10 Common Reasons Why Coffee Shops Fail in Abu Dhabi

Why most coffee shops fail? While there are a lot of reasons for the failure of a new or independent coffee shop, most of them can be prevented.  

Starting your own coffee shop business? Avoid the common pitfalls – learn how to open a cafe and coffee shop in Abu Dhabi – successfully.  

Why You Should Care About Abu Dhabi's Coffee Shop Failure Rate

We all know that the coffee industry is booming. In fact, there are more than 4,000 coffee shops in the UAE. But it turns out that not all of them are profitable. More than 20% of independent coffee shops close within a year and this figure is only increasing.

Do you own a coffee shop or want to open one and want to avoid it? This article will give you some ideas on how not to let your business fail in the first place and what you can do to increase your chances of success.

Factors That Lead to a Coffee Shop Closure

If you are planning to open a coffee shop, then you should be aware of the most common reasons behind coffee shop failure. Understanding these reasons can give you a clue to success. More than one-half of all new businesses fail within their first year. The failure rate for small businesses is even higher than that of new businesses.

Let’s see the 10 most common reasons why coffee shops fail in Abu Dhabi - and how to avoid that.

1. Finding the right location for your coffee shop

Poor choice of location can make or break a coffee shop's success. If your shop is not visible, if there is not much traffic in the area, if it is inaccessible or has poor parking, customers are unlikely to visit it.

Here are some factors that you need to take into account when choosing a location for your coffee shop:

- Make sure that the location has a high footfall

- The store should be close to public transport and other amenities

- Choose a space with plenty of parking space

- Close high urban commercial/resident population within a one-kilometre radius. 

These are key factors to score your location on, if the location scores low on any one of these, be happy to say no to whatever ‘great deal’ you are offered.

2. Unrealistically high rent and poorly negotiated coffee shop lease

Don't fall into the trap of renting in the trendiest place in town and end up paying more than you can afford for your lease. Your rent should not exceed 10% of your expected annual turnover. If it is more than that, you are working just to pay the rent.

Take the time to read and understand in detail the tenancy agreement you are about to sign. Don't be afraid to ask questions, you actually need to understand all the terms and clauses of the contract. Make sure they benefit and support the development of your business. You will save yourself lots of heartache!

3. Not understanding what your customer wants

To best serve your clients, you need to understand their needs and wants.

You may be thinking that it's obvious what customers want: they want a delicious cup of coffee or a tasty pastry. But there's more to it than that. For example, some customers might prefer their coffee black, while others like it with cream and sugar (or milk, or whatever else they prefer). Some customers may have allergies or other dietary restrictions that might affect what they can eat and drink.

The same goes for your target customer: who are they? What do they look like? What kind of things do they do in their free time? How old are they? Do they have kids? If so, how many? Do they live in an urban area or a rural area? All of these things affect the kinds of products and services that a business offers—and knowing them helps you better serve your customer!

4. The lack of Standard Operating Procedures is one of the main reasons why coffee shops fail

In a coffee shop, SOPs (Standard Operating Procedures) are important because they help the employees know how to do their job. They also make sure that every customer gets the same experience. If you don't have SOP's in place, then it's very easy for your employees to make mistakes or forget how to do things. SOPs are a crucial part of any business, especially in the food service industry.

The SOPs are the procedures that all employees follow on a regular basis, in order to ensure that everything runs smoothly. SOPs are used for everything from how to brew coffee, to how to serve customers, and even how to clean up after closing time.

SOPs have been shown to improve the efficiency of a business in many ways. First, they allow employees to focus on their jobs without having to worry about what other people are doing or not doing. For example, if one employee is working on making coffee while another employee is cleaning up after closing time, there is likely going to be some overlap in their duties (since they both need access to the same equipment).

Second, it helps eliminate confusion among employees as they work together toward common goals; they know exactly what each person’s job is so there’s no confusion about whose responsibility something is or who needs help with a task at any given time. Thirdly, it allows for better communication between supervisors and employees because there aren’t any questions about who should do what when or why something went wrong because someone didn’t follow protocol correctly (which happens often enough without having SOPs in place).

5. Poor choice of menu

When conceptualising your coffee offering, do not base it on your personal tastes/dislikes or eating habits. The business is about serving consumers' needs, creating a product that is more likely to be liked and patronised by consumers, filling a niche that is still empty, and then planning your menu to offer exactly that.

A large menu does not always translate into more sales. The number of choices can be a good thing, but it can also be a bad thing - both for your customer and for your revenue. If the customer has too many choices, they may not know what they want and end up confused and not knowing what is the best thing to order at your place.

Specialise in what your concept caters for and present those products in the right size, packaging and at the right price. Take a specialised approach to crafting your cafe menu.

6. Excessive investment in construction, equipment or fit out

The coffee shop business is a competitive one, and the investment you make in your storefront and equipment can have a significant impact on whether or not you're able to compete with the other shops in your area.

When you start thinking about your coffee business, one of the first things you may think of is your shiny new coffee equipment.

Commercial coffee equipment can be expensive. It is easy for coffee equipment costs to escalate quickly. 

Sometimes, these coffee shop start-up costs are entirely avoidable. This is because new café business owners may overspend on equipment they do not need. The determination of equipment costs depends mainly on the menu of the café.

