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Fancy opening your own coffee shop? We explain what you need to know about cash flow, hiring staff and of course, finding the right coffee.
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Starting a coffee shop is at once exciting and daunting – there’s a lot to factor in before you even start writing your business plan.
This guide will take you through the main steps of how to start your own coffee shop, with comments from experts in the industry and links to further information.
The first part of your start-up is always the same: your business plan.
Your coffee shop business plan will look very similar to any other. It should include:
What’s different with a coffee shop is that you’ll need to talk about what kind of coffee you’re going to use and what’s included in your menu. Is it food or drink that you expect to be your biggest money maker?
Along with the proposition, you should include your business’ purpose. Many businesses now launch with an ethical core. Not only will having your purpose in your business plan keep you on track with fulfilling your goals, but it will also help to attract ethical investors.
You must have these points nailed down before you approach partner companies. “The first questions we ask are, ‘What food are you going to serve? What kind of volume do you want to do?’ Sometimes they haven’t quite got that down on paper,” said Lloyd, founder of takeaway packaging supplier, Catering24. “They need to work out the portions of food to costings, to then work out what volume they need to do per day to cover their premises or their van rental or pitch space and rental.
“It’s the nitty gritty details that we try and get down to because sometimes we can offer them a container that’s 30p per portion or one that’s 10p per portion. That starts to make the difference between whether the takeaway or coffee shop is actually going to be profitable from day one.
They need to know the cost per unit of everything that it takes – from ingredients all the way through to a stirrer to go with that coffee. It must be all priced in. “I can go to a van on the side of the road and get a £1(R26) coffee from a polystyrene cup,” said Lloyds. “The cheaper cup is not very ergonomically friendly. It’s actually got quite good insulating in the cup. If I go for that same quality of coffee in a more expensive cup, I can sell it for a little more from the same brand, but it’s the perception of value that the customer is getting. Now it’s paper, it has a better fitting lid, you can actually sip out of it without it going over your clothes.”
Coffee shops are a popular trade and it’ll take ingenuity to stand out. This is where your business proposition and USP come in.
People watching, a popular pastime in cafés, could be illuminating here. “If you find this shop that you like, grab a coffee, sit outside for a few hours and just see how many people will pass,” said Stuart Wilson, founder of Lost Sheep Coffee. Yes, that’s a bit weird. But you can get an idea for them and who your target customer is.”
It’s also wise to know about current and upcoming trends in coffee and beyond. “For me, the next big thing is going to be your speciality coffees and your iced coffees. If I was a coffee shop owner now, I’d be planning for my iced coffee offering to be strong next year,” said Wilson. “All those sorts of things and your alcoholic coffees, like espresso martini. We talked to a few brewers actually about doing coffee-infused drinks, beers and stuff.”
Lloyd has noticed another trend coming from the rise in takeaways: “Afternoon tea boxes are massive at the moment. I Imagine someone starting out at the minute might not think of that first thing. They might think about takeaway coffee, because that’s what the norm is for a coffee shop.”
Décor can bring people into your coffee shop and support your USP. Think palm trees, retro arcade games or neon signs. For the basics, you can keep costs down buying furnishings second hand – it has added bonuses of being sustainable and giving your coffee shop a quirky charm.
This will depend on a few things: where you’re based, what units are available to you and what your goals are for the business.
Most will go for a traditional coffee house set-up. This a bricks and mortar café with indoor seating. Finding a location rests on what you want your business to be and where your customers are.
The other option is somewhat more mobile. Having a cart, kiosk or van has the advantage of being in a busy area like a train station or bus terminal for a much lower cost. Plus, you can opt for a fixed spot every day or, in the case of the cart or van, choose different spots and hit popular events like festivals. Lost Sheep Coffee started as a micro van back in 2012. Wilson tells us more: “For us, the cheapest way to do our [then] hobby was small, hence why it started with a three-wheeled coffee van. I set the whole thing up for less than £10,000 (R200 000). We were able to get a pitch slap bang in the middle of the high street in Canterbury, which, to this day, people still remember the cart. From a marketing perspective, it was fantastic.”
Why do people go for bricks and mortar coffee shops? “I think to be honest, it’s tradition,” said Wilson. “A lot of people don’t think of kiosks as a proper business. It’s just like a glorified market. Some people want the bricks and mortar, if you will, to feel validated.
