How to Be a Good and Successful Coffee Shop in 2025? Why My Coffee Shop Failed – Exclusive Interview with Tom Plets!

The Untold Story of Why My Coffee Shop Failed – Exclusive Interview

So we’re gonna go talk to a friend of mine. His name is Tom. He’s sort of a guy known around here for coffee. Everything. Coffee. You know, understand the brewing process, understanding techniques, etc.. Kind of a well known, I’d say, in town. He lives out on a small cool property out on the outskirts of town. And I think we’re going to learn a lot from him because he also ran a coffee shop. He started a coffee shop many years ago. He ran it and it didn’t work. It failed. And so I want to kind of ask him what happened, what, you know, he thinks were some of the causes for that failure and what he would have done differently. So anyway, let’s go meet him. Let’s go talk to him.

You want to start by tasting the coffee with me? Cheers. Cheers. Thank you. Yeah. For sure. What is this? This is the same coffee you had yesterday. Oh, this is nice. This is Brazil, but it. Yeah, fermented Brazil, but it is brewed in a drip pot. This is a moccamaster. So a very nice drip. Okay. You know the moccamaster by a technivorm. Oh, right. The Handmade in Denmark coffee brewer, which does a good job, but it’s still a machine. Is it like a coffee machine? Yeah. You just put the coffee in water. Pour the water in. Okay. Yeah. I had a friend that had that had one of those. It’s the best drip coffee brewer. If you don’t want to bother with the pour over, it is. Yeah, that was good, actually. Yeah, well, thanks for joining. Tom, it’s always a pleasure to talk to you. I know I’ve known you for a little while now, and I’m always intrigued by your story of your coffee enthusiasm. You’re heavily into the coffee business. You’re an artisan of coffee. You have your own coffee channel on YouTube, which is doing really well. And so I thought there’s a lot of folks out there that want to start coffee shops that they want to get into that business. It seems like a romantic, exciting business, you know? I thought it was. We’re looking at pictures on the wall of Italy. And, you know, when you think about about the next step for a lot of people, it’s like, well, why couldn’t I just recreate as a business what I love so much? How did you get the idea to start a coffee shop? That’s exactly how it started.

Is I saw something I liked, I experienced something I loved in coffee shops when my time in Italy and then back in the United States, some of the coffee shops. But yeah, that was really the the foundation of it is like, I like this. I feel like I’m passionate about it. Why don’t I just jump in and turn it into a business? Yeah. Which might not be like the most logical or practical way to start a business. What were you going to do instead? Like if you had if this was not your path back? Because if I’m not mistaken, after you graduated college. Exactly. So Exactly. So I graduated college with a degree in chemistry, and my intention was to pursue a master’s degree. Keep going into chemistry and eventually academia. Yeah, I kind of just wanted to become a teacher eventually. Maybe do some, like, lab work and stuff to gain experience. But about halfway through my degree, I kind of, like, fell out of love with it. Realizing I wanted to do something where I interacted with people more than I did in academia. So, yeah, my friends had run a coffee shop in Payson for, like, before I went to college.

And through the years I was in college. And right when I graduated, I wasn’t very enthusiastic about going back to college right away or getting a job in chemistry right away. So I figured I’m going to take, like, a sabbatical and do something a little different and maybe come back to it in a couple of years. But at that time, my friends who had the coffee shop, they they were going to shut it down. They were half heartedly trying to sell it to. And that’s when I started a started a conversation with them. Like it just honestly, it was a a very impulsive decision. It’s like, wow, wait a minute, they’re selling a coffee shop. I remember how much I loved coffee shops. Why don’t I buy it? I think I know what they did wrong. I can make it better. I can make it make money. So, like, I started talking to them and they were like, so excited. Like, first of all, do you know how their coffee shop was doing at the time? Do you have any idea? Yeah. What was what did you have in mind? That was it was what was wrong with it in your mind at the time and what were they doing wrong? Yeah. I think first of all, they were they were kind of had a very strong religious angle on their coffee shop. Like, they were kind of operating it as a church and a coffee shop.

And it turned a lot of people off, like, a lot of people did not want to get Jesus with their latte and too much. Yeah. And the quality of the coffee suffered too, because they were so distracted on so many different like sort of the intention with the whole shop was all over the place. It was just kind of a mess at the same time. It was it was decent and I enjoyed it. It was Payson’s only coffee shop at the time too. So before Starbucks came to town. Exactly, exactly. Honestly, their enthusiasm over me taking it over, I think, should have been a red flag. Nobody wants to get rid of a business. They’re not going to be that excited to get rid of a business that’s doing great. So that was an initial red flag, at least for taking over this business. I didn’t really buy their identity. I bought their equipment and the space like I rented the space. I took over their space. So it was like halfway ready to go, essentially not really buying their business, but okay, yeah, I want to get into that before we get jump into the business side of things. Yes. Can you take me back to your trip to Italy? Was this a sabbatical you’re talking about? And what was it about that that kind of turned you on to coffee? Right.

