Saturated market that’s got no room for new players, or a crowded canvas ripe for innovation? Let’s see what buying and running a Coffee Franchise UK is all about.
Coffee has never really been the beverage of choice for Britons. We’ve always been more of a ‘tea’ people.
The historical trade connections to tea growing parts of the world are – quite naturally – at the heart of the quintessential British love for a piping hot cup of afternoon tea. Coffee never really was able to break that ice and end up becoming a socio-cultural phenomenon in the UK, as it did in the US.
But that has been fast changing, especially since the 90’s.
It would be hard today to find a restaurant or café that doesn’t serve coffee. In fact, a quick look around – especially at the younger demographic – tells us that coffee is in.
Coffee franchises, coffee shop franchises and even café franchises have a lot to do with this mini coffee revolution. In this post, we’ll see what buying a coffee franchise in the UK means in the current economy and what would-be franchisees need to know about the relative downsides of owning one.
Is There Enough Room for More UK Coffee Franchises?
Like we always do in our franchising blogs, we’ll start this analysis with a brief look at the market itself.
- The coffee market in the UK has been growing steadily in the last ten years. In 2008, the estimated coffee consumption in the UK was approximately 70 million cups a day. The same number grew to 95 million cups a day in 2018 – a 35% rise over ten years.
- Instant coffee used to be the staple for coffee lovers in the UK. That has been changing – most coffee drinkers in the UK now give as much importance to the ‘coffee experience’ as to their coffee.
- The coffee habits are evenly spread across all age demographics.
- Britons spend over £9 bn each year on coffee shop visits.
- 81% of adults are estimated to visit a coffee shop at least once each week. This rate of return visits is, in fact, one of the major factors behind the success experienced by coffee businesses.
- There are close to 25,000 coffee shops spread across the UK. Of these, roughly 40% are branded chains, most of which can be safely assumed to be franchise units.
- By 2022, the number of coffee shops in the UK is estimated to cross the 30,000 mark, with the annual industry turnover estimated to touch £13 bn.
Considering these stats, it’s clear that the idea of running a coffee franchise or a coffee shop franchise does deserve to be taken seriously.
At the same time, it’s important to consider a few negative points brought about by the present market situation:
- The coffee shop market poses some unique challenges to new franchisees. The top 3 branded chains – Costa Coffee, Starbucks and Caffé Nero –take up more than 50% of the market share.
- Only about 10% of overall coffee consumption can be attributed to coffee shop or café visits. Looked at from another angle, this can also mean that there’s huge potential for growth.
UK Coffee Shop Franchises – What Makes Them Tick?
Before we get to the franchising aspect of coffee businesses and coffee shops, let’s take a moment to understand why this particular industry has managed to post some of the best growth rates over the past few years.
Firstly, it must be appreciated that coffee is more than just a beverage – it’s a global phenomenon. You’ll meet equally passionate champions for as well as against coffee, as far as its productivity effects and long-term health impacts are concerned. One thing, however, cannot be denied – coffee is the go-to drink for millions of Britons, especially at workplaces.
“Apart from being a bona-fide productivity booster for many, coffee has also gained unquestionable dominance through a peculiar social angle. Whether it’s a date, a casual meeting or a business appointment – people like coffee to be the proverbial ice-breaker.”
Combine both these aspects and you get a step closer to understanding why coffee franchises have been doing great.
Does Your Coffee Franchise UK Offer a ‘Coffee Experience’ or Just Coffee?
As we mentioned earlier, we have come a long way from having to make do with soulless, cheap and – in all honesty – horrid tasting instant coffee. You won’t find many cafes or coffee shops serving those anymore.
The answer is simple.
Regardless of the niche you want to be in, people expect their cup of coffee that costs anywhere between £2 to £5 to be a wholesome, rewarding experience. So, if you’re a coffee shop wanting to franchise, make sure you’re offering the best value combined with the best experience (if you aren’t already), otherwise there’s really nothing new you’d be bringing to the table.
If you are a would-be franchisee looking to invest into a coffee franchise, make sure your franchisor shortlist contains names that tick this box.
How Much Does a UK Coffee Franchise Cost?
Among all franchise business sectors out there, food and beverage franchises probably have the widest cost spectrum.
As far as coffee or coffee shop franchises go, the cost depends predominantly on two factors:
1. The Brand Name
The value of the franchisor’s brand plays a huge role. If you want to buy a franchise from a world-renowned brand like Starbucks, you will need to shell out hundreds of thousands of pounds in initial investments. More importantly, your investment potential, on its own, cannot still guarantee that you’ll really be able to own a franchise in such cases.
Of course, running a franchise under a brand that’s synonymous with coffee itself has its benefits. We would go so far as to say that buying a franchise under a well-established brand can take a whole lot of marketing hassle out of your way.
2. The Industry Niche
This will also have a telling impact on how much you’ll be paying to get started with a coffee franchise.
