How to Write a Coffee Shop Business Plan: Know Your Competition

Part 2 of a series on writing a real coffee shop business plan. New here? Start with Part 1: menu and market.

In the last post, I sent you off to build a real menu and a real transaction estimate for your market. That work becomes the foundation of your Market Analysis section — Section 3 of your plan. But a market analysis isn't complete once you understand your guests. You also have to understand who else is already trying to serve them.

Here's something worth knowing up front: this isn't a step you do once and file away. I did a full competitive analysis on Stay Golden last week — two years into running this location, not during the planning stage.

Here's why. My current neighborhood has seen a lot of turnover since I opened. Some of the shops that were my competitors when I moved in aren't there anymore. New ones have taken their place, and the neighborhood has grown enough that others have shown up who aren't replacing anyone — they're just new. On top of that, I've watched my own numbers shift: my transaction count is down about 25% year over year, while my average ticket is up about 16%, which nets out to my business being down somewhere around 7-8% overall. Real numbers, real pressure.

So I did what I'm about to teach you to do. And it told me something useful right away: a number of my competitors have gone out of business over the same stretch. That doesn't fix anything on its own, but it reframes the problem. It's not necessarily that something is broken in how I run my shop — it may be that the whole local market is under real strain, and I'm feeling an exaggerated version of it because I'm not sitting in a prime location. Competitive analysis didn't just show me opportunity. It helped me understand what I was actually dealing with.

That's the real value of this section, whether you're planning your first shop or checking in on one you've run for years: it tells you where you stand, and it tells you where the openings are.

The Six-Step Process

Most first-time owners skip this or do it halfway — they visit one or two shops, decide they're "different enough," and move on. The owners who do it well walk into their opening, or their next hard season, with real data instead of assumptions. When they sit down with a bank, they can say exactly where the gap is and exactly why their concept fills it.

Step 1 — Build your competitor list. Identify 8 to 12 shops in your market — not 3, that won't give you the full picture. Split them into three groups. Direct competitors are similar price point, similar vibe, similar customer — the shops you'll most directly compete with for the same guest at the same moment. Indirect competitors are a different format serving the same need — fast food coffee, grocery store coffee bars, even the office with a nice espresso machine in the break room. Your guest considers these alternatives even if you don't think of them as competition. Potential competitors are the empty storefronts nearby that could become a café, or a growing chain that's been expanding into areas like yours — worth knowing about even before they open.

Step 2 — Study their Google Business Profile. Before a customer ever walks in, they've already decided whether to visit based on what shows up when they search — this step is about understanding how a competitor gets chosen, before anyone experiences the actual shop. Look at the photos they chose to upload, which tells you what identity they're going for. Check the "popular times" graph, which shows real peak hours across a full week without you having to sit there for seven days. Compare their listed hours against whether they actually keep them — inconsistencies here tend to show up in reviews. Read the Q&A section, which shows you what confuses or worries customers before they visit. And notice how the owner responds to negative reviews, which reveals a lot about how they actually operate.

Step 3 — Visit in person. This is the step most people undervalue, and it tells you the most. A listing shows you what a business wants you to see. Sitting in the shop shows you what's actually true. Visit, order something, and sit for 20 to 30 minutes. Take note of parking and visibility, wait time from order to drink in hand, seating count, whether it's laptop- and wifi-friendly, the ambiance and music, and how staff actually treats people. You're testing the online promise against the in-person reality.

Step 4 — Compare menu and pricing. Log the same four or five core drinks across every shop — drip coffee, latte, cold brew, maybe a specialty item — then set your own planned prices next to theirs. This turns a vague feeling — "they seem expensive" — into a real number you can act on, and it'll show you exactly where you're priced above, at, or below market for each drink.

Step 5 — Read their last 50 reviews. One visit shows you a moment in time. Fifty reviews show you the pattern. Read them yourself, in your own words — don't just skim for star ratings. You're looking for two things: what keeps coming up as praise, and what keeps coming up as complaint, for that one shop specifically. A single bad review might be a fluke. A complaint that repeats across dozens of reviews is a real, recurring problem costing that shop customers on a regular basis — and that's often the clearest gap you can build your own shop around.

Then take it one step further. Do this for every competitor on your list, and look at the reviews across all of them together, not just shop by shop. If one shop's reviews complain about slow service, that might just be that shop. If three or four shops in your market all get hit with the same complaint — slow service, cramped seating, inconsistent hours, whatever it is — that's not a coincidence. That's an unmet need in your whole market, and it's worth far more than any single competitor's individual weakness.

Step 6 — Answer four questions for each competitor. Professionals call this a SWOT analysis. Ignore the jargon — it's just four questions: What are they good at? Where do they fall short? Where's the opening for me — what does their weakness make possible for a new shop? What makes them hard to compete with? Write real answers to all four for every competitor on your list. Then step back and look across the whole set. The strongest competitive positions don't usually come from one shop's single weak spot — they come from a gap that shows up again and again, across multiple competitors, that nobody in your market is actually filling.

