How to Start a Coffee Shop Business in India?

  • March 05, 2024
  • Dushyant Sharma
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Originally discovered by an Ethiopian Goat Herder named Kaldi around 800 AD, coffee has become one of the world’s most favorite beverages. 

 

The Indians are no strangers to the magic of beloved coffee beans. According to Statista Research, between 2023 and 2024, coffee consumption in India amounted to over one million bags, each weighing 60 kilograms. India is among the top 10 coffee-producing countries in the world, with about 3% of the global output in 2020. Due to its high quality, Indian coffee is one of the best coffees in the world and gets a high premium in the international markets. India produces two types of coffee namely, Arabica and Robusta.

 

Coffee giants like Starbucks and Tim Hortons have etched their marks in the Indian market. This shows India’s love for coffee. Coffee shops in India enjoy a boom in customers everyday. Therefore, if you’re planning to start a coffee shop business in India, it can turn out to be a thriving business.

 

Coffee History and Growth in India

India was introduced to coffee in the late 17th century by a sufi named Baba Budan. While coming back from hajj in 1670, he brought seven raw coffee beans from the port of Mocha, Yemen. At that time, it was illegal to take coffee seeds out of Arabia. Coffee was either roasted or baked before being exported to other parts of the world so that noone could grow coffee on their own and had to purchase it from the Yemenis. Baba Budan bought back 7 coffee beans in total as number 7 is considered sacred in Islam. He planted them in his home state of Mysore (today's Karnataka) on the slopes of the Chandragiri Hills.

 

Throughout the 17th century, the Dutch occupied much of India. They helped to spread coffee cultivation across the country, but it wasn’t until the arrival of British Raj in the mid 19th century that the coffee farming was fully flourished. Initially, the Arabica variant of coffee was widespread but due to the huge infestations of coffee leaf rust, many farms decided to switch to Robusta or Arabica/Liberica hybrids. In 1907, for the purpose of improving the quality through research and education, the India Coffee Board was set up. Throughout the modern history of the century, India Coffee Board has regulated the coffee sector with stringent regulations, particularly between the period of 1942 and 1995. In 1995, upon liberalization, the coffee growers were given the opportunity to sell their coffee to whoever they wanted. 

 

Location of Coffee

The coffee production in India is generally grown on small farms which are less than 10 hectares in size. The vast majority of coffee is still produced in the traditional growing regions located in the South Indian states of Karnataka, Kerala and Tamil Nadu which accounts for roughly 90% of the total coffee production in the country. The rest of the coffee production takes place in more recently developed areas of Andhra Pradesh and Odisha in Eastern Ghats and North East India’s ‘seven sisters’ i.e., Assam, Manipur, Meghalaya, Mizoram, Tripura, Nagaland and Arunachal Pradesh.

 

The coffee in India is generally grown under a two-tier mixed shade canopy of evergreen leguminous trees. These are usually intercropped with spices and fruit crops including vanilla, orange, pepper, cardamom and banana trees. Majority of Arabica farms lie between 700 and 1,200 meters above sea level. The coffee is processed by either the natural or washed methods, locally referred to as ‘Cherry’ and ‘Parchment’ respectively. For drying coffee, the tables and patios are used. On some of the larger estates, the mechanical dryers are used.

 

Steps to commence the coffee business

Kaldi had discovered the coffee when he found out that after consuming berries from a certain tree, his goats became so energetic that they didn’t feel like sleeping at night. It was due to the presence of caffeine. Now, coffee is widely sought after due to the energy it provides upon consumption. Indian coffee is one of the finest and most fragrant in the world and as an Indian, you should make use of Indian coffee in your coffee shop because you don’t have to pay any import taxes on it and you can get it at a cheaper price than people in other countries.

 

Now, let’s discuss everything which needs to be done before starting a coffee shop business in India.

Step 1: You must decide the type of coffee business

You must, first and foremost, decide the type of coffee business you want to start. There are three ways to go about:

  • You can acquire a franchise of an existing brand
  • You can buy out an already existing venture and mold it to your liking.
  • You can start your very own café from scratch

Step 2: Find the location of your coffee shop business

Once you have decided the type of business you want to go for, you need to select the location where you’d like to open it. The location has to be chosen very carefully. You have to have it in your budget but at the same time you need to make sure it is in an area which attracts more crowds where people are more likely to visit your coffee shop. 

