- Coffee shops are finding profits harder to squeeze from coffee alone, turning increasingly to food
- In 2024, food contributed 23% of the chain’s total sales – or $6.7 billion – underscoring its growing role
- Sandwiches boost ticket sizes, but staff, waste and slower service complicate the arithmetic
COFFEE may bring customers through the door, but food has been increasingly paying the bills. Across America and Europe, coffee shops have bulked up their menus with salads, wraps and hot meals in a bid to shore up margins. The strategy has paid off so far, but suddenly seems less straightforward.
In 2018, Starbucks CEO Kevin Johnson announced plans to double its food business by 2021. Earlier this year, new CEO Brian Niccol said the company would be cutting its menu by 30%, with reduced food options.
The trend may be suddenly shifting, but until now balancing profits with increased food options made good business sense until now – the arithmetic was pretty straightforward.
Coffee, though highly priced at retail, is surprisingly thin on profit once rent, utilities and barista wages are factored in. A latte may retail at $5 but the actual bean content costs pennies, and labour is the main expense.
Meanwhile, a sandwich or salad can be marked up substantially: raw materials are cheap when bought in bulk, preparation is straightforward, and customers are willing to pay a hefty premium for convenience.
Many brands – especially supermarkets and food-focused chains – don’t depend on coffee as their main source of profit. Instead, they use low-priced coffee as a loss leader, drawing customers in with the expectation that they’ll spend more on other items.
Pret A Manger, the British chain, has built its empire on precisely this cross-subsidisation model. It depends on high-margin food sales. While its 99p filter coffee seems absurdly cheap, the real money is made on sandwiches and salads, often priced at over £8.
Data supports the shift. In 2024, food sales formed 19% of Starbucks total sales – representing a cool $6,7 billion.
“The recent shift toward food-led menus at coffee chains is a bit of a disappointment, as it underscores how difficult it’s become to make coffee alone a sustainable business,” says Nathan Hamood, President and Director of Coffee at Dessert Oasis Coffee Roasters.
“We’ve always kept our menu pared down so we can focus on what we care about most – coffee – but it’s been an ongoing challenge to maintain strong ticket averages, and that’s only getting harder. For us, dessert was our way of addressing that: items we could make in our bakery that require minimal prep in cafés, allowing our team to stay focused on the coffee. Over time, we’ve taken the same approach with more savoury baked goods too.”
It’s clear that food creates ticket size: customers who might nurse a single cup of coffee for hours will spend more if they add breakfast.
Yet the pivot is not without costs. Offering food complicates operations. Hot sandwiches require ovens, salads mean refrigeration, and hygiene standards tighten with each new ingredient. Training staff to handle food safely adds to labour costs, while service times slow as baristas juggle toasties with flat whites.
Add rising costs to this equation, and food becomes a complicated choice for coffee shop owners.
Americans ate one billion fewer restaurant meals between January and March compared with the same period last year, according to data from market research firm Circana. The most recent Consumer Price Index found that the food away from home index rose 3.9% in the last year. With rising inflation and higher food and ingredient prices, many independents who once survived on avocado toast as much as pour-overs are now rethinking their food options.
The margin story looks strong on paper – but the operational reality is more complicated.
The economics of food options
Running food alongside coffee introduces a different cost structure. Labour is stickier: brewing coffee can be automated with machines, but preparing or even assembling food requires hands.
In America, where hourly wages for café staff have risen overall since 2019 – up to $20 an hour in some cases – the labour component can erode margins fast.
Chains have developed workarounds. For many, ingredients are delivered pre-prepared, allowing staff to combine them quickly. This is done through central kitchens, also known as commissary kitchens – a series of centralised production facilities where food is prepared and distributed to various branches of a restaurant chain. Starbucks’ breakfast sandwiches are pre-made and frozen, then heated in-store. These strategies preserve consistency and cut labour, though they blunt any “artisanal” or “fresh” claims.
Independent shops often resist such methods, preferring fresh preparation, often with a focus on baked goods – but that means hiring more staff and coping with slower service, both costly in high-rent urban markets.
The slowing of throughput can be deadly. Food service stretches preparation and consumption times and lengthens queues, threatening to alienate customers who came for a caffeine fix rather than a snack. Indeed, research from Technomic shows that “speed of service” is still the number-one reason customers choose quick-service cafés. The trade-off between higher average tickets and slower lines is delicate.
Margins also depend on waste. Coffee beans keep for months; milk for days. Sandwiches spoil by nightfall. Inventory management becomes a discipline in itself, requiring forecasting, cold storage and the stomach for disposal costs. Smaller operators often underestimate the drain of food waste on profit. Every year in the UK, over £3 billion worth of food ends up in the bin, much of which could be avoided.
“I’ve always said it’s not nearly as black and white as it might seem, that you’ll make money on a sandwich even though it’s growing your average check,” says Nathan. “There’s a lot of overhead in making even the simplest of food items, and it’s another can of worms when our knowledge and skill is focused more on coffee and those economics.”
“I think any amount of increased food service needs to be heavily analysed, to make sure the margin is there, and that it’s worth the diversification rather than a focus on the basics and trying to make our primary offerings more sustainable for everyone. This is a growing challenge though, and we’ve expanded our food offerings a bit over time as well, so we all have to play with those dials and see where our models shake out best.”
Food still pays off, but it seems it must be increasingly approached with laser-focused business strategy to remain profitable. This will allow coffee to anchor the business model, while food can continue to underwrite the profitability.
Coffee shops, or restaurants in disguise?
The longer-term question is whether expanding menus shifts the identity of coffee shops altogether.
In some markets, the line has already blurred. Pret A Manger is often described as a café but operates more like a fast-casual restaurant, with coffee as a secondary purchase. Panera Bread, another chain, built its reputation on soups and sandwiches but has drawn coffee drinkers into loyalty schemes. In Asia, bakery-café hybrids dominate, with chains like Paris Baguette offering elaborate cakes alongside espresso.
This raises a cultural issue as much as an economic one. Coffee shops have long traded on atmosphere: the “third place” between home and work, designed for lingering, or the quick caffeine fix delivery model, with a high customer turnover and quick service. Food complicates that vision. It shifts expectations toward meal service in the case of the third place, and slows down customer service for the quick delivery model.
For some consumers, this risks undermining the ritual of convenience aspects of coffee; for others, it just makes cafés more practical.
“I do worry that the move toward full food service changes the atmosphere,” says Nathan. “There are cafés that absolutely nail it, don’t get me wrong, but I think there’s still such an important place for coffee-focused spots. They’re spaces that showcase the work of producers and others across the supply chain, but also places where communities can gather more informally – with fewer metaphorical walls between the tables and chairs than you might find in a restaurant. Coffee has always lived just outside those formalities, and there’s something unifying and approachable about being able to sit down somewhere with a drink that costs less than a cocktail.”
The tension is visible in design. Starbucks Reserve outlets feature open kitchens, pizza ovens, and cocktail menus, pushing toward restaurant territory. Meanwhile, indie cafés often add a small but curated food selection – sourdough sandwiches, organic salads – that aligns with their brand, supports local communities, but avoids overwhelming their identity. This balance makes food an extension, not a replacement, of the coffee ritual.
For chains, food is almost certainly here to stay, though perhaps with fewer options: it raises revenue per visit and keeps investors satisfied. For independents, the calculation is trickier: margins are alluring but labour, waste and brand dilution are risks.
As inflation bites and coffee costs fluctuate, the lure of higher-margin sandwiches will keep reshaping café menus. Economically, food still makes sense – but in a context of skyrocketing prices, it needs careful planning.
Coffee Intelligence
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