So that was a semester abroad in college, so I was still doing college when I was there. I liked coffee before I left. Getting coffee on campus at Starbucks. How much did you like coffee? You know, I drank it every day. I bought a coffee every day, but I honestly didn’t even understand what I was buying. Like, I got an Americano. It’s like, okay, this looks like black coffee. This is fine. I’ll drink this. I didn’t I really didn’t understand what? Espresso. I knew pretty much nothing about how coffee is made. I, I wouldn’t I couldn’t have told you that it grew on a tree. And you weren’t that curious at the time about how to make coffee. You just got it from a store? Yeah, yeah. I then went to Italy and it just tasted so different right away. Also, they I think what struck me even more, though, was like the passion they had in the coffee shop. Like first just seeing people like, go up to the counter standing up, drink their espresso shot like it was so like ritualistic. It was such an such an experience. It completely blew my mind. You don’t see anybody studying or reading in a coffee shop in Italy. They are there to drink the coffee. It’s like the coffee was the event. It was the star of the show and it completely, like, took me off guard. I had no idea what was going on.

I remember ordering, trying to order like I would order at Starbucks and they they were just offended. I was like, I want to take this coffee to class. And they’re like, how dare you? You don’t take this coffee out of here. Put the put the what? Did they put the villa? No. Yeah. So that awakened me to like, what is coffee? I it made me question the identity of coffee. And I remember the first week I was in Italy just jumping on Google and googling. What is this process? What is a latte? I went through all of it, and I was trying to learn how to, like, order better in Italy too. And it it changed everything, almost in a moment of how my relationship was with coffee. So I don’t know if you’re familiar, but there’s your path kind of starts out similar to another very famous entrepreneur who had a very similar similar path to, you know, who that would be, Howard Schultz. Yeah, absolutely. And I did not know his story whatsoever until like, long after my coffee shop failed. I did not honestly know the man that was basically his story was he’s working for some sort of parts manufacturer in New York. He goes he goes to Italy for some conference there and then. Oh, no, he’s working for Starbucks at the time. Yeah, because he loved Starbucks, but he goes to Italy for a conference on on coffee and then realizes, what are we doing? This is this is what we need to be doing back home and changes the whole dynamic of the American coffee drinking culture.

Right. Now, when you came back, you were obviously inspired. I love the inspiration of Italy being this inspirational you know, kind of catalyst what happens when you get back is that when you talk to these guys or. No. So, like, I still had a year of college to go. So I did not think at all about opening a coffee shop. When I got back, I was like, stunned. Still at the difference in coffee culture between Italy and here also. That’s when I started like kind of discovering the third wave of coffee. Okay I didn’t realize that there was a sort of movement to make coffee at a higher level of quality here, and I started experiencing that while I was still in college. And the quality actually, like, surpassed what I had in Italy. I feel like the the science and attention to detail of brewing scientifically perfect coffee. Like, they don’t think like that in Italy either. It’s more, you know, about tradition there, right? And yeah, so that’s where I was when I came back. I had a year of college left, but it that was an was an important thing. The third wave revelation was important to me in the fact that I realized, okay, maybe we actually had even exceeded Italian quality here, but like, not the culture or the tradition.

Good point. And I still wasn’t thinking this right at this point. But later when I finished college, it’s like, and I started talking to these people about the coffee shop. I don’t know if I’m jumping ahead here, but like, that’s where my vision started to come together was like, maybe we can bring some of the like the community and culture that I experienced there to here. This is something that I think most coffee shop owners completely miss in the US or North America. Many places around the world is they think they’re copying Italy, but they’re actually copying just the nuts and bolts. They’re not copying the what makes the Italian coffee experience because, you know, again, I also lived there for a little while, and I think you have to live there for a little bit to actually get it, because if you’re just visiting, it doesn’t really hit you. You’re a tourist destination. But when you’re at like you’re at the coffee bar downstairs from where you live and nothing part of town that no one cares about. And there’s this dynamic conversation like happening in Italian. Yeah. And you’re like, drinking. It doesn’t even matter what you’re drinking. This whole experience is the beauty of it. It’s like no one’s at work. No one’s hustling to get anywhere. They’re just in the moment.