In addition, the physical space may influence the choice of café equipment.

Finally, your budget plays an important role in determining your equipment needs.

Overspending on coffee equipment can put you heavily in debt or tie up funds that you would otherwise use to start up your coffee shop.

It can be easy to spend upwards of $10,000 to $30,000 on coffee shop equipment that you may or may not need. 

On the other side, we see many coffee shop owners get so carried away with designing the front-of-house, they use up much-needed capital which should have been invested into the production area. Finding a balance between the priority elements and your budget is key.

Organize your budget keeping in mind that your production and service and your ambience keep them wanting to come back for more.

7. Not understanding your competition will set your café up for failure

It's important to understand your competition to craft a strategy that will set you apart from the coffee shops nearby.

You should be able to clearly identify your competitors' strengths and weaknesses, as well as their target market(s). You can then use this information to figure out what you need to do to build a business that is truly unique and appealing to your target customers.

Here are some questions that might help:

- What do they offer?

- What don't they offer?

- How much does it cost? (food, drinks)

- What do they offer that I don't?

- What can they do better than me?

- How can I differentiate myself from them?

8. Lack of Customer Loyalty will likely cause your coffee shop to fail

The coffee shop industry is a multi-billion dollar market that has been growing steadily for the past several years. With the growth of this industry, there are many options for customers to choose from, and as a result, many businesses are struggling to maintain customer loyalty.

Loyal customers are the lifeblood of the business. They are the reason why coffee shops are able to stay in business and continue to grow and generate more revenue.

Returning customers can be a valuable asset for your business because they will bring in more revenue from repeat purchases, which means more profit for you. Loyal customers will also tell their friends about your business, which helps spread word-of-mouth advertising that is free for you but can be very effective at bringing in new customers.

The best way to get loyal customers is through building a relationship with them by providing excellent service and giving them incentives for returning again and again.

For example, if someone comes in every day for coffee then you could give them a free cup of coffee or even a discount on their next order or something else that would make them feel special and appreciated as part of your family.

9. No Brand Strategy Or Coffee Shop Concept increase the likelihood for coffee shops fail

Today's coffee shops need to offer more than just a couple of hot drinks. Starting with a strong brand concept will mean less time and money wasted when trying to build a brand around what you already have.

When thinking about a café concept, entrepreneurs should consider how they promote themselves, the visual appearance of the shop, what kind of items are on the menu, the ideal customer experience, the importance of coffee shop interior design, and all the touchpoints of the brand with their customers.  

Without a successful brand image, concept or desirable menu, your café becomes just another characterless shop that will not attract customers.

When you set out to run your business without a business concept, you can be sure that you will spend more time and money than you would otherwise. Determine what type of café business you would like to set up and your objectives, and then base your decisions around it.

You may need to modify your actions as you go along.  However, having a central theme or concept will help you stay on track. "Staying on track" and moving forward will help you avoid spending more money than necessary, wasting time, or falling into oblivion.

10. Poorly Trained Cafe Staff

Your customers will demand excellent service every time they enter your business. Therefore, you should hire for it. Retail coffee can be a very competitive environment, especially in some urban or touristy areas.

Therefore, having great baristas that provide your customers with excellent service - every single time - will be critical for your long-term success.

Systems run the place; humans are needed to follow systems. A well-motivated team that receives regular training and growth opportunities can be your best asset. Consumers have a wide choice of outlets to spend their hard-earned money on, so ensure yours is the first choice in this competitive market by providing guests with a polite and professional smile and ‘consistent’ service. A mistake often made by new restaurant owners is to invest in Staff training at the pre-opening stage only, but after the initial euphoria of a new place, staff tend to be the most neglected, sales go down and regular customers are lost to more competitive and well-operated food outlets. 

With daily briefs, monthly training, and regular appraisals, you can keep your employees motivated and well-trained. Make training a part of your procedures, and don't leave the decision between 'good service' and 'bad service' to employee mood on that particular day.  

Repeat customers are happy customers. Unfortunately, I've seen once-great coffee shops wither and die as a result of poor customer service.

I strongly advise hiring and training baristas for personality, dependability, and trainability. Giving more weight to personality and dependability than experience when hiring staff is critical to your success.

Is it a good idea to hire an experienced barista?

Without a doubt.

I'm not arguing that experience and personality are mutually exclusive qualities to look for in a candidate - they're not.

However, hiring for integrity, dependability, and personality should always take precedence over experience. Customers would rather have mediocre coffee than rude, apathetic, or angst-filled service from your baristas. Of course, you'll want to invest in barista training as well. This ensures that they are fully prepared to provide excellent coffee and service.

Hiring the wrong people can slowly destroy your coffee shop.

Conclusion - Why most coffee shops fail and what to do to avoid it.

In short, hopefully, the article will help you make informed decisions on the viability of your own small business before launching it into action. If you already run a coffee shop, these reasons may help to make better in-process improvements to your business and its operations. With this guide as a starting point, you should be able to avoid many of the common hindrances that put many small businesses at a disadvantage in today's competitive market.

Now that you've learned some of the most common reasons why coffee shops fail, you should have a better understanding of the research, analysis, and planning required to realize your dream of owning your own cafe or coffee shop in Abu Dhabi, UAE, or anywhere in the world.