Bryan Reynolds offers some hard-won perspectives on break-even calculations that come from growing an 8 location coffee brand. Bryan is the first to admit, all his locations haven’t worked out. Below are some of his key insights on labor, loans, rent, and other things to think about when making projections.

Labor Costs

Labor costs can easily sway a coffee shop’s financial stability. Bryan stresses, “Labor typically represents 30-35% of a coffee shop’s expenses, and even small changes can create significant ripples in the business.” 

For instance, increasing monthly labor costs from $8,000 to $10,000 might seem minor, but Bryan points out, “That jump could add the need for 50 to 75 more customers each day just to stay afloat.” The implications of labor decisions are huge, particularly with variables like minimum wage, training costs, and peak vs. off-peak staffing. As Bryan puts it, “Efficient staffing isn’t just about keeping wages in check it’s about making sure you have enough people to keep customers happy during a rush.”

Who says there’s no such thing as a free coffee?

Loan Amount and Terms

Loan terms directly influence monthly financial burdens. Bryan makes a critical point: “A $100,000 loan versus a $200,000 loan may not sound worlds apart, but the reality is that your monthly obligations can nearly double.” He explains that a $200,000 loan at 5.5% over five years equates to roughly $3,800 per month, compared to $1,900 for a $100,000 loan. 

“It’s crucial to understand how the loan size and repayment term play into your overall break-even point,” Bryan says. He also advises that longer repayment terms might provide lower monthly payments but ultimately cost more in interest. “Be thoughtful about striking a balance between affordability today and the total financial burden over time,” he adds.

Location and Rent

Location decisions require a nuanced understanding of rent versus foot traffic potential. “A prime spot that commands $5,000 a month in rent might be more affordable in the long run if it brings consistent, high customer volume,” Bryan shares. In contrast, he warns about falling into the ‘cheap rent trap’ of a lower-traffic location costing only $3,000 but struggling to attract customers. He emphasizes, “The rent cost should be weighed carefully against the location’s ability to draw customers.”

Being Realistic About Numbers

Bryan insists that realistic daily customer volume estimates are vital for creating sustainable break-even projections. He suggests, “Industry averages indicate slow days may see 100-150 customers, while average days fall around 200-250, and busy days during parades we might hit 300-400.” But he adds a crucial warning: “It’s always better to stay on the conservative side. Overestimating customer numbers is one of the quickest ways to go out of business.”

Plan for upside and downside in the coffee business.

Building a Buffer

Finally, Bryan strongly advises against aiming for just breaking even. “It’s not enough to scrape by,” he notes, advocating for a 20-25% buffer over break-even estimates. “Unexpected repairs, price hikes from suppliers, or slow seasonal traffic are just some of the hurdles that can set you back if you’re too close to the edge.” He encourages setting aside funds for emergency situations and equipment replacement to ensure stability in uncertain times. “Building that buffer is an act of survival,” Bryan says, “not just a nice-to-have.”