money-growing

How to open a café: 5 golden rules for the new business owner

Table of Contents
    Add a header to begin generating the table of contents

    In short, coffee shops are extremely profitable due to the high profit margins and low cost of stock. Like any business, effective management of costs will ensure your café is a success.

    Opening a cafe takes a big investment in both time and money. It's essential that you spend time now understanding what it takes to run a successful cafe. This means reaching out to coffee business owners and learning from their experience; finding out what works, and what doesn't.

    The average profit for a small cafe is about 2.5 percent, but large coffee operations tend to earn much higher profits. Direct costs average about 15 percent, so most of a small coffee shop's expenditures go toward overhead expenses. Building sales volume makes a small cafe more profitable.

    It can be challenging to figure out how to open a cafe for business.

    There are as many tales of misfortune in this line of work as there are early chefs, but there are steps you can do to increase your chances of success.

    When people are confined to their cubicles at work, one of the things they fantasise of doing is opening a café. However, the actuality of running a café frequently doesn't match the reality of running a café.

    When people fantasise of opening a café, they often fail to consider the actuality of running a business. There are steps you can take to increase your chances of success in this line of work. These steps include pre-launch planning and preparation, as well as marketing and promotion. Cafés have the opportunity to differentiate themselves from their competitors. A skilled cook is able to take ten components and create twenty different dishes.

    If you offer too many different options, your storage space will get cluttered. The Thai beef salad is one of the most wasteful menu items in the restaurant business. Whether you like it or not, the phrase "many revenue streams" has become increasingly popular. Consider putting your culinary skills to use by starting a catering business as a side gig. There is a movement towards more environmentally conscious business practices happening across the hospitality industry.

    The following is a list of the five primary steps involved in opening a café:

    1. Start by doing some research on the market, as well as some pre-launch planning and preparation.
    2. Make your marketing and promotions stand out from the crowd.
    3. Design for menu efficiency
    4. Put in place the necessary procedures and systems for financial reporting.
    5. Think about the various options available for diversification.

    The essay that follows will walk you through each of the aforementioned planning considerations in greater depth so that you may make the most of your new café adventure.

    1. Plan right or plan to fail

    Workers in this industry may not necessarily need to have good numerical skills, but it is still a desirable trait to have. They embody the spirit of the common people. They are good at making things or talking to people, but if they would crunch the figures at the beginning, some of them may be in a better position. They are good at manufacturing things or talking to people. People are drawn to the idea of hospitality because it is usually portrayed on television in a manner that is overly idealised, particularly in association with cooking shows. In particular, people are drawn to the idea that hosts go above and beyond for their guests.

    I'm sorry to say it, but spreadsheets just don't make for very compelling television.

    According to him, another common mistake made by failing eateries is failing to conduct mock pay runs and failing to calculate their overhead costs at an early enough stage. One of the most typical traps that newly opened cafe operators fall into is not having sufficient storage space.

    Having the ability to store as much as possible has the potential to drastically cut down on waste, which in turn has the potential to lower operating expenses dramatically. Having this potential on your side from the very beginning can greatly help you to avoid frequent financial traps.

    2. Stand out

    In today's market, it is not sufficient to only provide outstanding coffee in order to be successful. The only thing necessary to do in order to participate in the game is to purchase a high-quality cup of coffee. Making great coffee is not at all a challenging endeavour provided that the methods are followed to the letter.

    You need to give some thought to what it is that you can supply that no one else can provide because there is so much rivalry in the café sector right now.

    It is a fundamental that is important in every company, but it is even more crucial in a market that has a lot of rivalry because of how competitive it is.

    The provision of food is one area in which coffee shops have the potential to differentiate themselves from other businesses that are in the same industry.

    You really need to have something exceptional, and the world of cuisine is typically where different types of coffee shops can differentiate themselves from one another.

    3. Menu efficiency

    When it comes to the menu of a café, customers may like having a large selection of items from which to choose; nevertheless, this does not imply that there should be a lengthy list of the individual components. If you give a good cook ten different ingredients, they can come up with twenty completely distinct dishes using just those ingredients.

