"Everyone Opens a Coffee Shop — But Do They All Succeed?"

As of 2025, interest in opening coffee shops in Mongolia is on the rise, especially among young entrepreneurs who see it as a low-risk entry point into small business. However, in reality, 3 out of every 10 newly opened coffee shops shut down within the first year.

That said, coffee imports tell a different story: In 2013, Mongolia imported approximately 39.8 tons of coffee. By 2022, this had risen to 467.4 tons — an 11.7x increase. This demonstrates a rapid growth in demand for coffee and coffee shop culture.

🌍 Learning from the Global Market

Although coffee shops generally offer high-profit margins and relatively low operating costs, the competition is fierce. According to Daily Coffee News, there are about 40,000 coffee shops in the U.S., and 40% of those are operated by Starbucks alone.

This saturated market, coupled with economic uncertainty and operational challenges, creates significant risks for newcomers. Being aware of these hidden pitfalls — and preparing for them — can help coffee shop owners thrive long-term. With the right concept, planning, and tools, you can build a profitable, beloved coffee destination.

🚨 Coffee Shop Failure Rate

The National Restaurant Association reports that 30% of restaurants close within their first year. Coffee shops, while less capital-intensive, still face challenges:

• Lower operating costs

• High-profit potential:

  • 60% Gross Margin: Revenue left after subtracting direct costs (e.g. ingredients, packaging, staff wages).

  • 15% Net Profit: The remaining profit after subtracting all costs (including rent, utilities, marketing, taxes, etc.).

Though the odds of success are better, outcomes vary based on location, concept, and experience. Well-planned, uniquely branded coffee shops are more likely to grow sustainably.

❌ 6 Main Reasons Coffee Shops Fail — and How to Avoid Them

1. Economic Instability

The coffee shop industry is sensitive to economic fluctuations — e.g. COVID lockdowns, inflation, rising raw material costs.

• Diversify income streams (delivery, online orders, packaged coffee sales)

• Monitor expenses (use inventory management software, optimize your menu)

• Stay adaptable (e.g. launch online coffee classes, subscription boxes)

📌 Example: James Lim (Watson’s Counter) started doing live coffee tutorials on Instagram, opening up new revenue streams.

2. Undefined Concept

Good coffee isn’t enough. Your shop needs a clear value proposition.

• Know your target audience (students, families, coffee enthusiasts)

• Build your brand identity (live music nights, pet-friendly spaces, eco-conscious focus)

• Learn from successful examples

📌 Example: Dessert 39 — Offers low-calorie or guilt-free treats, plant-based milks, and unique desserts. The brand appeals to health-conscious customers and stands out in the market. It is priced lower than premium brands like Starbucks but higher in quality than convenience stores.

3. Poor Staff Management

Staff instability negatively impacts customer satisfaction. Retaining great staff saves money and ensures service quality.

• Provide regular training (equipment handling, service, communication skills)

• Foster a healthy workplace culture (incentives, flexible schedules)

• Implement performance bonuses (sales incentives, recognition)

  
  

4. Inadequate Budgeting

Failing to allocate enough for equipment, rent, or wages can quickly lead to trouble.

• Draft a detailed budget including all costs

• Track cash flow closely

• Avoid over-investing in non-essential items (e.g. overly fancy decor, excess stock)

  

💡 Tip from Chris Deferio: "Your first year is experimental. Real decision-making and profitability begin in year two."

5. High Competition

• Focus on service excellence

• Launch loyalty programs

• Create a standout menu (seasonal drinks, organic or homemade products)

  
  

6. Lack of Experience

Loving coffee isn’t enough — you need business acumen. Collaborate with experts, attend trainings, webinars, or get a mentor.

📌 Example: Natalia Alcazar — A former roaster who opened the first Mexican coffee shop in Cleveland with expert guidance.

📊 Key Metrics for Success in Mongolia

Metric	Target Range
Avg. Purchase Amount	₮8,000–₮12,000
COGS (Cost of Goods Sold)	25–35%
Labor Costs	20–30%
Repeat Customer Rate	≥40%
Service Speed	≤7 minutes

✅ Where to Start?

• Define a strong concept

• Create engaging content

• Develop a solid marketing strategy (promos, social media ads)

• Track KPIs regularly

• Share valuable tips through your blog as a content series

  

  
  

  📊 Key Performance Indicators New Coffee Shop Owners Should Monitor

  
  

  By consistently tracking these Key Performance Indicators (KPIs), new coffee shop owners can significantly improve their chances of long-term success. These metrics provide a clear picture of financial health, operational efficiency, and customer satisfaction. Staying informed and responsive to these numbers can help guide smarter decisions, reduce risks, and optimize growth over time.

KPI	Why It Matters
Avg. Purchase Amount	Measures income per transaction
Labor Cost %	Should remain within 20–30% of sales
COGS %	Should stay within 25–35% for profitability
Customer Retention Rate	Indicates satisfaction, loyalty, and brand affinity
Cash Flow Management	Ensures timely payments for key expenses like rent and wages
Customer Satisfaction	Gather feedback regularly to improve the experience

Final Thoughts

Opening a coffee shop may seem like an easy business, but success requires strategy, discipline, and a data-driven mindset. With careful planning and continuous learning, you can build a coffee brand that stands the test of time.