Blue42 Guides · Choosing a location

Coffee shop site feasibility: how to know a location can carry the lease before you sign it.

A site feasibility study compares what a lease demands against what the trade area can actually provide. This is how to run one — the arithmetic, the site conditions that turn a short buildout into a long one, and what to ask the landlord for while you still can.

Matt Powers· Calioh CoffeeTen years operating · more than fifty locations assessedUpdated September 2026

What a site feasibility study is

A site feasibility study compares two numbers. The first is the sales volume the lease demands — the revenue that rent, CAM, escalations, operating costs and your own income require before the shop is doing anything more than surviving. The second is the volume the trade area can support — the people within reach, what they spend on coffee, and how many other places are already selling it to them.

That comparison is the whole question. If the lease demands more volume than the market can support, it is a no-go. If the buildout costs more than you can fund, it is a no-go. If the buildout takes longer than you can carry the rent, it is a no-go.

Some of it fits on the back of a napkin. A real evaluation does not. It needs the right inputs, and it needs to know which of them decides the answer.

What you are actually signing

A five-year lease. A personal guarantee standing behind it. Often half a million dollars of buildout in front of it — signed on information you did not know to ask for, in an industry you have not worked in yet.

Most first-time operators do not know what to ask. Plenty of commercial brokers do not either — not because anyone is hiding it, but because coffee is not what they lease most weeks. And once the lease is signed, everything the space turns out to need is your problem. The landlord will tell you so.

The purpose of a feasibility study is to find those problems while they are still the landlord’s to fix, or your reason to walk away.

Start with what the space costs to occupy

Occupancy cost is what it costs you to be in the building. Rent. CAM or triple-net charges, which arrive in the same check. Utilities — gas, electric, water, data. And the liability insurance on the shell of the space.

The rule that keeps a coffee shop solvent is that occupancy cost stays at or below ten percent of net annual revenue. Net revenue is what is left after transaction fees, sales tax, discounts and refunds — money that was never yours to begin with does not count toward carrying the rent.

Work it backwards, because that is the direction the lease works in.

Then model the worst year, not the first. Almost every retail lease escalates — three percent a year is standard, and sometimes negotiable down a little. At three percent, year five costs about twelve and a half percent more than year one. A lease you can carry in year one and cannot carry in year five is a lease you cannot carry.

From required revenue to customers a day

Revenue is not a number you can see from the counter. Customers are. So the next step turns the annual requirement into the transactions the shop has to ring every day it is open.

The average order is the input that moves this number most, and it is the one to be honest about. A counter selling coffee alone will sit well under $10 and need far more customers to carry the same rent. A shop with a real food program and confident pricing can run $15 or more. Use the number your menu will actually produce, not the one that makes the lease work.

The lease determines the required volume. You do not fabricate one from a web search.

This is where most feasibility spreadsheets go wrong. They open by asking how many transactions a day you expect to do. You do not know — you have never operated in that building — so whatever you type becomes the number that makes the rent work, because you already like the space. Running the arithmetic in this direction removes the guess. The lease sets the target. The next question is whether the neighbourhood can hit it.

What the trade area can support

The trade area is the ring of people who will realistically walk or drive to you. Its size depends on the format of the site. An urban walk-up draws from roughly a one-mile radius. A suburban centre draws from about three. A shop on a thoroughfare sits somewhere between, depending on the traffic and how easy it is to pull in and out.

The listing brochure almost always includes demographics for one-, three- and five-mile rings. Take the population for your ring and add the daytime transient population — the people who work or visit there without living there. If the brochure does not carry it, the broker’s website will, and a CoStar report will carry it in more detail than either.

Data from the National Coffee Association, the Specialty Coffee Association and the US Census puts annual per-person spending at coffee shops at roughly $200. The model multiplies your trade-area population by that figure to get the total coffee spend in the ring, then divides it by the number of places already competing for it. What is left is the supportable volume — the transactions a day the area can reasonably provide to one more shop.

Set that number beside the one the lease demands. In one worked case from the model, the trade area could support about 256 transactions a day and the lease required 156. The shop needed to win roughly an even share of the available demand — a real target, and a fair one. When the required number is the larger of the two, no amount of enthusiasm about the space changes the answer.

The site conditions that decide the timeline

The numbers tell you whether the location can work. The building tells you how long and how much it will take to find out. This is the part almost nobody evaluates before signing, and it is where the expensive surprises live.

The first question is whether the space is first generation or second generation. Second generation means it was already a coffee shop or a restaurant: the grease interceptor, the plumbing and some of the electrical service are already there, and the permits you need to pull shrink accordingly. First generation means none of it exists yet. The difference is measured in months.

Then work through the list. Every item on it has cost a coffee operator real money.