“A kiosk doesn’t always bring that for someone. They are becoming a lot more popular now that you’ve got your Costas and your Greggs in the service stations. It has been popularised in the last four or five years.”
Start-Up Loans says that it can cost £20,000-£100,000 (R200 000 +) to start up a coffee shop depending on its size, offering and location.
Though it needn’t be as pricey. “A lot of people these days are taking on affordable units. So actually, they can start becoming a bit more accessible,” said Wilson. “A good selection of people who are starting out as a coffee shop these days are taken on premises that might be rates exempt, basically, because of the current government’s side of things.”
These could have perks like giving you three months free rent. They’re already fitted with water and electricity too. “I’ve got a customer who’s just launching one in Folkstone and she’s pretty much doing it for less than £15,000 (R300 000). It’s a full-size shop,” he added.
There are properties like this in the south east of England, but you should be prioritising areas that you know and like. If you do find such an affordable unit, just ask what your landlord can do for you.
However, it can be done more cheaply if you opt for a kiosk. “That chaos in Canterbury, that is a lot of work still done by me to be honest with you, but it’s still less – more like a £30,000 (R600 000) project” said Wilson. “The shop we had in Ashford was a 750 square foot shop and to kit that out from a shell with everything came in at around £15,000-60,000.”
He added that they’re looking into a bricks and mortar shop and it would cost £100,000 a year just on rent. The kiosk, just around the corner, costs a fraction. It could be worth going for the full shop as they generate more revenue. “You’ve got the kiosk, which you’d take X amount a year, and then your shop should be probably taking more like 700,000x,” said Stu. “You pay more, but you actually end up with a higher revenue stream.” Again, weigh up the costs and see which option works best for you.
As for your overall cash flow, if the rent is 15 per cent more than your projected rates and sales, it’ll be difficult to make a profit. Staff should not exceed 50 per cent of overheads, according to Start Up Loans.
Now, arguably the most important part of your coffee shop business.
Are you going single origin or a blend? Does the target customer decide the coffee or vice versa? Are you targeting regulars or passing trade?
“The product itself needs to be relevant to the to the person who owns the business, but also the person drinking it,” said James Sweeting, founder of coffee roasters, Lincoln & York. “These tend not to be one off purchases. They have a very high level of repeat client. I’m guessing that 90 per cent are likely repeat visitors.”
He added that you should really know your customer. “I think these days, you tend to think of an artisanal-type coffee shop, with hand-roasted coffee and healthy cake and all that kind of stuff,” said Sweeting. “Of course, it could be a coffee shop in a shopping centre, or it could be in another format that’s not necessarily Metropolitan. That’s why the coffee needs to be relevant.”
He does stress that there should be a ‘high-quality aspiration’, no matter if the coffee is espresso-based, filter or cold brew. “It should probably be a 100 per cent Arabica coffee blend, or singularity, or a blend of Arabica and Robusta beans that will produce a great espresso coffee. Quite often, you do need an element of reverse engineering to do that. Anyone who says otherwise doesn’t really know the full 360 degrees of the coffee business.”
The coffee shouldn’t just reflect you as a business owner, it should also reflect the values and purpose of the business, as discussed earlier. If you’re claiming that you’re ethical, you need to root through your supply chains to make sure they have the same standards as you.
“You’ve got to have an idea of the standards – where it’s grown, some story element. Have you paid a fair price to your supplier? Has the supplier, in turn, paid their fair price to the grower?” said Sweeting. “if you buy something cheap, somebody has possibly been exploited. Can you defend yourself as a business if somebody walked in and said to a coffee shop and asked, ‘Where do you get your coffee from?’ If you can’t at least give an answer, you haven’t done the homework.”
A quick way to spot a supplier or roaster’s standards is to look out for certifications, which they’ll likely display on their website. Fairtrade means that the group of growers has been paid a known price level as well as covering elements of training and origin. Rainforest Alliance is more focused on the environmental management of the growing.
You should ask your supplier how the coffee will be roasted and how it behaves under certain types of roast. “You should ask questions on along those lines and say, ‘Well, what difference does it make if you roast it slowly and roast it dark? What does that do to the taste? And what will my consumer think of that when I make coffee to it with themes like that?’” said Sweeting.
Don’t forget to factor in the freshness of coffee. “There are one or two myths around whether coffee should be freshly roasted or not,” he added. “Well, of course, if you see ‘freshly roasted’ on a pack, well, it was definitely true when the rest of the pack was freshly roasted. By the time the consumer gets it, it might not be the case.