If the franchise is a new-age, out-of-the-van mobile coffee business, it’ll cost you – on an average – to the tune of £20,000 to £40,000. On the other hand, a location-based coffee shop franchise will cost you significantly more (upward of £50,000). Moreover, coffee shop franchises have other overheads like rent to worry about.
Coffee Shop Franchises Must Innovate
As we have already mentioned in the market review, there are over 25,000 coffee shops spread across the UK. This doesn’t even cover for all the other restaurants and cafes that serve coffee as a part of their menu.
So, how does one get noticed in such a seemingly overcrowded market?
Well, as usually is the case, the answer lies in innovation.
To succeed as a coffee franchise owner, you’ll need to make sure that you choose a franchise business that offers something unique. Here are some ideas that may be worth thinking about:
Menu Innovation – From Mundane to Exotic
Of all the coffee franchises that exist in the UK, many are young businesses built exclusively on menu innovations.
This applies even more prominently to businesses that operate exclusively in big cities.
Along with the generic, standard cup of coffee, businesses that offer new, exciting, innovative flavor varieties have a significant competitive edge. From the mysterious Hawaiian Kona to exotic Guatemalan El Injerto, coffees from around the world are now finding their place on menus across the UK. When buying a franchise, you need to look out for such USPs.
Finding A Lucrative Niche
This is the holy grail of franchise market research.
If the niche you zero in on doesn’t have much to offer, it’s always going to be a tough ride.
Think about this – it may make sense to run a mobile coffee franchise in a busy business district, but it would be almost pointless to do the same in a sleepy retirement village. In that sense, it becomes extremely important to mould your niche to the location you want to operate in or the territory you want to claim as your own.
Focussing on the Coffee Experience
Coffee franchises that aim to offer a complete coffee experience are usually the ones that win the race.
This isn’t to say that on-the-go coffee franchises that offer cheap coffee don’t make it – they certainly do. But, the ideal locations for such franchises are only a handful. These are also businesses that people visit only when they need to.
Instead, by investing a little more, if you could build a coffee shop franchise unit that offers a great social setting where people want to go, it could well be the recipe for great success.
Coffee shops that serve nothing but coffee form a great niche. However, they are becoming a rarer sight every year.
Cross-selling and up-selling food items as complements to a cup of great tasting coffee is a trick that works more often than not. Just think about the times when you’ve ordered a biscotti or a shortbread to go with your tall frappe at Starbucks!
The point is this – when you’re looking for coffee franchise opportunities, it’s important to weigh the brand name, the business model and the USPs to arrive at an actionable conclusion.
Types of Coffee Franchise UK
Here are some of the most common coffee franchise types that you can classify franchise opportunities into:
A. Coffee As A Commodity
These are a hit among the urban demographics. Gourmet coffee franchises work just like other retail franchise businesses. If you can combine unique products with a great location and prop it all up with a good deal of marketing, such franchises can be profitable investment opportunities.
B. Dedicated Coffee Shops
Among all coffee franchises, these seem to be the most common. To make a coffee shop franchise unit successful, it’s important to get two things right – a franchisors that offers unique flavors and a location that experiences heavy footfall.
C. Café Franchises
A strategic retail location combined with a range of menu items is the key here. Café franchises don’t focus exclusively on coffee.
D. Mobile Coffee Vans
In a large enough city, mobile coffee van franchises can secure steady business. These franchises are usually the lowest priced and worth considering if you can match the rigours of the job.
Top Coffee Franchises UK
To give you an idea about what they bring to the table, here’s an overview of some of the most popular coffee franchises UK*.
- Minimum Initial Investment: £7,490 (plus VAT)
- USP: Coffee on a bike for events, gatherings and other occasions
- Eco-friendly bike
- No monthly fees, fixed royalty per sale
- Full barista training
- Over 250 units in operation
- Minimum Initial Investment: £10,000 (plus VAT)
- USP: Mobile coffee vans
- Barista training provided
- Marketing support
- No royalties
- Fixed weekly fees
- Partner income guarantees
- Associate BFA Member
- Minimum Initial Investment: £85,000 (plus VAT)
- USP: Retail gourmet coffee brand and coffee houses
- Store-design and location assistance
- Full training
- Ongoing support
- Equipment provisions
- Associate BFA Member
- Minimum Initial Investment: £9,500 (plus VAT)
- USP: Mobile coffee vans
- Thorough training provided
- Business launch assistance
- Technical and technological help
- Low ongoing fees
- Get started fast
- Associate BFA Member
- Minimum Initial Investment: £55,000 (plus VAT)
- USP: New-age café experience
- Funding assistance
- Full training
- Multi-unit operations available
- Ongoing support
Coffee Franchise UK – The Takeaways
- Focus on franchises that bring something new to the mix.
- Market research is extremely important.
- Draw a detailed business plan for all your shortlisted coffee franchise opportunities.
- Go with franchisors that offer ongoing support and assistance.