• Electrical service.The single most important thing in the building. A hundred-amp panel and a fifty-amp espresso machine means you are done before you start — you cannot run the machine and the air conditioning at once. Know the load your equipment package needs before you look at the panel. If the panel is two hundred amps and the buildout needs three hundred, you are adding a sub-panel, an electrical permit and contractors, and a three-month build just became six.
• Grease interceptor. Plumbing code now requires one almost everywhere a commercial kitchen or bar operates. A second-generation space may already have one that meets current code. A first-generation space will not, and installing one is a plumbing permit and a floor.
• Hood. Only if you cook. If the concept is coffee and pastry, say so early and do not let a hood requirement attach itself to the project.
• Health permit.If the previous operator closed, you are pulling a new one even in a second-generation space, and the inspection that comes with it is where the building’s other problems tend to surface. Budget about two months for it.
• Year built, and accessibility.The accessibility standards under the Americans with Disabilities Act took effect in 1992. A building that went up before then and has not been upgraded since may not comply — and if you sign the lease without addressing who pays, you own the upgrades your permit triggers. That can mean a bathroom widened by eighteen inches, a toilet relocated six inches, a door, a ramp. None of it is on the listing. There is a limit. Under the federal rule, the accessibility work triggered by your project is capped at twenty percent of what the project itself costs, spent in a set order — the entrance first, then the route, then the restrooms. On a small buildout that cap is small: in one real case, about $500 of tactile paving at the door satisfied it on a $4,000 project. California writes the same rule into its building code. But you only get to use the cap if you know it exists before the inspector arrives, and it does nothing for you if the lease has already made the whole building’s compliance your responsibility.
• The accessibility report.In California the landlord is expected to have a Certified Access Specialist inspection — a CASp report — on file, and the listing will often say whether one exists. Ask for it. Many landlords do not know they are supposed to have one, which tells you something about how the rest of the building has been kept.
• Parking and change of use. Turning a nail salon into a coffee shop is a change of use, and a change of use can trigger a parking requirement the previous tenant never had to meet. Count the spaces serving the centre and ask the municipality what your use requires before you fall in love with the patio.
• Site format and approach.Suburban centre, urban centre, thoroughfare or walk-up — and whether customers reach you directly from the main approach or have to work for it. The format sets your trade-area radius; the approach sets how much of that radius actually comes in.
• Coffee exclusivity. The first question to ask when you look at a location, before the rent, before the square footage: does anyone else in this centre already hold the right to sell coffee? If they do, you cannot open there. If they do not, you want that right in your lease, so the next tenant cannot take it from you.

A proper model turns those answers into a timeline. In the walkthrough case, a second-generation space with a two-hundred-amp panel, a health permit to pull and no grease interceptor modelled at eight months to open. Take the grease interceptor off the list because the space already has a compliant one, and it drops to five. Either way, the model also tells you what you will pay in rent every one of those months before you sell a cup — $4,500 a month, in that case — which is the number you carry into the next conversation.

Time is the cost nobody quotes you

Worked out by hand, deciding whether a location is viable takes most people three or four months. That is three or four months of not looking at the sites that would have worked. The location that costs you the most is rarely the one you sign. It is the one you spend a season on and walk away from.

The other version of the same cost is the lease that starts before the shop does. It is common to see an operator sign, begin paying on the first of the month, and still have no certificate of occupancy twelve months later — rent going out every month, no coffee going over the counter, and the buildout eating the cash that was supposed to carry the ramp. Some of those shops open. Many do not.

Every delayed month is rent you pay before you sell a cup. The buildout timeline is not a construction detail. It is a line in the feasibility study.

What to ask the landlord for

Everything the site assessment surfaced is a negotiating point, and the moment to negotiate it is the letter of intent — before the lease is drafted, while walking away still costs you nothing. Once you have signed, every one of these is gone.

• Free rent through the buildout. If the model says five months to open and $4,500 a month in occupancy, that is $22,500 of rent on a space that cannot yet sell anything. Ask for the months. Landlords expect the question from tenants who know what they are doing.
• A tenant improvement allowance. A contribution from the landlord toward the work the space needs to become your shop. It is negotiated against the length and value of the lease, and it is far easier to get on a first-generation space that nobody else wants than on a turnkey one.
• Landlord-side fixes.The grease interceptor, the electrical service, the accessibility upgrades to the common path of travel. If the building needs it to be leasable to any food operator, there is an argument that it is the building’s cost and not yours.
• Who pays for accessibility upgrades triggered by your work. Written down. A lease that is silent on this has answered it, and the answer is you.
• Coffee exclusivity. In the lease, not in a conversation.
• The escalation rate. Three percent is standard. It is not law.

An unknown risk is a risk you absorb. A named one is a risk you can negotiate.

Where the numbers come from

Almost everything a feasibility study needs comes from three places you can reach today. The listing brochureand the broker’s website carry the square footage, the asking rent, the CAM, the parking count and usually the demographic rings. A CoStar report carries the trade-area detail and the competitive set. The US Census fills in the population where the brochure is thin.

The rest — the panel size, the year built, whether a grease interceptor exists, whether a CASp report is on file — is a phone call to the broker or ninety seconds standing in the space with your eyes open. None of it requires expertise to gather. It requires knowing to ask.

What the answer looks like

Run properly, a feasibility study does not end in a spreadsheet full of numbers. It ends in a verdict with the reason attached: the occupancy cost in the worst year of the lease, the customers a day that cost demands, the customers a day the site can support, and the gap between them, read as GO, CONDITIONAL or NO-GO.

CONDITIONAL is the honest result more often than either of the others, and it is the useful one: it names what would have to change — fewer competitors, a larger ring, or a specific amount off the base rent — which is exactly the list you take into the negotiation.

Site selection still ends in judgment. This makes sure nothing knowable gets skipped on the way to the part that is not.

This guide and the Blue42 Site Feasibility model are operating tools, not financial, legal or tax advice. They organise the questions and run the arithmetic. Confirm code requirements with your municipality and lease terms with counsel before you sign anything.

Questions people ask