 

The location majorly decides the success and failure of your business. So there are a few factors that need to be considered while doing research for your business location:

  • Visibility and accessibility: You should set up the coffee shop in a busy market or shopping area which experiences high footfall the whole day. Additionally, you must also make sure that your shop is situated in an area which is easily accessible to the public. There are many great cafes and food joints out there which people would love to visit but choose not to due to no facility for parking. You certainly don’t want your business to end up like theirs.
  • Target Customers: You have to pick the location according to the customers you're targeting. Coffee is more of a drink of the youth population; the elderly are still mostly in love with their chai ka pyala. An area located near or within a university would be a great location for a coffee shop.
  • Affordability: Before you finalize the location, make sure it’s in your budget. Keep in mind that you will not start earning major profits within the first few days, it might take years. Also, make sure you assess the lease fluctuation pattern over the last few years.

Step 3: Hire employees

You’ve won half the battle once you’ve hired a competent set of people. A competent set of people would ensure that the customer service is great and help to boost customer loyalty.

For a coffee shop business, the following staff members are required:

  • Head Chefs and Assistant Chefs
  • Shop Manager
  • Baristas
  • Accountant or Cashier
  • Servers
  • Cleaners

Step 4: Required Technology & Equipment

Efficient technology is indispensable in today’s time since it makes the business smoother and easier to run. You need to invest in a good coffee shop POS system which facilitates fast billing, management of stock and inventory, real-time reporting as well as integrates customized offers such as, a delicious combo of a doughnut and a frappé coffee. Honestly, who wouldn’t love that?

Step 5: You must decide the Business’ Facade & Interior

Don’t judge a book by its cover, they say. But really, it’s a human instinct to judge a book by its cover! We just can’t help it. Imagine your coffee shop looks fancier and prettier than other coffee shops in the area. Of course, you’ll attract more customers and they’ll come back for more, maybe with their loved ones so they can admire the beauty of your coffee shop next time. 

Step 6: Ensure Strategic Marketing

New cafes are opened every other day, especially in the metropolitan cities. There is a lot of competition. Therefore, it is necessary to adopt an aggressive marketing strategy for your coffee shop business. You need to tell the world why your coffee shop is better than the rest and what makes it worth a visit. This can be done by building your own website and through digital marketing using various social media platforms as well as physical marketing tricks such as circulating brochures, print media advertising and offering attractive launch discounts and vouchers. You need to leave no stones unturned when it comes to marketing. 

Step 7: Manage your Finances wisely

In order to complete all the steps for setting up a coffee shop business, finances are required. Obtaining the expected funds for investment from external sources will be a crucial step in your business strategy. It is fairly easy to obtain the funds for food business since it is one of the most common entrepreneurial investments undertaken in India.

Financial assistance may be required for your coffee shop business for various short term and long term business provisions such as:

  • Buying a commodity
  • Building or renovating the coffee shop
  • Investing in equipment, furniture and fixtures
  • Working capital requirements 

Licenses Required to Start a Coffee Shop Business in India

This has to be the most important part of setting up your coffee shop business. Without obtaining these licenses, you can’t sell even a single cup of coffee to a customer.

  • Company Registration: Coffee shops in India are either organized through an LLP or Sole Proprietorship. The Company Registration is regulated by the Companies Act, 2013.
  • GST Registration: If the coffee shop’s annual turnover crosses the specified threshold limit of Rs. 20 lakhs (or Rs. 10 lakhs for special category states), it is necessary for the owner to apply for GST registration. 
  • Trademark Registration: Every coffee shop owner must get Trademark Registration for their coffee shop business to ensure their brand stays ‘unique’. It provides legal protection to their brand and guards against frauds. It creates a feeling of trust with the customers.
  • FSSAI Registration: All food business operators, including coffee shop owners, are required to obtain FSSAI Registration. FSSAI Food License ensures that the products meant for consumption are as per the standards of the FSSAI Act and are high quality.
  • Health Trade License: This license is mandatory for all businesses that engage in goods and services that directly impact the health of the general public. This license is issued by the Municipal Corporation.

In case you require assistance in obtaining any/all of the licenses mentioned above, feel free to connect with Registrationwala. We promise you help you in providing these licenses 

Conclusion

Coffee does more than just boosting your energy. Moderate amounts of black coffee (3-5 cups daily) lower the risk of heart disease, as well as Alzheimer's, Parkinson's, Type 2 Diabetes, Liver Disease and Prostate Cancer. Coffee is both healthy and tasty. Starting a coffee shop is easy because there are no special requirements. You just require a few tables, chairs, cups, and a bunch of people and some licenses that can be obtained easily with the guidance of the Registrationwala team!


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Dushyant Sharma
Author: Dushyant Sharma

Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.

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