Figuring out how to start a café business is tricky. It’s a business with as many hard-luck stories as culinary pioneers – but there are things you can do to improve your odds.
Opening a café is something people dream about when they’re stuck in their cubicle at work, but often the reality of running a café doesn’t match the reality of it.
How to start a café in five simple steps:
- Start with market research, pre-launch planning and preparation
- Create stand-out marketing and promotions
- Design for menu efficiencies
- Set up financial reporting systems and processes
- Consider opportunities for diversification
The following article goes into each of the above points in detail to help you best plan your new café experience.
1. Plan right or plan to fail
In this industry, people aren’t necessarily numerate. They’re people-people. They’re good at making things or talking to people, but if they would crunch the numbers at the start, a few may be in a better position.Ther ’s so much about hospitality on TV that’s romanticised with cooking shows, so people love the idea of it.
Unfortunately, spreadsheets don’t make for compelling TV.He also says doing mock pay runs and figuring out your overheads early on is something that the cafes that go out of business often forget about. One of the common pitfalls new café owners fall into is not having adequate storage.
The ability to store as much as possible has the potential to dramatically reduce wastage, which in turn improves running costs to reduce wastage, which in turn improves running costs dramatically on your side from the start can really help you avoid common financial pitfalls.
2. Stand out
Just doing great coffee isn’t good enough anymore. Good coffee is just the price of admission into the game.Doing good coffee isn’t hard if you just follow the steps.
The café industry is incredibly crowded at the moment, so you need to think about what you offer that nobody else can.It’s a principle that’s important in any business, but even more so in a competitive industry.Food is one area where cafes can try and separate themselves from the pack.You’ve got to have something better – and often the food side is where cafes can find their point of difference.
3. Menu efficiency
People may love to have extensive choice when it comes to a café menu, but this shouldn’t equate to an extensive list of ingredients. A clever chef knows how to take ten ingredients and turn them into 20 menu items.If you offer too many things though, your storeroom is going to be filling up with too many ingredients, and there’s going to be a lot of wastage.Thai Beef Salad has been held up in the café industry as a particularly wasteful menu item – as it involves a lot of perishable ingredients.It’s a symbol of something where people think ‘it’s got to be on [the menu]’, but they haven’t checked how many people were eating it.
4. Know thy numbers
One of the more positive developments in the industry in recent times is owners getting their heads into the books – powered by the likes of MYOB. Some owners were even able to take a day off because they had cameras installed in their cafes and real-time data coming through their point of sale software.
5. Diversify or die
Like it or loathe it, Starbucks set the bar for diversifying its business by offering retail items such as CDs and bags of take-home coffee beans.Since then, ‘multiple revenue streams’ has been in vogue.After all, the margin on a cup of coffee may be good, but it may only a couple of dollars per cup sold.Running a catering side-hustle is something to consider. There’s a whole other income stream that can develop from the same kitchen, same staff.The orders are coming from people who come into the café and get their coffee, but then think ‘I’ve got a sales staff meeting tomorrow and I need to cater for 20’.Businesses that diversify in different ways are really well-positioned.
The above tips form a great basis for any beginner trying to work out how to run a café for the first time, but it really is only a starting point. Once you’re in the hospitality game, just as in any other business, you’ll want to continue learning and upskilling to stay ahead.
Should your café consider ditching single-use plastic?
Plastic straws and bags are killing wildlife while people are drinking (and inhaling) an increasing amount of microplastics each day. What can your café do to help wean humanity off its single-use plastic addiction?
As a café owner, there’s no denying that there is an industry-wide shift to more sustainable practices when it comes to the products used to serve customers each day.
Unfortunately, with all the talk about the harm of single use plastics, the need for sustainably sourced ingredients and replacing everything you have with biodegradable or re-usable options iseasy to get overwhelmed and teel a little bit stuck as to where to start.
The first thing to remember is that the path to positive change doesn’t have to be walked overnight and every single step in the right direction is one that helps the environment.
The benefits of using plastic items are undeniable. They’re cheap, strong and convenient, but since the 1950s, plastic items’ production has outpaced almost every other material on them is easy.
Audit what you’re using
An excellent start for your café is to audit all of the single use items that you use and look at reducing those or doing away with them completely.
For example, plastic straws can easily be swapped for their paper or bamboo counterparts. To go even further, many cafes are finding success in offering dine-in customers metal, reusable straws which are simply cleaned before being used again.