    If you do offer an excessive number of distinct possibilities, though, your storage area will quickly get cluttered with an excessive number of components, and you will experience a considerable quantity of deterioration as a result.

    The Thai beef salad has been given the reputation of being one of the most wasteful menu items in the restaurant industry. This is due to the fact that it comprises a large number of components that need to be devoured in a short amount of time.

    This is a metaphor for something that people believe "must be on [the menu]," but they haven't checked to see how many people are actually ordering it from the menu.

    4. Know thy numbers

    top-view-darrk-skinned-female-deals-with-bills-taxes

    One of the more encouraging trends that has emerged in the sector in recent times is that owners are getting more involved in the bookkeeping of their companies, using software such as MYOB. Because the owners of some cafes had cameras installed in their establishments and real-time data was arriving through their point of sale software, the owners of such cafés were even able to give themselves a day off.

    5. Diversify or die

    Whether you like it or not, Starbucks has set the standard for expanding its business by selling retail things such as CDs and bags of take-home coffee beans. You can either like it or hate it. Since that time, the phrase "many revenue streams" has been increasingly popular. In the end, the profit margin on a cup of coffee might be rather high, yet it might only amount to a couple of dollars for each cup that is sold. Consider putting your culinary skills to use by starting a catering business as a side gig.

    In the same kitchen as before, with the same staff, there is the possibility of a completely new source of income growing over time.

    Customers that stroll into the restaurant, get a cup of coffee, and then think to themselves, "I've got a sales staff meeting tomorrow, and I need to cater for 20," are the ones who place the orders for food and beverages. Businesses that are able to expand their activities in a number of different directions are in a fairly advantageous position.

    It is essential to keep in mind that the information presented here is merely the starting point for any newbie who is trying to figure out how to run a café for the very first time. However, the guidance shown here is a fantastic foundation for such a novice. If you want to remain at the top of your game in the hospitality sector, just as you would need to do in any other industry, you will need to continue gaining new knowledge and developing your skills.

    Should your coffee shop think about giving up single-use plastics?

    A growing number of people are ingesting (and inhaling) microplastics every day, while at the same time they are causing harm to wildlife by using plastic straws and bags. What actions can your restaurant take to help the globe wean itself off its dependence on plastics designated for one-time use, such as straws and coffee cups?

    There is undeniably a movement towards more environmentally conscious business practises happening throughout the hospitality industry as a whole, which a proprietor of a café cannot deny is taking place when it comes to the items that are used on a daily basis to serve customers. This is something that cannot be denied.

    Unfortunately, with all the rhetoric about the hazards of using single-use plastics, the desire for components that are acquired in a sustainable manner, and the necessity of replacing everything you have with options that are either biodegradable or reusable, it is easy to feel overwhelmed and somewhat baffled as to where to begin.

    The first thing that you need to keep in mind is that the path to making positive changes does not have to be travelled overnight, and that each and every step in the right direction is one that is one that is beneficial to the environment. This is the most important thing that you need to keep in mind.

    The use of products made of plastic unquestionably comes with a plethora of benefits, which cannot be denied. Since the 1950s, the production of plastic objects has outperformed the production of practically every other material on them as a result of the fact that they are inexpensive, sturdy, and convenient. This is due to the fact that plastic can be moulded into virtually any shape and is extremely durable.

    Examine the tools you use

    Your café would benefit greatly by conducting an inventory of all of the things with a single purpose that it makes use of, with the goal of either cutting back on their consumption or doing away with them entirely.

    For instance, paper or bamboo straws can simply replace their plastic equivalents, and the same goes for other types of straws. To take things a step further, a growing number of eateries are discovering that they may boost their revenue by providing metal straws that can be reused multiple times after being well cleaned in between uses.

    Because of the increased demand, biodegradable alternatives to plastic cutlery and packaging are now readily available at practically every supplier serving the hospitality industry. Additionally, the prices of these alternatives have become more affordable. The options range from food containers made of recyclable materials and practically any size imaginable to complete sets of silverware made of wood.