It’s almost like a meditation. And so they copy the like you say, they may surpass the quality, but they didn’t surpass the dynamic of the of the essence of it. Right. So you captured that and you knew it was there. I mean, and so you were trying to recreate this. You were in a great place to have their coffee, which was Flagstaff. Right. Which is a great place. Someone has some great coffee shops up there. You come back to a small town which we both live in, basically, and you try to recreate this. Tell me about that story. How did that kind of like, you know, start to gnaw on your on you that you need to do this? You’re back home now? Yeah. So. Well, I wanted. I mean, like I said, I wanted the fusion of those two things. The space was right in front of me. That it was already set up as a coffee bar. It had the bones I needed to to do my vision. It was a large space, too, like 30 200ft². So enough space to sort of have like really big. Yeah. Like more of a community focused, more like I had a beautiful bar in there that was all Redwood. And it was just like all the ingredients were there. I thought, okay, I can rent this space. I’ve got some people that can help coach me getting it set up, and I.

Yeah, I just pulled the trigger. I said, I’m gonna do this, but I didn’t have money to. So we’re going to get into some business stuff here. Are we ready to sort of jump into that? Let’s do it. Okay, so I didn’t have money to do this. I just graduated college. I had like a tiny bit of savings, but I needed to fundraise first, which Fortunately, I was very lucky. I would say to find people that like, wanted to see this vision happen for Payson, and they gave me some money, seed money to get it started, to see some investors. Yes. And was that that was you know, people talk about investing as is usually the hardest part of all this stuff. It seems like it was fairly easy for you. Yes. I’d say that that was my greatest. My greatest skill still is like communicating with people, getting people excited. I get people excited very easily. Can you tell us about if you had to give some advice to someone who needs to fundraise for, maybe they want to start a coffee shop? What would you what would you say? Like how would you how would you convince someone or what would you how would you approach it? Right. I think it’s all about relationship building, letting them in on the idea, letting them get excited about the idea, taking some of their input, Approaching it with humility. Like enough confidence that like, yes, I can, like, make this business.

It’ll make money. Your money will grow. But also like, what do you think? What do you think would make it even better? How can you make them a part of your success? And then they feel invested. If they feel like they can make something too. They’re not just like it’s not just money to get more money back, but it’s more like they’re giving money. They’re doing something for the town. They’re doing something for you personally. Like, yeah, make it about a mutually beneficial relationship. So it occurs to me, as you’re talking, a small town has this pro and con to it. One is that one of the major advantages of starting a coffee shop in a small town is getting investors is going to be way easier than a place, a big city, or even a medium sized city where it’s where you might not have this strong network already in your neighborhood anyway. And you know, when I lived in Phoenix, the people I knew were 30 minutes away minutes away from me. They don’t care if I want to shop ten minutes at home. So that would have been a lot harder. Whereas in the small town they have kind of general like, let’s start this, we want this for the town, etc.. So that’s actually one of the benefits I think we’ll get into the, the negatives down the road of, of the business side of it.

But that’s, that is cool. I think it’s a key point though is and I think it would apply in a bigger place too. But like having a network in place and I had a network in place where I could reach out to a lot of people about finding money right away. Like that wasn’t even a difficult step. Like, because I’ve lived in this town for a long time. Before that, I had such a network built up. So I don’t think you can ever underestimate how powerful it is to have a network in place. You never know what idea might need the benefit of somebody in that network. So let’s think about the first year. First of all, the name of the coffee shop was what? Dee dee. Dee dee, which means. Which was like a Italian contraction for tell me. Wow. Yeah. Like it means tell tummy. All great name. I mean, thank you. And I saw it outside. Maybe we’ll have it. Oh, yeah. I should get some footage of the sign for sure. We have the sign that you still have next to your home farthest left. Which is a beautiful property that that you’re living on here. Thank you. So Diem is a great name. It’s something that I, I think I if I wanted to choose some Italian name for a coffee shop, I would have chosen something stupid, like, you know you know, espresso or.

Yeah. Some dumb thing. Yeah, exactly. Exactly. Terrible. So you chose this really cool and interesting name. It’s simple and straightforward and it’s light. Oh, did people struggle with it, though? Oh. Is it? Oh, my God, what did they. Okay, that is interesting. So I always thought like I get that because I love Italy I’m part Italian. Yes. What did they think of in a small town when you’re introducing this very, you know, highbrow culture, you know, European name. What what was the reaction? It was it was mixed, for sure. I think a lot of people in Payson, in Payson, a small town like this, especially when they’re only coffee shop, had just gone out of business. They were excited that anything was coming. Definitely got some mixed opinions on like, oh, this is like, way too fancy of a concept for Payson. Like, you should keep it cowboy related. But the name everybody thought my name was me, and they said, oh, are you anybody? I didn’t know, they didn’t know who I was. They were like, oh, you’re dreaming, you’re dreaming. Yeah, yeah, it kind of makes sense, actually. It does, it does. No, I mean, no one knows that. Yeah. I don’t look Italian at all either, but Interesting. Yeah, yeah. Well, you kind of do, though, when you have the the long hair. I mean, you could pass as a northern Italian maybe, maybe, maybe.

