit took over. He opened a coffee shop. He sat down with us to talk about running a successful small business, the Canadian coffee scene, and how much you should tip your Baristas.

Starting your own coffee shop

Justin moved to Toronto from the East Coast to pursue his dream of being a professional musician. After a few years of trying to make it as a musician, he realized that dream may not come true. He quickly began pursuing another: opening a coffee shop.

His years as a musician gave him experience working day jobs in the hospitality industry, so a coffee shop felt like a passion worth pursuing. Once he got started, his focus was clear. “I had to find a way to get some money… (I) did a business plan and just did it.”

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Know your industry

Starting Black Cat Espresso, Justin knew that his focus had to be all about volume. “Coffee is an incredible profit margin but only small dollars going in your pocket, so you need volume. If you don’t have that large volume, you need to find things to sell that are less of a profit margin, but where more dollars going in your pocket. That’s where food comes in.

With that in mind, Justin launched a wholesale breakfast sandwich business that took off fast. Its popularity grew, and he was able to deliver to many similarly-sized coffee shops. This extra income made the process of increasing Black Cat’s revenue easier, and it also gave his coffee shop something unique.

You need to have something proprietary that sets you apart. You’re the place that has late-night shows or has the best breakfast sandwiches. Having the best breakfast sandwiches allowed Justin to open his second location in Weston, in Toronto’s North-West end.

Coffee in Canada

Justin discusses the three trends in the history of Coffee in Canada. The first being the focus on small, local shops brought to Canada by Italian immigrants in the 1940s and 50s. The Starbucks explosion came next, or 2nd wave, which was a move toward espresso drinks in a more accessible format. Canada is in its third wave –  espresso-focused indie shops like Black Cat. The movement towards boutique indie coffee makes larger companies like Tim Hortons focus more on fast-food options to diversify their offerings, especially in big cities.

Should you tip your Barista?

The short answer is yes, but Justin does have good reasons to support this. Justin thinks that quality service is essential. For example, when going out for dinner, “if you’re gonna treat me bad, I’m probably not gonna tip you. Because I didn’t go out to dinner and spend $200 to have someone treat me like I’m not worthy of talking to them.” 

For tipping Baristas, Justin likes to use the analogy to bartenders. “The bartender might just twist a cap off a bottle and pass it to you, but you’re gonna give a dollar or two dollars. The Barista is back there, making this beautiful latte art that takes like 6 years to learn how to steam the milk. They’re chatting people up and multi-tasking like it’s nobody’s business. They deserve a tip.”

It’s not to take away from the work that great cocktail makers do, but Justin believes that you should be tipping for the skill and the service you are getting. For those reasons, Justin thinks you should tip your Baristas.

The bottom line

It’s hard to make money by running a coffee shop. So, before you jump in, do your research, develop a business plan, understand your costs, and know where to diversify to make more profit should the need arise. To support your local coffee shop – try new foods, communicate your preferences, and always tip!

Hear the full conversation with Tim, Tyler, and Justin on your trusted Canadian personal finance podcast, Real Money Talk.

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