Opening a Coffee Shop? Advice from a Portland Coffee Expert

October 25, 2016 • 7 min read
Byron Beck

Byron Beck

PDX Correspondent

If you’ve been dreaming of opening a coffee shop, you may be wondering, just how big a business is coffee?

Well, according to the Specialty Coffee Association of America (SCAA), “The U.S. coffee market has a retail value of $48 billion,” with specialty coffees comprising over half of that. Who’s paying for all this caffeine? “Nearly two-thirds of U.S. adults today drink coffee,” and we drink almost three cups of joe a day. Americans may be “the most caffeinated—and wired—humans on the planet,” with our 146 billion cups per year putting us in the lead of coffee consumption globally, at least in some estimates. Statista claims there are now over 55,200 coffee shops in the U.S.

Those numbers “signal business potential to aspiring entrepreneurs,” according to WalletHub—as well as suggesting Americans will pay a premium for the right specialty cup.

Thinking about a career in coffee beans? Matt Milletto is your man, because Matt knows coffee.

A native Oregonian, Milletto didn’t have his first cup of coffee—cappuccino, actually—until a trip across the ocean, deep into the soul of a more caffeinated-savvy culture.

“I was traveling in Italy with my father,” said Milletto. “That little cappuccino changed my life.”

That one coffee lead to a life in the bean business. Throughout his teens, Milletto worked as a barista at his family’s various coffee bars. Now 38, he’s the Vice President of the American Barista & Coffee School (ABCS) and Co-Founder/CEO of Water Avenue Coffee. He runs operations and works on cultural development for both companies and is also the President of the Oregon Coffee Board.

Water Avenue Coffee

Obviously, coffee is a big part of Milletto’s life. Fortunately, he’s in one of the greatest cities in the country for pursuing that passion: Portland, Oregon. In fact, the city was just recognized by WalletHub as the best city in the United States for coffee lovers.

Here in Portland, and across the globe, Milletto and ABCS have helped hundreds of folks interested in opening a coffee shop succeed. He also works directly with his Water Avenue wholesale partners to help grow and build their businesses. So, we figured he was just the person to ask, not just about drinking coffee, but about running a coffeehouse.

Opening a coffee shop

Milletto says that “running a coffee business is all about volume and understanding your margins,” which means that it’s “a lot of hard work.” Your product has “a fairly low ticket average,” so anyone looking to open, and stay, in the coffee businesses needs “to create a great environment, offer a consistently great product and exceptional customer service to build a loyal client base.” Regular customers are “essential” to successful coffee shops.

Can’t decide between becoming a roaster or opening a coffeehouse? Milletto says both business models have their advantages, “but it really comes down to a balance and focus.” If you’re new to coffee, Milletto recommends starting with one or the other. “There is a lifetime of education in the coffee industry, and it takes a strong foundation to build your career and business on,” he says. It’s also important to keep the volume of work in mind: “the investment in time, logistics, equipment, and labor involved in roasting your own coffee can be a lot.”

pour over brew

As anyone who’s ever lingered in a coffeehouse (so, practically everyone) knows, “All coffee bars truly exist to satisfy a social need.” Milletto points out that “people have used local coffee bars as social hubs for hundreds of years.” For Milletto, a good coffee shop is a third space, between work and home, where we can go for a break (and to stay caffeinated, of course). That’s why regular customers are the universal sign of a great coffee bar. Such a spot “has regulars who come in multiple times per week, as well as customers who come in occasionally or as a destination or special treat.”

How do you lure coffee drinkers to your shop, when they have a lot of options? It comes down to the product and the customer’s experience: “A great, consistent product and well-curated menu, and an inviting and authentic environment,” as Milletto says. The coffeehouses people love share “impeccable hospitality and customer experience.”

An integral part of that experience is the barista, and there’s no opening a coffee shop without at least one. The best are dedicated to the craft of coffee, and “a love for making people’s day better through great service,” according to Milletto. Last but not least, a good barista is also “obsessive about preventative maintenance.”

Despite market saturation, even places as saturated as Portland, “a great concept and well thought-out business plan can be successful,” says Milletto. So opening a coffee shop can still be a good idea for a young entrepreneur, but Milletto says, “you must do everything right, from the beginning. You also need to have an authentic story and passion for a great overall customer experience.”

pouring a cup

Coffee drinkers will come for a great product, a welcoming environment, and quality customer service. And market saturation isn’t a killer in part because “coffee and espresso beverages will always be an ‘affordable luxury.’ We can buy coffee that is in the top one-percent of quality in the world for only a few dollars.” And, of course, part of what we coffee drinkers pay for is the happiness a good cup can provide.

We confess to wondering if there is any truth to the story that Starbucks opening a coffee shop near your establishment improves your business. There’s no guarantee, of course, but as Milletto pointed out, “Starbucks has a team of developers, real estate gurus, brokers, financial experts, and other professionals behind them. If they identify a great location and you’re nearby, you can be pretty sure you’ve made a good choice on where to be.” And the upside, if you feel Starbucks encroaching on your territory, is that being local is a big differentiator. Particularly with products like coffee, Milletto says, “people often identify with a local brand over the chains.”

Drinking the java

For fans of java on a budget, Milletto advises, “Eliminate all the flavors and add-ons, and consume smaller amounts at a time. A simple espresso or drip coffee at a coffee bar is typically under $3.” For its part, Milletto’s Water Avenue Coffee offers a “side car,” which is an espresso served on its own, for $1.50 when added to a drink order. Milletto hopes this encourages customers “who don’t often drink straight espresso to give it a try.”

And there’s nothing wrong with a homebrew. “Investing in a great grinder and manual brew method for home can allow you to have a quality coffee at an affordable price.”

espresso machine

Milletto agrees that Portland is the best city in the U.S. for coffee aficionados. But, he says, “we should never rest on our laurels. Our city represents a long history of true pioneers in the coffee industry, and we need to continue our dedication to leading by example in all that we do.” He believes Portland’s coffee community “must embrace and drive this change to remain a leader.”

In Portland? Here’s where to get your coffee

And now, what you’ve been waiting for. Where does Milletto like to get his coffee? “I’m a little biased, and enjoy two or three coffees a day from Water, at our flagship location or our downtown coffee bar. In between, I am often cupping [tasting] coffees, and do make an effort to visit our wholesale customers regularly, as well as many of the other great coffee bars in Portland.”

That coffee connoisseurship means he can suggest a few other Portland favorites:

Solo Club, Northwest Portland
Jola Cafe, Southwest
Two Stroke Coffee Co., North/Northeast
Madrona Hill Café, Northeast
Fairlane Coffee, Southeast

You can read more about Matt Milletto’s own entrepreneurial journey on the Water Avenue Coffee site.

Ready to open your own space? Read about how to choose a roaster and find the right location and employees.

Water Avenue image courtesy of Water Avenue Coffee

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