That’s true. That’s true. So you get into this, can you give me what were some of the first like think about that first year. What were some of the big wins that you remember that you were excited about? So big wins or any highlights? Lights. Yeah, we incredible support from the community. Honestly, the newspaper, like, they just loved us. They couldn’t. The whole staff of the newspaper came every single morning to like debrief there and get coffee. So we got massive publicity because they loved us so much. That was a huge win. Being like really good friends with the like, main press in town. Let’s see. Yeah, so many events to everybody wanted to have their event in our large space. That was a huge looking back. I should have leaned heavy into that. The amount of people that wanted to use the space, that was a huge win. How was the, you know, basically like how was the getting the regulars in there? Did you start to get regulars in all that stuff? Yeah, we we built up a regular following pretty quickly. We was coming in like, who are the folks that are coming in to their coffee? A lot of this is retirement time. So a lot of retired people would come and there was a mismatch there between the like, what my vision was and who my customers were. But it was still they still loved it.

They adjusted. They adjusted. We kind of had drip coffee as a loss leader to like we kept it really cheap for these people, but they never bought anything else either, though was a slight problem. Like they just wanted their black coffee. But still we built up a big following pretty quick. I’d say that was a big win. Okay, so let’s get into the the challenges that you started noticing in the first year. Like now you’re starting and you’re like, okay, you have all this hope and promise, is this going to work? What are some of the early signs that things are kind of like, maybe not as ideal as as the earliest sign was, I needed to borrow more money. Okay. Yeah. That was like, wow, we are we are falling short. Even before we opened the doors, I tried to be so conservative with my estimates of how much everything would cost to get going, and I still completely missed the mark. And You bought their old espresso machine? Yes, I bought all the equipment that was all done. You think you’re close to like, having, you know. And that is such an experience talking when I thought, like, okay, we got the equipment. Like, I’ve got my first month rent paid the deposit and all that. It’s like, okay, we’re, you know, just getting we should be good to start earning some money now. And I couldn’t be further from the truth.

The amount of extra fees and permits and then problems with inspections that required more modifications. It snowballed so fast. Like before I opened the door, I was so over budget and I was still, I think, keeping it conservative. Like if I had gone fully into what I wanted for the place as far as remodeling, I could have gotten so deep. Okay. Did you hire anyone at the beginning or did you have staff? I had oh. You mean for like, the remodel? I hired a contractor like a guy I knew again. So it kept it cheap and, like, did a ton of work myself, too. And then what about employees? When you started off, started off, did you have employees? Yeah. Yes, quite a few. So we had full food service when we opened. We had a chef too. So like an actual trained chef. He was gonna do it like part time, though, because he was working as a chef at another place in town, so he was gonna, like, be part time there, sort of overseeing, getting other people trained up. When we opened the door, we had 11 people hired on the first day. Yeah. So we had like kitchen staff. We had like dishwashing staff, like mostly part time, but a few full time baristas, full time kitchen people. That was a lot of staff to have trained. So let’s break it down since this is a long time ago.

Yeah. Nothing to hide? No. How much is rent? How much is would you guess is the overhead for the staff? Yeah. And compared to the revenue that. Okay, so rent was $2,000 a month for 30 200ft² in 2015 2000. No, 1313. Yeah, that was dirt cheap, right? Yeah. Even at that time for that much square footage on a highway location too. It was fairly visible location right on the main highway through town. That was dirt cheap, right? Truly. And the landlords, like they we signed a lease agreement, a two year lease agreement. And like they had planned. Oh, the rent’s going to go up a substantial amount after two years. But they wanted to, like, make it easy to get started, give it some room. And like, that was honestly inconsequential. $2,000 a month rent. The labor was extraordinarily high, like I did not anticipate. I knew labor, especially in coffee shops, is going to be a big portion of your expense. But what do you remember as a rough estimate of how much you were paying in labor? I think about 10,000 a month for ten people. That’s it’s been a while, but I think it’s about 10,000. Yeah, that makes sense. Okay. It’s about 12 K now, probably more at the beginning and maybe a little more. I think 10,000 was my target over. So maybe 12 or 13. Probably 1213. Exactly. And then you had some inspection stuff going on.

