With the average net income of a cafe estimated at around 2.5% to 5% of gross sales, it’s clear that opening one isn’t a route to riches. The more product sold, the lower cost per unit, so economies of scale become key. That’s why the big chains make all the profits, and why having multiple outlets is seen as the only way of making big money.
Here are 8 things to know:
Coffee Shop Startups, an online resource for cafe owners, estimates the cost of starting a coffee kiosk at around $5,000; a mobile business between $10,000-$45,000; and a coffee bar between $50,000-$155,000.
Commercial leases are normally a minimum of three-seven years, meaning it’s crucial to negotiate a break clause and the ability to sub-lease. In the UK, the Landlord and Tenant Act gives tenants security of tenure after the lease ends.
Try to wangle a couple of months free at the start of a lease as it will probably be several months before you’re ready to make income – most landlords are flexible on this.
There are three main points of insurance: buildings and content insurance; business interruption insurance; and employer’s liability (if you have employees). The total could be between £350-£500 per year for a startup cafe, according to Will Ellis from Premier Insurance Centre.
A common tip is that rent should not exceed 15% of sales projections.
The supplier relationship is crucial – along with the beans, roasters can be invaluable sources of advice on every aspect of making and selling coffee, and often rent out equipment.
With water making 98% of most hot drinks, installing a water filtration system is essential – though you’ll need to test your water to find out what type to get. Commercial systems range from £500-£4,000.
The most common size for an espresso machine is the ‘2 group’ machine, which is capable of turning around 20kg of coffee a week (1kg = 100 cups). They can cost anywhere between £1,000-£5,000 to buy, or £10-£50 per week to lease.
This article was first published in Courier issue 34, April/May 2020. To purchase the issue or become a subscriber, head to our webshop.