Should you open a coffee shop next to a metro station with lots of foot traffic or look for a quiet little spot? I can’t answer this question. Each case has to be considered on its own merits. Even a location with lots of passers-by does not necessarily guarantee success.
We spent a long time looking for the first location for Double B, our coffee shop. We were afraid to make a mistake. We wanted to find a spot which, above all else, had the required ambience. We immediately felt a kind of chemistry with the spot on Milyutinskiy Lane, right from our first visit, but we spent another month and a half mulling it over.
Despite the fact that a business centre was supposed to open next to it, there’s a French lycee and a Catholic church, along with a pretty large residential block nearby, the street didn’t actually have a lot of foot traffic.
A nearby street, Myasnitskaya, has much more foot traffic, but you can't get a property there for less than 900,000 roubles ($15,000) a month. The spot we ended up leasing cost us 350,000 roubles ($6,000), and we never regretted it. We managed to bring people in with tastings, media placement and solid ground work: we went and met locals and employees from the nearby office buildings.
Your success depends on your concept and how you’re bringing it to life. It's as simple as that. If you plan on building a chain, you need to experiment with different formats from the get-go. This is the only way you’ll understand which format works and how it should be reproduced. If you want to have just one coffee shop, but to turn it into a landmark, you should open it downtown.
Don’t pay over the odds for a place with a lot of foot traffic though. If you make something truly worthwhile, then people will come to you. If you want to make a home-style cafe, it’s fine to open it in a residential area and serve simple, delicious food. But if you’re picturing an establishment with 50 rouble (85 cent) coffees, then a residential district won’t generate enough revenue to cover the lease. You’d need streets with the most foot traffic (at least 1,000 people an hour), as only 1-2% of those will actually come in.
Foot traffic is important, not just in terms of quantity, but quality as well. If 10,000 people work at a business centre, but their average monthly salary is 30,000 roubles ($510), then no one will buy expensive coffee there, but discount places will do just fine. There are business centres with 1500 employees, but with average salaries of over 150,000 roubles ($2500) – they don’t care how much good coffee costs, they care more about whether they look good with cup of a particular brand.
The more quality establishments there are in the area, the more people come to each of them. So it's not only possible to open next door to another coffee shop, it's recommended. It has already popularised the area (people know that you can buy coffee here), so if you offer better quality, you’ll be able to steal their clients.
Our coffee shop format has a seating area but doesn’t sell food, so it takes up about 50 to 70 square metres. A location without a seating area, such as a mall or business centre only requires 25 square metres – we only need room for our equipment and a stall. Don’t settle for a spot with no windows, in the basement, or on the third floor of a residential building (even if it’s very popular), as people just won’t go there. We choose spaces with shop windows and wide windowsills which can be comfortably used for seating. These spaces are found in old buildings with large windows and high ceilings or in former stores.
Renting 50 square metres on streets with moderate foot traffic in the centre will cost around 400,000 roubles ($6800) a month. The locations with the most foot traffic will cost around 700,000 roubles ($11800), while spots in residential and not very expensive areas will cost 150,000 roubles ($2500) a month. Be ready to pay up to 200,000 roubles ($3400) a month for 25 square metres in a business centre, but remember that you’ll only operate five days a week and with a limited client base.
The average monthly revenue of a 50 square metre coffee shop isn't likely to exceed 2 million roubles ($34,000). Once a new place opens, owners should expect a revenue of 20,000 roubles ($340) a day, so take it into consideration when calculating costs. Your main outlay will be on consumables and wages. Each establishment has its own budget, but I think that a Moscow coffee shop ought to earn at least 50,000 roubles ($850) a day to survive comfortably.
It makes sense to find out whether you can place a sign on the building where you’re leasing space straight away. These days, Moscow has strict rules for signs, regulating their location, size and appearance. In any case, there are certain restrictions. First of all, the sign must have separate letters, white, of a certain size. Secondly, you can’t use a foreign language, only Russian.
You should always know your budget and haggle as much as you can with the landlord. You can try arranging so that the lease is lower during the first year or for a gradual increase. In this case it’s usually a 5-12% increase. It’s always indicated in the contract, and the final figures solely depend on how well you negotiate.
Landlords and real estate agencies prefer to deal with well-known, established companies. A newcomer will only able to convince them if they have a clear, profitable plan which answers questions like “Why do you think your coffee shop won’t go under? Why will people come to you? How will you retain customers?” If the landlord asks about what will happen if you can't afford to pay the rent and you have don’t an immediate answer, then you can consider the negotiations over.