For plastic cutlery or packaging, biodegradable options are now available at almost every hospitality supplier and, thanks to the demand, are now quite competitively priced. The options range from recyclable food containers in almost every size, to full sets of wooden cutlery.
Other cafés have introduced a ‘free refill’ station, which encourages customers to refill their water bottles instead of purchasing a new bottle, while others, offer discounts for customers who bring their own ‘keep cup’ instead of using a disposable cup, the biggest ‘single use’ issue in the café industry.
Ditch the disposable cup
Every year an estimated 500 billion disposable cups are thrown away worldwide after a single use! That’s one million cups an hour and the number is growing.
Over 1.2 billion disposable coffee cups are used each year in Australia, 90 percent of which end up in landfill or littering the streets.
Paper coffee cups are lined with plastic to make them waterproof. Although the paper outside will break down, the plastic inner won’t. To recycle them, they must be sent to a specialist recycling facility that is costly and complicated. Consequently only eight per cent are recycled.
This equates to 2.7 million coffee cups in Australia going to landfill each day.
Ditching plastic straws and plastic cutlery seems like a simple thing to do. Still, when it comes to ditching takeaway cups, many cafés are worried about its effect on their business and the options available to their customer.
Thankfully, some companies have understood this and identified a gap in the market for a product that works for the café’s functionality but also is convenient for customers.
Make it easy for the customer
With the reusable system, cafes offer a more environmentally focused solution for their customers and have the opportunity to increase their profit margin by doing away with disposables. It also allows the restaurants to market their ‘forward thinking’ to their consumer and look to increase a loyal customer base.
When it comes to implementing sustainable choices for your café, it’s essential to take your time, do your own research and take things one step at a time.
We can all agree that single-use plastics have had their day, and as more and more companies rise to the challenge and create solutions designed to help cafes make the switch, making the right decisions for our planet will become a lot easier and more convenient.
Why POS systems are a café’s best friend
We’ve come a long way since the days of mechanical cash registers and handwritten receipts. For café owners, the introduction of modern, integrated point-of-sale (POS) hardware and software keeps the money flowing in a highly dynamic working environment.
Cafés can get a little crazy for those working behind the scenes. While on the exterior, customers sip lattes and relax in the morning sun; for those working at the heart of the business, managing takeaway orders, tracking sit down orders, keeping an eye on stock levels and working out who is doing what, all teamed with the steady stream of on-the-go customers can make efficiency fly right out the window.
POS systems are a must for any café looking its productivity and managing the workflow and transactional side of their business properly. They’re like the central nervous system in your café and link your guests, service team, kitchen team, accountant and management team together.
As things stand, the world of POS options is divided into two main categories: those hosted locally, installed and stored on your hardware, and then there are cloud-based, wireless systems that rely on remote data storage.
If your business is smaller and only has a simple menu and a smaller team, it might make sense to work with a mobile, cloud-based system that can be paid by subscription on a monthly basis.
If, though, you’re operating a much larger venue with lots of moving parts, there are systems that can really justify the higher price tag thanks to the features designed to suit larger businesses.
It’s important to keep in mind that there’s no ‘right answer’ when it comes to choosing a POS system for your café. A good way to decide is to weigh up your café size and your specific operational needs and then take the time to speak to a range of providers, shopping around until you find the system that best suits your needs.
A few key considerations are listed below, and from these, you will be able to work out what features you need your POS to incorporate.
The need for speed
Many POS systems offer different setups for their ordering management, including touch screens, portable tablets and pre-programmed menu items.
This means your employees can take orders much quicker, often on portable devices, with a single tap on the screen.
Having waitstaff’s ordering directly linked with the main cash point also results in fewer errors when compared manual ticket calculations. This also means your staff can serve customers more efficiently.
Knowledge is power
When you start tracking your business electronically, a whole new world of reporting capability is opened up to you.
One of the most important benefits of an electronic POS is tracking purchases and then comparing those with your overall sales. This way you’re able to monitor what’s working, what isn’t and what requires further attention.
Superior staff streamlining
Some POS systems incorporate certain aspects of staff management into their programming.
A brilliant feature of many POS systems is the ability to create weekly, fortnightly or monthly staff rosters which then also allow your staff to ‘clock in’ and out of their shifts each day, tracking their work hours electronically and ensuring you say goodbye to endless piles of paper timesheets.