“Now, for a coffee shop, the ideal gestation period is probably two weeks to six weeks. The reason for that is and you could say well, ten days to 30 or 35. If coffee is very fresh, i.e. roasted one day, then consumed the next, the blend itself hasn’t had chance to settle down. When you get it into a grinder, you know the grinding characteristics will be different if you roast today, it’s a day old versus one that’s ten days old.” Ensuring it’s settled for around the same period each time will give your coffee more consistency, giving a consistent taste experience to your regulars.
Finally, there are questions about what certain roasters can offer. Some of the craft roasters can do very small quantities, perhaps up to six kilos. However, other businesses would want to be able to drop off around 20 kilos plus artillery products to make it worthwhile. “There’s a balance between pure coffee freshness and sensible logistics as well,” said Sweeting. “I think a coffee shop probably should be able to get a delivery every fortnight.”
If you’re struggling to commit to one supplier, you can sample a variety to see what their offerings are like. “Another good little way of coming across roasters you might want to work with is setting up subscription services,” said Wilson. “There are so many companies now that will send, say, three bags a month from different speciality coffee roasters from around the country. You could look into setting up a speciality coffee shop. Sign up for one of these for a few months or go old school and pick up the phone and just ask for samples.”
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Now you want to ask yourself what equipment you’ll be buying and whether it will be new or second hand. It’s also important to look at the lifespan or warrantee.
Depending on what you’re offering, this could include:
It’s not just the purchase you’re thinking about. It’s also what you need to clean your equipment and how costly that’s going to be time-wise. “There are a lot there’s lots of great choices of coffee machines out there. It can be fully automatic, or semi-automatic or fully manual, but maintain them very well. It’s got to be scrupulously clean,” said Sweeting.
Some firms offer hospitality of coffee shop-specific point of sale (POS) systems. Read more at The essential guide to point of sale (POS) systems.
Finding the right suppliers for goods other than coffee is overlooked. Spend some time researching different suppliers, focusing on their story and values as well as their products.
“Try and get an idea of their history, how many years they’ve been trading. You want them to be big enough to support you when you’re starting out,” said Lloyd. “The long-term supply is lots of knowledge. They usually have customer service and salespeople that have been speaking to businesses for decades. Often, they have great ideas.”
Look for positive testimonials and third-party certifications to tell you what your supplier is like. “These are little cues to tell a customer that this is a reputable company, something that they can rely on,” said Lloyd. “They’re doing things properly in terms of sourcing supply. These products come from all over the world, sometimes it’s very difficult to for a café or coffee shop, to know where their products genuinely come from.”
The size and goals of your coffee shop will help you decide which staff members you need to hire and who comes first.
You’ve got baristas and chefs/cooks of course, but your staff could extend to managerial roles, marketing and accounting, to name three. If you’re hiring them, your manager and marketing specialist should be recruited first, according to Rebecca Siciliano, managing director of hospitality recruitment firm, Tiger Recruitment. They’ll help you lay out the ground-level stuff before your café even opens.
It’s a good idea to have barista training yourself, even if you’re not the one making the coffee. But your baristas are incredibly valuable to your business – coffee shop owners often look for somebody who is already trained. However, training can vary, so it’s up to you to ask the right questions. “If it’s a coffee shop [they worked at before], fine.” said Wilson. He would then ask for the name of the coffee shop and look them up on Google and/or TripAdvisor to read the reviews and see pictures of the coffee. “You know, if it’s a greasy spoon or something, and they’ve made a couple of coffees that are frothy, that’s not barista training,” he said. “If they’re working for a well-known coffee shop, and you know they take their training seriously, then great.
“I then say, ‘Have you got any photos of your art?’ With someone who’s a barista who’s proud to be a barista, I guarantee you has photos on their phone. I then say, ‘Can you email it to me?’”
He added that the final thing during interview is getting them on the machine to make a coffee in front of you – the one they’re most comfortable making. “You can see what level of training they’re going to be at straight away,” he said.
If you can’t get hold of staff who are already trained, speak to your coffee roaster. They may offer training themselves or at least be able to give you some reputable names.