Anything else. Those were like the electric. The utilities like blew my mind how expensive they were. We were spending about $3,000 a month in electricity, you know, a lot of equipment, a lot of refrigerators, a lot of cooking equipment and the electric rate. I didn’t realize the electric rate for commercial was nearly double residential. So they get you there. Also, I didn’t realize the electric company wanted a deposit of like three times your highest bill. So that was like right at the beginning. They wanted like a $9,000 deposit before they would turn your electricity on. That completely shocked me. I got it back at the end. So it was a deposit, but still, that was like a lot of cash. The cash was just flying out. It’s like I felt like by like the opening date we set, which was for 20. I don’t even smoke weed, but it was fun. We opened up for 20. Yes. We were like, I was crawling to the finish line to get the doors open, which is. And you started what? What month? I mean, was this like April 20th? Yeah. April. April 20th, 2013. And you can you began the process. What? In February. January of that year. What would you know? I began the process. Well, actually. Yeah. No. Hang on. I would have no, I began in in the fall of the previous year, so probably like October.

Yeah, yeah. October 2012 is about when I probably began the process. Six months. Yeah, six months to get it going. And they weren’t even charging rent until I opened. But again, with all that money that was going out for those other things, like, don’t even worry about rent, like there’s so much money, like you should rent the best location you can, like with the best traffic, because the other expenses are so high relative to rent that like I was like, oh, I got cheap rent, I’m going to win. But no, that was not a good a good way to look at it. Yeah. And I appreciate you getting into the, the sales and the revenue because I think people don’t have any idea what the reality is unless you run a restaurant before or something like this and you have an idea for utility costs and stuff. I didn’t know that they would charge a commercial rate versus a write a residential rate for electricity. It makes sense. Yeah, yeah. But yeah, it does. I haven’t had to pay that before. And so you’re you have things open. You obviously have a lot of investment coming in now we look at and maybe we can just say like about 15 K is the is the run is the cost expense monthly expenses. It sounds like yeah maybe more. More I would say more. Maybe 17. Yeah. What is the revenue start to look like at the beginning? Terrible.

Okay. All right. But yeah, I want to back up just real quick. I don’t know, you might want to add this like on the previous clip, but people told me when I was getting into this, people more experienced in business were telling me, like, whatever you think your initial startup cost is double it and maybe even double that. And I thought I did, but like, it cannot be exaggerated enough that like, you need to need to, like, really plan way far ahead on startup cost. And I think that a lot of people go into coffee shops at the beginning, like they don’t have enough experience in the nature of restaurants or coffee shops, and I didn’t I mean, totally foolish, I, I don’t want to say arrogance, but like, yeah, naivety. Naivety was like huge like I had I should have managed a coffee shop for five years before I even considered this. Like I had a little bit of barista experience, a little restaurant experience, but like, not even close to enough to understand the business side of starting it up. But I think even if I had experienced, like if I managed to coffee shop first, still would have fallen so short of understanding the total expense of starting it up and running it. Yeah, yeah. Make sense? Okay, so what was the the next question. So let’s look at what the I want to want to do revenue first and then we’ll get into what you would have done differently.

So first of all, so let’s get into the revenue. You have you’re doing maybe 17 to 20 K a month is going out the window. What is the revenue look like first year. And then did it get better? Well, I wish I had numbers, like on the top of my head. I think the first year we grossed about 250,000. Okay. Which makes me think the expense is not correct. Well, we grossed 250,000, right? The cost of goods ends up being half of that. Yes. So to divide that by 270,000, 17,000, we’re pretty much at zero right away. But I know I’m not like calculating that correctly, because we were very red by the end of the first year, making 20 ish K a month from the get go. Right. Bring it in and you’re out. At least Probably up to. It sounds like you’re maybe 20 K, then. Yeah. Because you were saying you didn’t have much left or did you? We’re not talking about like in that initial when you said 15, we guess 15,000 a month expense. That’s not counting the cost of goods. So like that it’s not pure profit. The cost of goods is more than half of that. Like so you think you think a cup of coffee is going to be cheap? It costs $0.10 in coffee beans to brew 12oz of coffee, let’s just say for a drink, coffee.

