How coffee shops make money

Start with one cup. Our example latte sells for $5.50 and uses 18 g of coffee and 10 oz of milk. At US average grocery prices in September 2026, $9.33/lb for ground coffee and $4.11/gallon for whole milk, the espresso costs about $0.37 and the milk $0.32. Add a cup and lid at $0.15, and the drink costs about $0.84 to make: 15.3% of its price.

Our example numbers here are $5.50, 18 g, 10 oz, $0.37, $0.32, $0.15, $0.84 and 15.3%; the others come from the sources below.

So drinks carry a big markup, the gap between what something costs and what it sells for. Real cafés pay their own prices: they buy beans wholesale, often specialty beans that cost more than grocery coffee, and milk by the case for less. The free lesson walks you through a cost card like this one, then has you price a drink of your own.

But the cup is the cheap part. A whole shop spends more on what it sells than one perfect drink, because it also sells food and throws some milk and pastries away. Dutch Bros, a chain of drive-thru coffee shops, spent 25.9% of its own shops' sales on drinks, food and packaging in fiscal 2025. Starbucks' North American business spent 27.9% of its revenue on products and getting them to the stores.

The expensive parts are people and the room. Dutch Bros spent 26.9% of its shops' sales on staff and 16.6% on rent and the rest of the shop. At Starbucks North America, staff, rent and running the stores, reported as one line, took 51%. And every card payment costs a fee: Square charges 2.6% plus $0.15 for a tapped card, which on a $4 drip coffee is about 6.4% of the sale.

Our example numbers here are $4 and 6.4%; the others come from the sources below.

Small orders add up only when there are a lot of them. In 2022 the US had 78,856 coffee and snack bars with employees (the Census counts ice cream, donut and juice shops in the same group). The average one sold about $811,000 that year, but that includes the big chains' stores. Leave out the companies selling $100M or more a year, and the average drops to about $585,000.

Most of those orders come early. Placer.ai, a company that estimates store visits from phone location data, put 43.1% of the coffee business's daily visits between 5 a.m. and 11 a.m. in 2025.

Many costs don't follow the customers. Rent is the same at 3 p.m. as at 8 a.m., the payment on the espresso machine doesn't change, and someone has to be behind the bar for every hour the door is open. Costs like these are called fixed costs: they stay the same however many people come in. So the busy morning has to earn enough to carry the quiet hours.

That's why owners plan the day around the rush: more hands on the bar in the morning, fewer later. Fast-food and counter workers, the government's job group for baristas, earned a median of $14.67/hour at US restaurants in May 2025, before the payroll taxes the owner pays on top, so every hour on the schedule needs enough orders to pay for itself. The afternoon still matters: Starbucks says its own US stores sold $11B after 11 a.m. in fiscal 2025, and chains push cold drinks and food to fill those hours. At Dutch Bros, energy drinks were about 25% of sales in 2025.

Opening a coffee shop costs far more than the espresso machine. Franchise companies, which sell people the right to open a shop under their name, have to publish an estimate of what opening one costs, in a Franchise Disclosure Document. They run from hundreds of thousands of dollars for a small espresso bar in a rented space to more than a million for a drive-thru built from the ground up. They're a useful guide for an independent shop too, which skips the franchise fee but pays for its own design and its own mistakes.

The biggest part goes into the space: building it out with plumbing, power, counters and, for a café that serves food, a kitchen. Then come the equipment, furniture and signs. One commercial espresso machine with two brewing heads, a common choice in cafés, costs about $22,050 with installation at a US dealer. A drive-thru costs the most, because of the site work and the building.

Rent usually starts before the first cup, while the space is still being built. Dutch Bros spent about $180,000 per new shop on pre-opening costs in 2025, which include rent on shops not yet open and travel for training teams. The franchise estimates also set money aside for the first three months, before sales can cover the bills. If the owner works the bar too, the shop has to earn enough to pay them as well.

A few pressures can close a coffee shop: too few orders for the fixed costs, costs that rise faster than prices, and a lease that keeps running. Even the biggest chain feels it. In fiscal 2025, the number of orders at North American Starbucks stores open long enough to compare fell 4%, while the average order rose 2%, mainly from higher prices. Late that year Starbucks closed 584 stores in North America.

Costs move too. The US average grocery price of ground coffee rose from $6.47/lb in September 2024 to $9.33/lb in September 2026, about 44% more. Dutch Bros said higher coffee costs raised its goods costs by 0.9 points as a share of sales in fiscal 2025. Wages and rent rise as well, and a shop can raise its prices only so far before regulars go somewhere else.

The lease is often the hardest part. It's a promise to pay rent for years, and closing the shop doesn't end it. Starbucks booked $239.3M across the company in fiscal 2025 in lease costs for stores it left before their leases ended. A small owner who signed a personal guarantee, a promise to pay from their own money, can owe that rent too.

A chain opening nearby can feel like the biggest threat, but it isn't always what closes a shop. A 2016 working paper followed 4,768 coffee sellers in Melbourne, Australia, and found chain stores had no clear effect on whether nearby independent cafés closed; other independents mattered more. One city isn't a rule, but it points to what owners can control: their costs, their rent, and a reason for regulars to come back.