4 reasons coffee franchises are booming

By Nick Hall | 16 Apr 2019 View comments

Franchising is a sector that encompasses a wide breadth of industries, however it’s no secret that food retail and QSR models are among the most successful. While fast food franchising is one way to build your fortune, coffee franchises have emerged as some of the most profitable.

Unlike the full-service, restaurant and fast-food franchises that dominate the sector, such as McDonald’s and Subway, coffee franchises provide a more accessible entry to the sector.

The success of global coffee franchises such as Starbucks and Costa Coffee demonstrate the value in branding. However, here in Australia, coffee consumers can be far more cautious.

Getting the balance between a quality cup and return on investment is critical. If you play your cards right and do your due diligence however, you will be well on your way to brewing up a prosperous pot.

So, what makes coffee franchises such a profitable and inviting opportunity for prospective franchisees?

Australians love coffee

While coffee in Australia is a big cultural driver, it is also proving to be a major economic boost domestically.

The region has quickly become one of the biggest coffee markets worldwide, despite not being a major producer.

Buoyed by moderate growth over the last five years, café and coffee shop industry revenue is expected to grow. IBISWorld predicts that revenue will jump 2.2 per cent per year over the five years through 2018-19, to be worth $9.8bn.

For prospective franchisees, the industry presents a booming market with a flourishing clientele, but buyer beware. A growing emphasis on quality is driving stiff competition, meaning that if your barista skills fail to hit the mark, there may be tough roads ahead.

For the coffee industry in particular, the due diligence process should extend beyond financial, legal and social research. Seek the brands with the highest customer satisfaction ratings for flavour, service, speed and innovation.

Coffee franchises are a multi-faceted opportunity

While the stand-alone coffee shop may be seen as the beacon for commercial success in the sector, new models are greatly influencing the market.

Over the past five years, the rise of mobile coffee vans and pop-up cafes have opened new opportunities for potential franchisees.

The low investment ventures allow entrepreneurs to get started in business, build a clientele and set their own hours. With a reduced staff requirement, minimal preparation needed and the ability to reach customers wherever they are, the mobile model is helping brands like Cafe2U make a big impact on the domestic market.

The franchise chain started in Sydney’s Northern Beaches in 2000 and now has 140 mobile coffee vans.

Expansion has come steadily and as the nation’s demand for coffee grows, so too does Cafe2U’s plans for the future.

“Locally, we want to add another 100 franchises in four years, and internationally we are seeking opportunities in countries that lend themselves to the Cafe2U business model,” a spokesperson told Inside Franchise Business.

It isn’t just mobile sites that are helping to bolster the appeal of certain coffee franchises however, with kiosks, cafés and vending machine models redefining the notion of franchising in the industry.

Convenience

Where in the past, coffee franchises may have been criticised for lacking personality, recently, the consumer mindset has moved towards convenience.

The shift in ideals has allowed franchisees to leverage the success, speed and convenience of brand heritage to build a customer base.

Increasingly, Australians are choosing to enjoy their coffee on the go, as seen with the emergence of drive-through operations such as Zarraffa’s Coffees.

Rather than focus on driving a vibrant café atmosphere, music and fitout, coffee franchises that appeal to the before-work crowd can hone in on product quality, reliability and speed of service.

By understanding which master they serve, franchisees can differentiate themselves in an often over-saturated market.

Scalability

One of the biggest advantages of joining a coffee franchise is the prospect of scalability.

Particularly in the lower investment models such as coffee vans and vending machines, a successful franchisee can easily add an additional unit to their network.

While Australian coffee fans can be demanding, the reality is that few will travel great distances.

This in turn allows prospective franchisees to operate a number of units across a relatively small geographical region.

The ability to oversee a number of units within a short distance permits the franchisee to ensure compliance and consistency is maintained across the entire network.

Final thoughts

There is no denying the domestic coffee industry is competitive market, however the rise of mobile and vending models has changed the way consumers interact with coffee.

Prospective franchisees should take the time to assess their desired location and establish who buys what, how often they return and what purpose the franchise must cater for.

Love coffee and want to get into business for yourself? Check out these coffee franchise opportunities.