But then just the cup is more than the cost of the coffee that goes into that cup. And then you put a sleeve on it and you put a lid on it, and then people drop cups and there’s waste and there’s the the cost escalates so much. And this is why you need to charge a lot for the coffee. And it’s it’s hard to cover the cost of that. The margin is razor thin ten K at least. Would you say a month for cost of goods or more, do you think? Probably more. Probably like 11 or 12 if we add ten or let’s say 11 or 12 to the 17 that we estimate. We’re looking at about 20. We were losing $9,000. We were in the red 4 to 5000 a month after everything all right? Yeah. So maybe so, yeah. Think about we can figure out the calculator. But basically, yeah, you’re losing four or 5KA month and did that 4 or 5 k get smaller or larger. After the first year it got smaller. So there was improvement. There was positive change in direction. And like yeah we made we made a lot of changes. I tried to adapt quickly, which is not good because I was kind of desperate. What did you do to try to adapt? I caught labor. Labor cost was exceptionally high and my hours were too long.

That was a big problem. I was overly optimistic about how much business I would get in the evening, especially because we had live music. We had open mics. We did it all. Wow. And it still is not enough. You just don’t coffee centric business. And we did have a kitchen that did like, you know, light fare basically. It was not enough money made in the evening hours because people just don’t want to come out for coffee at that hour. Yes. In a small rural town, there’s just not enough people. And this is not a college town where you’ll have a fair amount of students who need to study somewhere and they’ll, you know, be there till midnight or whatever. Yeah. So you were open from what? What hours? We started. I’m trying to think. I think we opened it. I know we opened at 6 a.m.. I think we started closing at about 8 p.m.. Wow. Okay. Yeah. Which was way too late. You were probably there all day. Oh. All day. I slept there the first few weeks. I slept there every single night. Oh my gosh. Yeah. So okay, so you you start cutting labor. You you bring it down to how much, how many people now, you know, at the, at the lowest amount you do for the whole life of the coffee shop. I think by the end we were down to about six, six people.

Okay. Yeah. Got it. And that’s covering. Yeah. And we cut the kitchen down. So much to like how many hours we served. What we served. We had to get so careful with that. And like with the kitchen being in, like, the back, it wasn’t part of the barista counter. That was very limiting because like, a barista can’t prepare any food. Got it. Because they’d have to leave the front and go to the back kitchen, which is. And they weren’t connected in any way. You had to, like, go out of the counter and around, which was a major design flaw. Got it. Did not think about making sandwiches. Yeah, in front of everyone. Okay. Let’s kind of look at what you would have done differently starting from day one. What would you have done? Absolutely. Day one, I would have hired nobody. Okay. That is absolutely the first thing I would have done, given my experience and where I was at, what I should have done is just open this as like a pop up to start. Got it. Honestly, I never would have rented that location either for various reasons, but like, let’s just say in that location, I still would have just started myself. Maybe one friend, maybe some family, but really hire nobody on payroll yet, so I didn’t have to deal with the payroll taxes and all of that. At the start, I should have tested the concept with Absolute minimum viable product and learned what was going on before I opened the kitchen, before I started hiring people.

Again, given my where I was at, I could have learned so much. And I think built from tiny and up, rather than overestimating everything and having to come back, which also upset a lot of regulars, that hours were shortened. Yeah, options were lost. Coffee options were lost. Food options tried to give up something when you got it. Sort of like, you know, if I’m if I’m getting, you know, a benefit and you take it away, it’s like it would have been so much better. Like, we don’t have any food. We’ve got the simple menu. And then months later, when I’ve got it figured out, I hire somebody for the kitchen. It’s like exciting news. We’re adding food, right? And I’ve seen coffee shops. A lot of coffee shops start up with that approach and they’ve done so much better. I’ve also seen a lot of coffee shops do exactly what I did. More of them do exactly what I did. They’re overly ambitious and they have to slam the brakes. Okay, out of the gate, which. Yeah. So and then less hours, you know, you’re definitely, definitely. Because my jumping way ahead here after this coffee shop failed and I closed the doors, I started like a little coffee stand, which was just me running it. And that was immediately profitable because, like, the overhead was so immensely lower and I had learned so much.

Even with the cost of goods, you can be profitable if you cut a lot of the other. Yeah. And the labor is going to represent just a massive part of a coffee shop’s expense. Massive. Like with the cost of goods. It’s okay. This is what it costs. I can’t change this. Pretty much like I’m not going to cut quality at the quality level I want. This is what the product is going to cost. So I need to charge appropriately. And if people are willing to pay it, you’re going to make money. If the labor it costs versus the amount of customers you have exceeds that, there’s no way you’ll ever make money. Like you can’t just go generate a generate a massive customer base. You could mark it, you can do all of that and it will grow. But also in a small town where there’s just a limited number of people, you kind of hit an apex really quickly, the top of that parabola. And if at that top of that parabola of customers that you can, like, get through the door, you’re not profitable. You’re in big trouble. Tell me this. This is an interesting thing about a small town real quick is you have you mentioned this, that you had a loss leader of this drip coffee that would bring in some of the, you know, the retired folks, and that’s why they came.

