Coffee Shops & Snack Bars
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 56,000 coffee shops and snack bars in the US sell non-alcoholic beverages, snacks, and related items for consumption on or near premises. Companies may specialize in bagels, beverages, confectionaries, cookies, donuts, frozen custard, ice cream, yogurt or pretzels. They may prepare food and beverages on site or resell goods purchased from third-parties. Formats include national and regional chains, franchises or licensed shops, and independent operators.
Sensitivity to Food Trends
The food and beverage industry is subject to fads and trends that affect demand.
Competition from Alternative Sources
Coffee shops and snack bars compete with various alternative sources, including fast food restaurants, grocery and convenience stores.
Industry size & Structure
The average coffee shop or snack bar operates out of a single location, employs fewer than 20 workers, and generates about $1 million annually.
- The coffee shop and snack bar industry comprises about 56,000 companies that operate over 73,000 locations, employ about 931,000 workers and generate about $64 billion annually.
- The industry is concentrated at the top and fragmented at the bottom. The top four firms account for 31% of industry sales; the top 50 firms account for 37% of sales.
- Large companies include Starbucks, Dunkin' Brands (Dunkin' Donuts, Baskin Robbins), Restaurant Brands International’s Tim Hortons, and Krispy Kreme Doughnuts. Some large chains have significant international operations.
Industry Forecast
Coffee Shops & Snack Bars Industry Growth
Recent Developments
Jul 14, 2024 - Employment Falls Amid Rising Wages
- Employment by coffee shops and snack bars and average industry wages are moving in opposite directions, according to the latest US Bureau of Labor Statistics data. Employment shrank 1.6% in May compared to a year ago after contracting by 2.4% year over year in April, according to the BLS. Meanwhile, average industry wages rose 3.6% in May YoY to $17.50 per hour, a nickel short of their peak in March. Rising sales for food services and drinking places and sustained consumer spending are helping to support higher industry wages. Industry sales were up 6.2% in March compared to a year earlier and rose nearly 10% from February, according to the Census Bureau.
- Coffee shops are among the retailers experimenting with smaller, take-out-focused stores, The New York Times reports. The trend in smaller, pick-up-and-delivery-only outlets, which started during the pandemic and has persisted aided by online ordering apps, with coffee shops and fast-food restaurants among the key participants. In addition to reducing person-to-person contact, smaller, seatless businesses reduce rental costs for operators because they can be much smaller. According to NYT, from 2019 to 2023, the average size of a retail lease in Manhattan shrank 17% to 2,585 square feet, citing data from commercial real estate data firm CoStar Group. The decline in space has been most visible in coffee shops, where Manhattanites have been left with fewer places to sit, Gregory Zamfotis, the founder and chief executive of Gregorys Coffee, told NYT. The seatless trend contradicts Starbucks' “Third Place” concept of coffee shops being gathering places.
- Cold is on the menu this summer at coffee shops, QSR reports. Frozen treats, iced coffees, and cold brews have eclipsed traditional hot drinks to become the fastest-growing product category, with menus evolving to attract younger consumers at different times of the day. “The afternoon pick-me-up is becoming cold, the weekend treat is becoming cold, and even the morning routine coffee is being consumed cold,” says Sanjiv Razdan of The Coffee Bean & Tea Leaf, widely credited with sparking the frozen coffee craze. Razdan says younger consumers are driving the shift toward cold and frozen offerings that boast a broader range of flavors and toppings and have a strong visual appeal that is perfect for sharing on social media. New Orleans-based PJ’s Coffee combines trending flavors like rose and lavender with more familiar flavors like strawberry and white chocolate to spark consumer interest. Indulgent and eye-catching drinks are a key traffic driver, according to QSR.
- Global prices for coffee are surging as severe weather hampers production in key growing regions, The Wall Street Journal reports. Heat waves, heavy rainfalls, and droughts are increasing in frequency, damaging harvests and crippling supplies amid growing demand from consumers worldwide, according to WSJ. “Adverse weather conditions, mostly in the Southern Hemisphere, have played an important role in sending several food commodities sharply higher,” Ole Hansen, head of commodity strategy at Saxo Bank, told WSJ. The global coffee benchmark prices, London Robusta futures, were up 56% in April compared to a year ago, according to data from FactSet. Soaring coffee bean prices and rising costs for other inputs like labor and transportation are pinching coffee manufacturers' margins. Climate change is central to the rising price of coffee and other commodities and threatens to send them even higher, per WSJ.
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