A cup of coffee keeps a wide margin: a 12-ounce latte costs $1.37 in espresso, milk with a little pitcher waste, the cup and lid and the card fee, and sells for $5.00, a 72.6% margin. Oat milk costs more and is charged more, and keeps a little less; drip and cold brew keep about the same as a latte; pastries bought in from a bakery keep the least. What a coffee shop pays out of that margin is wages and rent, which are most of its costs, so the margin that matters is the month's. Margin = (price − cost) ÷ price. In the example below, a month of five lines brings $37,400 of sales and about $25,820 of gross profit, before wages and rent.
The short version
- Margin = (price − cost) ÷ price; markup = (price − cost) ÷ cost.
- A latte: $1.37, sold for $5.00, 72.6%.
- Oat milk costs more; price it to match.
- Drip and cold brew keep about what a latte does.
- Pastries bought in keep the least.
- TaroStack costs each drink from what each batch and delivery cost. More below.
A latte, costed
Old Town Coffee House, the made-up coffee shop in Fort Collins, Colorado, I use in these examples, counts its baristas as a fixed cost in its plan, so the costs below are what each drink uses:
| A 12-ounce latte | Cost |
|---|---|
| Espresso and milk, with pitcher waste | $1.02 |
| Cup and lid | $0.20 |
| Card fees, 3% of $5.00 | $0.15 |
| Cost | $1.37 |
The shop's year is in coffee shop business plan, and what a good food cost looks like in what is a good food cost percentage.
Margins by channel
| Product | Sold where | Price | Cost | Gross profit | Margin |
|---|---|---|---|---|---|
| Latte, 12 oz | Counter | $5.00 | $1.37 | $3.63 | 72.6% |
| Oat latte, 12 oz | Counter | $5.75 | $1.69 | $4.06 | 70.6% |
| Drip coffee, 12 oz | Counter | $3.25 | $0.92 | $2.33 | 71.8% |
| Cold brew, 16 oz | Counter | $4.75 | $1.31 | $3.44 | 72.4% |
| Pastry, from a local bakery | Case | $4.50 | $1.99 | $2.51 | 55.9% |
The pastry keeps 55.9%, bought in at $1.80; the oat latte keeps 70.6%, charged 75 cents more.
A month's numbers
A month for Old Town Coffee House:
| Product | Units | Sales | Gross profit |
|---|---|---|---|
| Latte, 12 oz, counter | 2,500 | $12,500 | $9,075 |
| Oat latte, 12 oz, counter | 1,200 | $6,900 | $4,869 |
| Drip coffee, 12 oz, counter | 2,000 | $6,500 | $4,665 |
| Cold brew, 16 oz, counter | 1,000 | $4,750 | $3,438 |
| Pastry, from a local bakery, case | 1,500 | $6,750 | $3,772 |
| Month | $37,400 | $25,819 |
Lattes bring the most gross profit, and drip keeps nearly as much a cup for less work at the bar. Every 10 cents of milk saved a latte, from less pitcher waste, adds $250 a month across the lattes alone. Wages and rent come out of the gross profit; the beans themselves are in how to price coffee.
Get the calculator
Download the coffee shop margin calculator. One sheet: one line for each product and channel, with its price, materials, packaging, labor and fee rate; the cost, gross profit, margin, markup and the price your target margin needs fill in. It's an ordinary Excel file with no macros, and it works in Google Sheets, LibreOffice and Numbers.
Where this stops working
The calculator holds one cost per drink. Milk prices move, a new barista steams twice the milk a latte needs, and pastries left at close change every margin.
How TaroStack does it
TaroStack costs each drink from what each batch used, so margins sit on real cost.
True cost from the batch. Each batch takes beans, milk and cups at the price of the deliveries they came from, so a price rise shows in the next batch's cost.
Labor on the batch. The minutes a batch took are recorded on it, so the hours behind each product are on record.
Margins by product. Margins are reported per product on that actual cost, and a price-creep report per supplier shows whose prices moved.
| The job | Spreadsheet | In TaroStack |
|---|---|---|
| What a drink cost | One price from last season | Cost from the batch's deliveries |
| The hours behind a batch | Remembered | Labor minutes on the batch |
| An ingredient creeping up | Noticed late | A price-creep report |
| Margins by product | Re-worked by hand | Margins on real cost |
Recipes, batches, costing and margin reports are on every plan, from $49 a month. The first 30 days are free, with no credit card. If you'd like a hand setting up, ask, and we'll do it with you.