How do you think one should balance that dynamic of needing something inexpensive to bring people in, but not allowing that to dominate the fact that you can’t charge higher, and it kind of limits you in in terms of how do you balance that, especially in a small town, what would you do differently? Would you allow them to have a low expense, low product? Yeah. No, I would not like without like a breakfast restaurant could get away with, like having a loss leader. Like, come get this super cheap coffee because most people are going to buy breakfast, right? And like expensive breakfast. Exactly. And nobody’s going to expect at a a full service restaurant to sit there and drink ultra cheap coffee. I mean, I’m sure they’ll get some of that, but it would make sense if you’re really driving them to another product. Problem is with the coffee shop making the drip coffee a loss leader was a terrible idea because that was the end in itself, and I was hoping it would sell pastries. And we did have breakfast and stuff, but too many people went there to just be in the environment and to, you know, hang out, work on their laptops or their retired folk. Just wanted to chat with each other for, you know, and I loved that. I loved that it worked out for them, but it just was not feasible.

Well, it sounds like what, similar to Italy, what they were going for was not particularly the coffee or the caffeine itself. What they were going for was access to this community dynamic you created. And the question is, would they have been willing to pay a higher price to get access to that? And there may, as I think a lot of business owners have, there’s this fear that or a dismissal that they won’t. Yeah, they’re not going to pay for it. Yeah, I know them. Well, blah blah blah. Absolutely. I can’t raise the price. And so there’s a resistance to do so because you think, well, well, I’m just offering because you’re thinking as a business owner, what I’m giving them is just this cup of coffee. Yeah, that’s not worth that much. But what actually, what you’re giving them is access to a community. It’s almost like a memory. Like you’re totally wrong or something. You’re totally right. And they without a doubt, most of them would have paid three times as much. I’m sure they would have. Yeah. And they might complain about it even. Sure. But they’ll do it. But they’ll come back. And it wasn’t actually a loss leader. We made profit on it, but it was so small it was practically it didn’t make up for the other losses. Yes. So that was a huge mistake. And again, it goes back to my last overall mistake of I should have started it at a much higher price point.

See how people respond and if necessary, make a special and then then see. But started way too low on that. Yeah. So let’s kind of get into going forward what this is, you know, a lot of folks are wanting to start this. What I, what I would say worked for you and what you were able to do that many people weren’t, is you created a dynamic at this coffee shop that I keep hearing about. Like, this coffee shop is before my time, but everyone I’ve talked to besides yourself. Yeah, would talk about it in this very nostalgic way, because it was this, this hub of the town. It was this meeting place. That’s true. You were able to recreate this, I would say, because of your time in Italy, you focused a lot on the social dynamics and the community aspect. And you’re again, you’re creating sort of an access. Yes. To to what we all kind of need, which is someone to talk to. You. Yes. And that’s just something that, you know, especially in our society. Yes. The Italians are great at that. We, you know, in the US here, we’re kind of suck at that. So you created this kind of a magical dynamic. How would you help another coffee shop owner start off? What would you do? And to what would you recommend they do to kind of create that if you had to explain it? That’s a great question.

That is a great question. And I think so many inherent decisions I made were based on I want people to come here, meet other people, and it to be a community space that’s like, there’s so many buzzwords, though, in the coffee shop realm of like community focused, community driven, blah, blah, blah. Yeah, like but like truly it happened there at a level I couldn’t believe. Like it shocked me. Actually. People got married there. I would get letters from people out of the country who visited and wanted to thank me for their time there like that. I had never I have never since seen that happen. Yeah. So we absolutely nailed the community aspect of it and probably the cost of everything else. But I think a lot of the decisions were made that that I made unconsciously reflected that. I think I hired people, and that was a big one that were truly extremely charismatic and friendly. Like I just wanted it to be a big one. Yeah. And like and often overlooked, you just look at the price of how much labor is and stuff. But. Yeah, totally. And I’m telling you, we had a group of people working there at the front that like, would just start the conversation. They would bring people together. They would. It was just starting conversations, which doesn’t happen much.