On top of that, many POS systems even have the function to send staff timesheets directly to your payroll software, making the correct wage, tax and superannuation calculations as simple as the click of a button.
Minimising the expense related to food waste is a constant battle for anyone in the hospitality industry.By using a POS system to track your inventory, you will not only be able to identify items that require attention in your cool room quickly, but understanding where your products are going will also help you identify and deter theft issues, another common problem café owners face.
By tracking purchases, stock on hand and then the product sales, you will be able to see red flags a lot faster than you would with a manual systems.A POS can make the management of busy, interactive businesses, such as cafes, a lot easier. By understanding that a good POS is much more than just a fancy cash register, businesses are now able to streamline almost all aspects of their business and very quickly ‘make back’ the money they spend on their POS setup.,
Efficiency is incredibly important in the café business and finding the right POS for your business is a huge step in the right direction, which no savvy café owner has ever come to regret.
A 3-step approach to boosting café profits
Running a café means keeping a tight ship, writes Renae Smith. So here’s a three-step plan of action to boost profits and get your ship pointed in the right direction. Cafés, for anyone who doesn’t own one, have a reputation of being incredibly profitable businesses. Most people look at the surface operations and compare the cost of what they pay at home for a piece of toast or a cup of coffee and assume that the profit margins of their local café must be through the roof.
While gross profit margins of cafes in Australia average at 65-70 per cent (according to ATO industry benchmarks), the net profit for a café is only around 10 per cent, with the additional 55-60per cent margin all but wiped out when you pay things like rent, wages and the cost of the assets you need to operate.
So if you run $450,000 through your register each year, you’re likely to only be left with only around $45,000 to pay loans, do repairs, and consider paying yourself something.
How then can you help your business beat the averages and increase your profit margin?
Chart your cash flow
We say it all the time but keeping a watchful eye on your finances and understanding what is happening in your business accounts is essential to identifying problems, opportunities, strengths and weaknesses. If you’re worried about your profits, you should be checking your Profit and Loss Statement at least weekly, and if you’re not sure what you’re looking for, sit down with your accountant and get their help.
You need to understand your percentages of profit, costs of goods sold, wage expenses, rent and other items you’re spending money on. The ATO benchmark survey gives you an idea of what other companies are spending, but you need to work out where your money is and identify areas that need work.
And while checking your finances may not immediately grow your bank account, understanding where your money is going helps you refine your business practices and give yourself the best chance of success.
Use the figures to fix things
Once you’ve worked out what’s not working, it’s time to look at what is working. Understanding what it costs to make sure items on your menu and then identifying the profit margin of selling those will very quickly show you your ‘best performers.’
Menu items that are selling like hot cakes’ and have high-profit margins are your golden ticket to profit success. On the flip side, menu items that cost a fortune to make and only sell every now and then should be shown the door.
Another figure you’re going to become familiar with are your wage expenses. Wages are no doubt going to be flagged up as a pretty hefty bite out of your profit cake.
A lot of businesses panic when they see this and immediately start cutting staff or run on ‘skeleton staff’ until they hope their profit margin is looking better.
This can actually be a very costly mistake. Simply cutting staff without a real plan can cause the service standards at your venue to drop, wait times to increase and customer satisfaction to plummet – leading to fewer sales than you had before. Instead of cutting at the first sign of trouble, why not take a more measured approach?
Focus up, not down
Instead of focusing on cutting down, focus on selling up. Try making a commitment to do all that you can to increase sales each day. A great motivator is to compare week-to-week financials and always try to beat the previous week’s sales – even if only by a small margin.
Speak with your staff and remind them of the importance of consistency. Good food, good coffee, and good service all promote word of mouth and repeat customers.Upselling is a simple tool that is often underutilised, as people wrongly assume it has to be aggressive.
Simple upselling to larger drink sizes, offering take away items with takeaway coffees or adding small additional sides to dine-orders can be a minor change that, over time, really helps the bottom line. Another great way to increase customer spend is to bundle items. Do your sales records show that many items are often bought together? Why not create a special deal with some of your high-profit items (such as a coffee and a bacon and egg roll), which will encourage the items to be bought together more frequently. You could also encourage repeat customers with loyalty programs, VIP events, keep cup exchanges, or gift cards.
Ultimately, however,r your attempt to increase your sales will depend on your specific venue and customer base. But, by shifting the focus up instead of down and working out where you can refine your business practices, you may find things begin to improve quite quickly.