The numbers behind how coffee chains choose their locations
Much more than just demand.
You stroll past a new café tucked into an unassuming corner and think: why did they open here of all places? It’s not exactly downtown. But look around. There’s a college just down the street, a yoga studio a block away, and bright murals that practically beg for selfies.
It feels intentional, doesn’t it?
That’s because it is.
Coffee chains don’t just roll the dice. Before the first bean is roasted, there’s data, lots of it. Each potential location is scored, studied, and run through profit simulations. That morning latte you’re holding? It passed a spreadsheet test before it ever passed the taste test.
In retail food service, location isn’t just important, it’s everything. But how do coffee chains actually decide where to set up next? Turns out, they focus on a mix of factors. Let’s walk through the big ones.
Foot traffic potential
They’re looking at how many people walk by, yes, but more importantly, who those people are. Busy doesn’t always mean profitable. They want commuters grabbing a quick shot, students on study breaks, and couples out for an afternoon sip. The right kind of footfall builds steady business.
Rent-to-revenue ratio
This is simple but powerful: how much rent costs compared to how much money the shop is expected to bring in each month. The sweet spot is below 10 percent. If rent is too high, even a popular store might struggle to stay profitable. If revenue is strong, slightly higher rent might still work. It’s all about balance.
Demographic fit
A cozy café won’t thrive just anywhere. Chains look closely at who lives and works nearby. Are there young professionals? College students? Health-conscious folks who’d linger over oat milk lattes? The better the match, the higher the chance of return visits and brand loyalty.
Competitive saturation
Chains don’t want to open a shop right next to three similar cafés unless they have a standout strategy. Sometimes, competition is a sign of healthy demand. Other times, it’s a sign to steer clear. The goal is to spot gaps and move in with something different, whether it’s faster service, better seating, or a signature flavor.
Ambience and brand alignment
A coffee shop isn’t just about drinks, it’s about the space. Think warm lights, calm corners, and natural textures. Chains ask: does this location feel like us? If not, they might pass. The place has to invite people in and make them want to come back.
Delivery viability
Beyond walk-ins, chains now rely on delivery, especially during quieter hours. They’ll map out how many homes and offices fall within a 2–3 kilometer radius. If the delivery density looks promising, that location gains bonus points. More cups moving out the door means more revenue without more space.
Of course, not all these factors weigh the same. So coffee chains build scorecards to rate each location. Here’s one example.
Foot traffic potential: Weight 30%, Score 9, Note: Dense college area
Rent-to-revenue ratio: Weight 20%, Score 8, Note: Strong margins
Demographic fit: Weight 15%, Score 8, Note: Young, tech-savvy crowd
Competitive saturation: Weight 15%, Score 6, Note: Two cafés within close range
Ambience and brand appeal: Weight 10%, Score 9, Note: High Instagram appeal
Delivery viability: Weight 10%, Score 5, Note: In-person footfall stronger than delivery
Each score is out of 10. You multiply the score by the weight to get a weighted value for each factor. Add those up and divide by 6 (the number of criteria used) to get the average. In this example, the result is 7.85 out of 10. That’s a pretty solid spot.
Now, let’s zoom in on the rent-to-revenue ratio again. Chains love to see it under 10 percent. Why? Because when rent doesn’t eat up too much of the income, profits stay healthy. That’s how you get strong EBITDA margins, the operating profit that headquarters really cares about. It’s not a perfect rule, but lower rent almost always leads to higher margins, assuming other fixed costs like salaries stay stable.
Still, numbers aren’t everything. Emotional cues matter too.
Footfall quality: Who walks in matters more than how many.
Repeat rates: Coffee is a ritual. Return customers are gold.
Ambience economics: A great vibe can turn a casual sip into a loyal habit—even if margins are tighter.
So the café around the corner didn’t land there by luck. It landed there by logic. Someone ran the numbers, studied the flow of people, matched the brand to the atmosphere, and ran profit models before signing the lease.
And when the math works out, that’s when the coffee magic begins.