You know, I’ve been to hundreds of coffee shops and like, I usually have to put quite a bit of effort out to get like a conversation going. A lot of the time it doesn’t happen. Sometimes it does and it’s great, but it’s not the customer’s job. Yes. And, you know, you remind me of many experiences I’ve had in third wave coffee shops. Yeah. Where they get the coffee right, but they miss again the Italian culture. Yeah. Which is I feel like I’m a burden as a customer. Like, oh, I’m so sorry you have to do this for. Oh, gosh, you look so miserable. And it does come out good, but it doesn’t feel good because as I’m drinking, I’m like, wow, this person was so cranky. Yeah. And unpleasant. And that’s such a different experience than, again, when you’re in Italy and they’re here you go and they’re throwing out, they’re joking with you. So you created that. What what would you do in terms of is there anything design wise? Is there anything. Absolutely. The the bar area around the baristas definitely worked well for fostering that conversation space. It can be difficult because you don’t want your baristas totally burdened either by like a customer that just, you know, to become the bartender when they’re trying to work. So explain that with the bar area. What does that mean? What does it look like where the coffee was prepared, like the counter space there had the stools like, you know, like cheers.

Yeah. So I think that helps foster, you know, that kind of kind of space where somebody, especially by themselves, could sit and feel like they’re part of what’s happening again, that that can be mixed, though, because it can put some burden on the baristas to, like, overly interact. Yeah. But other design things too, that I think were really important was like the space was interactive. We had we had a pool table, we had a piano, we had a jukebox. We had like games. And again, none of that stuff makes money. But it absolutely like people would go there to like, do things and they would like interact with the shop in ways. We had tablets set up with games on them and stuff, which again, we got kind of far from the Italian thing there. That would never have happened in Italy. So but you don’t need it to, because in Italy the culture is so strong that they’re going to go either way. Whereas what you’re saying is you’re adapting. Yeah. This coffee shop to the American culture, where you had to kind of pull them in a little bit more. Yeah, yeah. It was interesting having those those elements in it, like the pool table, which was I mean, granted, we had that awesome space, so it had it had its own little room away where it didn’t disturb other customers.

You know, the the pool, but the amount of people that would have first dates there. And just because the pool table, I mean, it it did bring in a lot of people. A lot of coffee shops couldn’t pull that off, though, just because the dynamics of our space were such that that worked. But you know, I think having something interactive, though, is nice. There’s a really small coffee shop in Tucson I went to, and it was a really small coffee shop, but right in the corner they had like a tabletop Pac-Man arcade. Nice. And it was like I would have gone in and gotten my coffee and got out, but like, I hung out and played the Pac-Man arcade there just it was something to interact with and do and it becomes like a hotspot for interaction. It I don’t know, it could be part of it. Okay, great. So and also, just the last thing would be your role in terms of fostering that community as the owner, as the manager, whatever. Yeah. How would you recommend someone think about that and go about it without burning themselves out. I think a big part of it is, is passing that on to staff. I mean, this is in a situation where you have staff, not in my solo operation, but where you have staff to, like, make sure that the staff like, first you hire people that are charismatic and friendly, but then, like, really encourage it as a matter of policy, like how you greet customers and really, really make that an important part of training on the customer, like how to interact with customers and also to make sure your employees are not overburdened by it too.

Because if if they’re trying to work through a line and they’re expected to to do too much, they’re never going to have time to, like, foster that kind of community if that’s an important thing to you. I mean, in the realm of revenue and profit, it might not matter that much. Okay. It’s an interesting thing to balance. Tom, this has been really insightful and enlightening to me. Thank you so much. This is I feel like I’ve talked to you about this topic a few times, but I haven’t really gotten these levels of details before, and I think this will be super helpful to people out there. I hope so, to give them a bit of a wake up call in terms of what they can expect. And maybe what you’re kind of talking about is what you know, because I do online business, and there used to be a book called The Lean Startup, and the idea came from someone who, similar to you, had started. Yeah, raised a lot of money and just ended up failing at their, their startups with a lot high cost. Yeah. And just all that stuff.

And then they he kind of switched to a more lean, lean approach. So it sounds like. Yes. And those stories though, where people get a ton of money is this gigantic success, are very romantic and exciting, but like, it’s just like minimal viable product for every business, I think is a hard way to fail. Like you can’t fail too hard if you just start as small as possible in one little brick at a time. Last thing, what would what what do you plan to do going forward? Do you plan do you think you’ll ever start another coffee shop? I hope so, I think I will, I think I will eventually like like I said, I’m doing some roasting and well, I did the whole roasting business too. But like that’s another video. Yes, another video. But I’m back into it a bit and I really want to keep trying to grow the YouTube of coffee, my coffee, YouTube, and I could foresee another coffee shop in the future. It’s going to be something very different though, and I want to try something creative and new. And it will start as a a small, viable product and see what happens. Your coffee your coffee YouTube channel is called let’s let’s make coffee. Let’s make coffee. Yes. Please check it out. It’ll be in the description below the video. Please like and subscribe. Of course. And thank you so much, Tom, for this time. Thank you. Kevin, it’s been a pleasure. Appreciate you.