What This Actually Looks Like

Here's what came out of my own analysis last week, because the four questions are a lot more useful once you see them applied to something real.

A number of my competitors have been criticized lately for shrinking portions while raising prices. My market is feeling that, and saying so. That's a value opportunity, and I can speak directly to it.

A number of competitors are getting praised for their cold brew programs. I don't serve cold brew — I serve a Japanese-style iced coffee, which is fresher and lighter, a different thing entirely. My first instinct was to read that as a weakness. It isn't. It's a real point of difference I can market directly: if you love cold brew, come try something different.

Several competitors were criticized for cramped seating, or for being too loud or too full to actually sit and work. Monday through Friday, I have plenty of open seats. That's a real opening to position Stay Golden as the place to come work remotely during the week — something a few of my competitors simply can't offer, no matter how good their coffee is.

And one finding needed a second look before it made sense. My filter coffee is priced 75 cents to a dollar higher than every competitor I logged. On its own, that looks like a straightforward disadvantage — they're cheaper. But my coffee, hot or iced, has pretty much always been bottomless. Paired with a market that's actively frustrated about shrinking value elsewhere, that's not a weakness to explain away. That's the argument: for fifty cents more, you get unlimited refills. There's no better value than that, and now I have language, sharpened by what my competitors are doing wrong, to say so — in emails, on social media, at the register.

None of that came from guessing. It came from actually doing the six steps.

A Gap Doesn't Obligate You

One more thing before you move on, because it's easy to walk away from this section thinking every gap you find is something you have to fill. It isn't.

Competitive analysis should absolutely inform your decisions — I've let real sales data reshape my own menu over the years, and that's smart business. But there's a line. If an analysis showed me that adding chicken strips and fries would be a smart competitive move, I still wouldn't do it. That's not who Stay Golden is. Changing your whole business because a gap exists isn't always the right call, and it's not always even a smart one — sometimes it just isn't you.

But it's also not that simple, and I want to give you the other side of it. I have a consulting client whose business was coffee-heavy — that's who he was. Then a matcha drink he created went viral, and within days he was selling more of it than almost anything else on his menu. He had a real choice: hold the line as a coffee-only shop, or lean into what the market was clearly telling him. He leaned in. He built out a few more drinks in the same vein, and he's now known well enough for matcha that he changed his business name to include it. He didn't become a different business. He let a real opportunity grow who he already was.

That's the discretion this section is really asking for. Use the data. Let it inform you, sometimes even change you. But you decide what's actually yours to fill — not the spreadsheet.

What Comes Next

You now know two things most owners never bother to find out before they open: what your market actually wants, and where the real gaps are in what's already being offered. The next question is what ties both of those together — who are you, clearly enough, that you can tell which of those gaps are genuinely yours to fill, and which ones aren't you at all?

That's Part 3: building a brand people actually remember.

Frequently Asked Questions

What should a competitive analysis for a coffee shop include?
A thorough competitive analysis covers three types of competitors — direct competitors with a similar price point and customer, indirect competitors like fast food or grocery store coffee bars, and potential competitors who might open nearby soon. For each one, you want their online presence and reviews, an in-person visit, a menu and pricing comparison, and honest answers about their strengths, weaknesses, and what that means for your opportunity.

How many competitors should you research before opening a coffee shop?
Aim for 8 to 12 competitors, not 2 or 3. A handful of shops won't reveal real patterns — a repeated complaint or a shared weakness only becomes meaningful once you see it show up across several competitors. Researching a wider set is what separates a real competitive analysis from a quick, unreliable impression.

How do online reviews help with competitive analysis?
Reading a competitor's most recent reviews shows you the pattern behind their business, not just a single moment in time. A complaint that repeats across dozens of reviews for one shop points to a real, ongoing problem. Comparing recurring complaints across multiple competitors goes further — if the same issue shows up again and again across your whole market, that's an unmet need worth building your shop around.

What is a SWOT analysis for a coffee shop?
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats, but it's really just four plain questions applied to each competitor: what are they good at, where do they fall short, where's the opening for a new shop, and what makes them hard to compete with. Answering those questions honestly, for every competitor on your list, is what turns a list of nearby cafés into a real competitive strategy.

Should you change your coffee shop menu based on competitor research?
Competitive research should inform your decisions, but it shouldn't automatically dictate them. If a gap in the market doesn't fit who your shop actually is, filling it isn't always the smart move, even if it looks profitable on paper. At the same time, a real market signal that does align with your concept is worth leaning into — the goal is using the data to sharpen or grow your business, not to chase every opportunity that appears.

Ready to build this the right way? Join the How to Open a Coffee Shop Masterclass waitlist for the full system — including the financial model that turns everything in this series into a plan you can actually defend.