Coffee Shop Profit Margins: How Specialty Syrups & Purees Boost Revenue
Your favorite wholesale Raleigh coffee company here, and we’ve got some words to share about your coffee shops’ profit margins and how adding specialty syrups and fruit purees can add to your shops’ revenue. Dilworth has been selling wholesale syrups and coffee for 30 years, and in those years, we’ve seen many coffee trends come and go. It seems like specialty syrups and purees are here to stay, and we’re so excited to share our thoughts with you.
WHAT IS YOUR PROFIT MARGIN
Your profit margin also helps you understand and track your performance over time—not just in revenue, but in actual profit. In other words, what you have left after you cover your expenses. Each item on your menu will have its own profit margin, and added all together gives you the average profit margin.
To find your coffee shop’s profit margin:
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Subtract your expenses from your total net revenue
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Divide this figure by your net revenue, then multiply by 100%
Let's say your total net revenue for a 12oz latte is $4.50 and your expenses are $1.30. The calculation would be 4.50-1.30= 3.2 and then 3.2/4.50=0.711 and then 0.711x 100= 71.1% In this realistic example, your coffee shop’s profit margin would be 71.1%. That means for every dollar you spend to create this latte, 71.1% of that dollar is revenue, and 28.9% of that dollar is expense. This doesn’t mean the 71.1% goes into your pocket, a lot of that percentage will go towards rent, labor, overhead etc.
This is the metaphorical “bottom line” everyone keeps talking about. Only in this case, it becomes way more literal.
How do you know what to charge for a 12oz latte? We got $4.50 by breaking down every item involved into its individual cost. Espresso, milk, cup, lid, and sleeve. This is assuming the customer orders it to-go(obviously for here orders reduce the cost even more).
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$0.83 |
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8 oz milk |
$0.26 |
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$0.09 |
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$0.05 |
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$0.04 |
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Total |
$1.26 / 28%= $4.52 |
The 28% is your markup, which from the other side is also your profit margin. You’re in charge of the markup percentage for each item. Generally, coffee shops need to run a 25-30% markup to make a profit. The lower the markup percentage, the more money you’re making. To find your needed profit margin of your coffee shop, you need to have up-to-date numbers for your revenue, expenses, and COGS.
You need to determine your minimum profit margin for everything you sell. After all, your margin must cover everything else: your rent, employee labor, insurance, marketing, utilities, and more. This means that everything on your menu must be priced above your minimum profit margin—or you essentially lose money with every sale of an item priced below this threshold.
SPECIALTY SYRUPS & PUREES
Now that all the numbers are out of the way, how should coffee shop owners and operators use specialty syrups and purees to increase their profit margins?
Specialty syrups and purees are a great way to add a bit of seasonal flair to your café menu. Adding a special, fun, and colorful syrup combination to an everyday latte allows a manager to charge $6.50 for the drink instead of $4.50. An average pump of syrup costs an owner $0.25 - $0.50. Let’s say you add two pumps of specialty syrup; that’s an additional $1.50 you can charge for every drink sold. Having a special name for a specialty drink is important, and a key way operators market new recipes. Once you’ve changed the name from Vanilla Latte to Lavender Dream, you’ll have lines out the door waiting to get a taste.
As for purees, they are typically used in a café to create delicious fruit smoothies, frappes, and juice drinks on hot summer days. One unique way to liven up a fruit smoothie is to add a blendable cream base to it. Suddenly, that mango smoothie becomes a Mango Ice Cream Shake. An operator can charge $7.50 for a fruit milkshake instead of $6.00 for a mango smoothie just by adding half a cup of powdered cream base. A second way to turn a standard fruit puree into a specialty drink is by blending two different purees and adding a flavored syrup. Combine a mango puree, a strawberry puree, and a pump or two of pineapple syrup, and you’ve got a fresh and fancy Tropical Delight Smoothie. You’re not increasing any of the puree amounts in the recipe, just substituting a different smoothie for a portion of it.
With the variety of products that Dilworth offers, it’s never been easier to freshen up your café menu with specialty syrups and purees that boost your coffee shop profit margin. Get in touch with us and let our menu experts guide you in the right direction!
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