    Some cafes have implemented a "free refill" station, which encourages customers to refill their water bottles rather than purchasing a new bottle. Other cafes provide discounts to customers who bring their own "keep cup" rather than using a disposable cup, which is the most significant "single-use" problem in the café industry.

    Avoid using single-use cups

    There are an estimated 500 billion throwaway cups that are discarded after a single usage across the globe each and every year. That's one million cups every hour, and the total is only going to keep rising.

    Over 1.2 billion single-use coffee cups are consumed annually in Australia, of which approximately 90 per cent are discarded in landfills or left behind as litter on the streets.

    Paper coffee cups have a plastic lining inside of them so that they are waterproof. The paper on the outside will eventually deteriorate, but the plastic on the inside won't. In order to recycle them, you have to take them to a specialised recycling facility, which can be time-consuming and expensive. As a direct result, recycling rates are barely 8%.

    This means that every single day, 2.7 million coffee cups are thrown away in landfills across Australia.

    Eliminating the use of plastic straws and cutlery may not seem like a difficult task to do. However, many cafes are concerned about the impact that eliminating takeout cups will have on their revenue as well as the range of beverage alternatives that will be offered to their customers if they make the switch.

    We may give thanks that some businesses have grasped this concept and recognised the demand for a product that not only contributes to the smooth operation of a café but also meets the needs of its clientele in terms of ease of use.

    Facilitate the customer's experience

    Cafes that use reusable systems have the ability to increase their profit margins, in addition to providing their customers with a solution that is better for the environment. This is because these cafes no longer have to rely on disposable systems in their operations, which eliminates the need for these disposables. The restaurants are also able to promote to their clients that they are "forwards thinking," which can help them establish a more devoted client following. This is made possible as a result of the use of this technology.

    When it comes to making those decisions, it is really important to take your time, do your research, and approach the process of implementing sustainable options for your café one step at a time.

    We can all agree that single-use plastics have had their moment in the spotlight, and as more and more companies rise to the occasion and develop alternatives that will assist cafes in making the transition, it will become a lot simpler and more convenient to make decisions that are beneficial to our planet.

    Why POS systems are the best friends of a café

    There has been a significant amount of development in this sector since the days of mechanical cash registers and handwritten receipts, which can be summarised as follows: The implementation of cutting-edge point-of-sale (POS) technology and software that is also integrated enables proprietors of coffee shops maintain a consistent stream of revenue even when operating in environments that are extremely fast-paced and chaotic.

    Things have a tendency to get a little bit crazy when you're working behind the counter at a coffee shop. Customers can be seen sipping lattes and enjoying the morning sun while employees working in the core of the business are responsible with managing takeaway orders, tracking sit-down orders, monitoring stock levels, and determining who is doing what. The combination of this factor and the steady flow of clients who are in a hurry might lead efficiency to plummet to new lows.

    A point-of-sale (POS) system is an absolute necessity for any café that is serious about increasing its efficiency and effectively managing the workflow and transactional aspects of its business. They serve as a link between your customers, the service crew, the culinary team, the accountant, and the management team, functioning similarly to the nervous system in your café.

    The way things are currently standing has led to the world of point-of-sale (POS) alternatives being divided into two primary categories: those that are hosted locally and are installed and kept on your hardware, and those that are cloud-based, wireless systems that rely on remote data storage. Those that are hosted locally fall into the first category.

    Working with a mobile, cloud-based system that can be paid for on a subscription basis on a month-to-month basis may make the most sense for your organisation if your firm is on the more compact side, has a straightforward menu, and a more limited staff. In this scenario, you would have fewer employees.

    However, if you manage a much larger venue that has a lot of moving elements, there are some systems that can actually justify the higher price tag thanks to the capabilities that are made to accommodate larger organisations. If this describes your situation, you should look into purchasing one of these systems. In the event that this is the case, you need to investigate the possibility of obtaining one of these systems.

    It is vital to keep in mind that there is no one "right solution" when it comes to choosing a point-of-sale (POS) system for your café because there are many different options available. You should think about the size of your café in addition to the specific operational requirements that you have. After that, you should take the time to speak to a number of different providers and shop around until you find the system that most closely corresponds to your requirements. Using this approach to make a choice is a terrific way.

