The following is a guest post written by Teddy Tsang, vice president of product marketing at Toast.
Cafes, coffee shops, and bakeries often get pigeonholed around which products and services they can offer and, as a result, what they can achieve as businesses. But they do not have to focus on just selling coffee, crumble cake, and scones anymore — digital tools and retail goods are opening up new kinds of customer relationships and revenue opportunities.
Whether locally owned or part of a large brand, cafes, coffee shops and bakeries are cornerstones of our daily residential and workplace experiences. To many, cafes and bakeries are their “third place,” offering a sense of community and social interaction outside of home and work — whether locals meet to caffeinate, converse and start their day, grab breakfast, play a game of cards, get lunch to go, or relax with an evening libation. Cafe and bakery staff often know their regulars by name and can create a tight bond that can go beyond serving up their “usual” order. This eatery-patron relationship offers a unique opportunity to serve guests through different revenue streams one may not typically associate with a cafe or bakery.
Like many businesses that have an in-person element, cafes, coffee shops and bakeries have seen up-and-down periods since 2020 due to various economic factors. To gauge how they performed from April through June (Q2 2023), Toast analyzed transactional activity by these types of stores on the Toast platform in 17 U.S. metro areas. The upshot: These businesses are doing well, but can still expand what they offer, and how, to do even better.
Serve the ‘winding-down crowd’
It’s been a trend in recent years for coffee shops to extend their operating hours and offer wine, beer, cocktails, “mocktails” and other non-alcoholic beverages for guests who want to wind down after work. This represents a potential revenue growth opportunity beyond coffee shops: Cafes and bakeries we looked at that serve alcohol had an average spend per alcoholic beverage of $10 during Q2 2023, a 4% increase on average from the same quarter in 2021. These cafes and bakeries are leaning into the idea of serving “craft brews” of all kinds — from specialty coffee to unique cocktails, mocktails or locally brewed beer.
Before implementing a full bar, cafes and bakeries should make sure they are compliant with applicable regulations and possess the necessary licenses to serve alcoholic beverages. Then, with the right commercial space and enough staff, offering an evening beverages menu can be a significant win for cafes, coffee shops and bakeries in neighborhoods with strong evening foot traffic. And it can deepen regulars’ relationship with their favorite “third place,” making their visits even more meaningful.
Boost your business with catering
On the services front, catering can be a crucial factor in driving revenues for cafe and bakery operators. It broadens their business’ reach, extending services to a larger base of guests who can become regular patrons. Private events such as weddings, birthday parties, anniversaries and company celebrations offer an opportunity for restaurants to display their hosting abilities, culinary skills and menu choices. Such exposure helps increase brand awareness and has the potential to significantly bolster revenue growth.
With the right catering equipment (insulated food pan carriers, cooking countertops/chef stations, chafing dishes, etc.), this channel can be relatively easy to implement. Approximately four out of five small-to-medium-sized cafes and bakeries derive a portion of their sales from catering — generating 12% to 32% of their revenue from this channel, according to a recent Toast survey.
Cafes, coffee shops and bakeries can use digital tools that make it significantly easier to handle backroom tasks for catering, such as invoicing, time management, food safety and cost tracking. All it takes is for restaurant managers to get up to speed on how to use the digital tools, and then they are off and running. The same is true for public events such as street fairs and festivals; they can become high-value revenue streams with the right equipment and digital features.
Embrace a retail mindset
Beyond slinging drinks and baked goods, cafes and bakeries might consider exploring another revenue stream: retail. This could help maximize revenue with their square footage. By selling dried goods like coffee beans, heirloom flour, specialty condiments, mugs, cookbooks and even baking tools, cafes and bakeries can turn their storefronts into small, niche shops where patrons can pick up supplemental groceries, gifts and impulse buys while ordering their coffee.
The great secondary effect is that the investment in offering retail is relatively small. For instance, a simple shelf near the counter that guests can browse along with inventory management tools will add a new revenue stream to an existing shop, and the items can be great conversation-starters for regulars and new guests alike.
In the end, cafes, coffee shops and bakeries have an incredible opportunity as the “third place” for their dedicated regulars. By adopting growth strategies, such as extended evening hours, catering/events and retail, these eateries can serve regulars in fresh ways while attracting new patrons.