    The following is a list of some key items to consider, and based on them, you will be able to determine what features you require your point of sale system to have in order to meet your needs.

    A desire for speed

    A variety of interfaces, such as touch displays, portable tablets, and pre-programmed menu items, are available for use with the order management functions of many point-of-sale (POS) systems.

    Because of this, your staff will be able to take orders considerably more quickly, typically using portable devices and making a single tap on the screen.

    When opposed to manual ticket calculations, the number of errors that occur as a result of having the waitstaff's ordering immediately linked with the main pay point is significantly lower. This also implies that your personnel will be able to serve customers in a more timely manner.

    The power of knowledge

    When you start keeping track of your company's operations electronically, a vast new realm of reporting possibilities will become available to you.

    The ability to log purchases and subsequently evaluate those figures in relation to total sales is one of the most significant advantages offered by electronic POS systems. You will be able to monitor what is working, what is not working, and what requires additional attention in this manner.

    Superior staff efficiencies

    There are certain point-of-sale (POS) systems that integrate various aspects of personnel management into the programming of their back-end servers.

    Many point-of-sale (POS) systems allow you to create staff rosters on a weekly, fortnightly, or monthly basis. These rosters then enable your employees to "clock in" and out of their shifts each day, enabling you to electronically track their work hours and relieving you of the burden of having to deal with endless piles of paper timesheets. There are a variety of point-of-sale (POS) systems that come equipped with this excellent capability.

    In addition to that, many point-of-sale (POS) systems also have the potential to submit staff timesheets directly to your payroll software. This makes the process of computing the proper wages, taxes, and superannuation as simple as hitting a button.

    open-cafe

    Inventory control

    Those who are employed in the hospitality industry encounter a persistent obstacle every day in the form of the effort to cut down on the expenses caused by food waste. If you use a point-of-sale (POS) system to keep track of your inventory, you will not only be able to quickly identify goods that require maintenance in your cool room, but you will also be able to spot and deter theft issues, which is another typical problem that café owners experience. If you use a POS system to keep track of your inventory, you will not only be able to identify goods that require maintenance in your cool room, but you will also be able to identify goods that require maintenance.

    When you track purchases, stock on hand, and then product sales, you will be able to notice warning indications a lot more rapidly than you would be able to if you were using a manual strategy. This is in comparison to how long it would take you to spot these signs if you were using an automated approach. This is due to the fact that you will be able to monitor all three at the same time.

    Businesses that have a high volume of foot traffic and interaction from customers, such as cafes, may find that the adoption of point-of-sale systems is quite beneficial to their operations. Because companies have come to the realisation that a good point of sale system is much more than just a fancy cash register, they are now in a position to simplify practically every part of their operations and very rapidly "earn back" the money they spend on their POS setup. This is because businesses are now in a position to "earn back" the money they spend on their POS setup.

    Finding the perfect point-of-sale system (POS) for your café is a huge step in the right direction, and no savvy business owner who also operates a café has ever come to regret making this decision. In the restaurant and coffee shop business, effectiveness is of the utmost significance.

    A 3-step approach to boosting café profits

    Renae Smith believes that running a successful café requires one to keep a tight ship in order to be successful. Therefore, in order to raise income and get your ship moving in the right way, the following plan of action, which consists of three steps, is presented for your consideration. You should be aware of the fact that coffee shops have a reputation for being incredibly lucrative businesses, even if you do not currently own one of these establishments. The vast majority of customers, when they take a look at the surface operations and compare the cost to what they pay at home for a piece of toast or a cup of coffee, immediately leap to the conclusion that the profit margins at their neighbourhood café must be really large.

    When you take into account expenses such as rent, employees, and the cost of the assets that are necessary for you to run your business, the additional 55–60 percent margin is almost entirely eliminated. According to industry benchmarks given by the Australian Taxation Office (ATO), the gross profit margins of cafes in Australia range between 65 and 70 percent on average. However, the additional 55–60% margin is practically wiped out, which results in a café only realising a nett profit of roughly 10%.

    Therefore, if you process transactions totalling $450,000 each year through your register, it is likely that you will only have approximately $45,000 left over after paying off loans, making repairs, and possibly paying yourself something. This is the case even if you run $450,000 worth of transactions through your register each year.

    The question that arises next is how you might be of assistance to your firm in surpassing the averages and expanding the profit margin that you already enjoy.

    Chart your cash flow

    Maintaining a vigilant eye on your financial situation and being aware of everything that is going on in your company's accounts is absolutely necessary in order to see issues, possibilities, and both your strengths and weaknesses. We say this all the time, but it bears repeating: If you are concerned about the amount of money you are making, you should consult your Profit and Loss Statement at least once per week. If you are unsure of what information you should be searching for, you should consult your accountant for assistance.

    You have to have an understanding of your percentages of profit, your costs of goods sold, your wage expenses, your rent, and any other things that you spend money on. You can get an idea of what other businesses are spending thanks to the ATO benchmark study; however, you still need to determine where your own money is going and locate areas that require improvement.

    Understanding where your money is going enables you to improve your company operations and offer yourself the best opportunity of being successful. This is true even if monitoring your finances does not result in an immediate increase in the amount of money in your bank account.

    Use the figures to fix things

    After determining what is not functioning, the next step is to examine what is successful about the situation. If you know how much it costs to produce the things on your menu and then calculate how much profit you generate from selling those items, you will very quickly be able to identify which ones are your "top performers."

    Menu items that have a high profit margin and are selling like hotcakes are your golden ticket to success when it comes to making a profit. On the other hand, menu items that cost a fortune to produce but only sell seldom should be removed from the menu altogether.

    Your pay expenses are going to be yet another number that you are going to acquire acquainted with. Wages are without a doubt going to be flagged up as a fairly sizable chunk out of the cake that represents your profits.

    When they realise this, many companies immediately go into a state of panic and begin laying off employees or operating with a "skeleton staff" until they have reason to believe that their profit margin will begin to improve.

    This is actually a highly expensive mistake that can be made. Simply reducing employees without having a concrete plan in place could result in a decline in service standards at your venue, an increase in wait times, and a precipitous loss in client satisfaction, all of which would lead to fewer sales than you had previously. Why not take a more deliberate approach rather than panicking at the first sign of danger and cutting corners?

    Think up, not down

    tax-return-financial-form-concept

    Increase the focus of your efforts on growing sales rather than reducing the number of people you employ. You need to make it a daily goal to do everything in your ability to bring in additional business, and you should attempt doing this. Employees can be motivated in a fantastic way by comparing their financial performance from week to week and encouraging them to always strive to achieve more sales than they did the previous week, even if it's just by a small margin. This can be done by comparing their earnings to the previous week's earnings.

    Have a discussion with your staff members and emphasise how important it is to be consistent. By exceeding expectations in all three areas—food, coffee, and service—a business may increase the likelihood that satisfied customers would recommend it to others and build a dedicated client base. People have the notion that upselling must be done in an aggressive manner, which leads to it being a straightforward strategy that is commonly underutilised. As a result of this misperception, upselling is a tactic that is frequently underutilised.

    Upselling to larger drink sizes, offering takeaway goods along with takeaway coffees, or adding very small additional sides to dine-in orders are all examples of minor improvements that, over time, can significantly increase a business's bottom line. All of these are examples of straightforward methods of upselling that can be done. Another wonderful strategy for raising the amount of money spent by clients is to bundle things together and sell them as a set. Do your sales statistics show that customers typically buy a variety of different items at the same time? Why not make 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 and so increase your overall sales? Your company will see an increase in revenue as a result of this. You might also encourage repeat business with customers by introducing loyalty programmes, having VIP events, exchanging keep cups, or providing gift cards. These are all potential ways to encourage customers to continue doing business with you.

    However, the success of any attempt to increase sales will, in the end, be dependant on the unique location and customer of your business. This is the case regardless of the strategy that you choose. But if you shift your focus upward rather than below and figure out the ways in which you can enhance the operations of your company, you might find that things start to get better in a reasonably short length of time.

    Scroll to Top