Attracting and retaining staff can be a real task across the hospitality industry, so try and offer what perks you can. “You have to offer a little bit more to be able to attract those candidates, like higher pay,” said Siciliano. “Then it’s also some of the other benefits. In fact, there’s one coffee shop we know of where they’ve got one designated day that all staff have been told that they can have the day off, just to acknowledge that they know how hard they’ve been working.” Flexible working is important too, with staff looking for leeway to have days off for important events or to be able to work during the day and have evenings off.
She also recommends posting roles on social media to target people who may already be interested in your brand.
With all this said, you should avoid overstaffing. “I’ve walked into a new café and they’ve got a 15-seat café and they’ve got five people working,” said Wilson. “The biggest, quickest way to kill any new business is to waste all your money on staffing costs. I mean, don’t get me wrong, you want to recruit people, but you’re no good to anyone if you go out of business.”
One way to tackle this is to hire temporary staff for busier periods. “Temporary staff can be ‘dialled up’ and ‘dialled down’ according to demand,” said Novo Constare, co-founder of Indeed Flex. “This makes them invaluable during busy periods when it’s hard to find enough permanent staff. Their flexibility means there’s no requirement to keep using them during quieter periods.
“Having ready access to good temporary staff also gives a coffee shop a defence against staff absences. A big pool of trained, vetted – and above all, available – workers can save the day at short notice if the shop’s regular staff call in sick.”
This section will be dry but could save you an inordinate amount of hassle later on.
First off, register your business. This can be done as a limited company, as a sole trader or a legal partnership.
You must register your coffee shop through the government website at least 28 days before opening. It’s free to register and you can’t be refused.
Next, coffee shop licences. If the premises is not already classed as a coffee or a tea shop, you’ll need to get planning permission. Coffee shops will mostly be classed as an A3 premises which permit food and non-alcoholic beverages to be consumed on the premises. Find out what need with gov.uk’s licence finder.
There’s a lot of health and safety paperwork to get through. Visit the Food Standards Agency (FSA) for more information about your business’ needs.
The right insurance is crucial and there are a few different types.
Public liability insurance: Cover for claims made against you from employees or clients if something happens to them or their property is damaged as a result of your work. It can be an event which took place on your premises or off-site
Employers’ liability insurance: Protects you against claims for accidents involving staff and customers and covers issues with appliances and other breakages.
Deterioration of stock insurance: Covers damage to goods stored in specified cold storage spaces, which can happen because of a change in temperature caused by a breakdown of refrigeration equipment or accidental damage to it.
Contents insurance: Covers the contents of your coffee shop if they’re lost, damaged or stolen, including fixtures, fittings and your employees’ personal possessions.
Business interruption insurance: Could cover Covid-like events as well as weather-based events like flooding.
Different insurers will have different core packages and add-ons. Remember that, if applicable, your business insurance will need to cover takeaways as well as your delivery drivers. This also applies to alcoholic takeaway drinks and the provision of late-night refreshments in your establishment.
A couple of extras, should you need them. Get an entertainment license if you plan to play music in your caff.
Finally, know about your staff’s employment rights – this includes working hours, holiday and other leave.
Let’s start off with your branding – make sure it’s consistent online and offline. Having an instantly recognisable logo that you can put on all of your marketing material will help customers remember you.
For your offline marketing, this could be well-placed signage like bus stop advertising near your site. You’ve likely seen something similar with fast food restaurants who have signs with their logo and an arrow pointing towards their nearest restaurant.
Entice locals and passing trade into your shop with free samples of cake (Covid restrictions apply at time of writing). Drive more brand loyalty by joining a food event or hosting a coffee making/bakery classes. This can be in-person or online. Give participants an exclusive discount on their next coffee and cake or your in-store products.
Of course, it’s essential to establish regulars – they’re a great source of word-of-mouth advertising too. Treat them well by getting to know them and learning their regular order. Try getting in contact with local groups such as parent and toddler clubs or a nearby sports team – you can look at meetup websites for this – and offer them a regular space at quieter time to build up that customer base, making yourself the go-to for the locals. Having discounts and deals for quieter times and a loyalty scheme for regulars will drive footfall.
As for your online offering, you really need to consider having a website and being on at least one social media platform. This is especially true if you’re in the city and have a lot of competition. An easy starting point is getting on Google My Business. This is the widget you see when you type something like ‘coffee shops near me’ into the search engine. It includes your opening hours, images of your café and customer reviews.
Make sure you have a user-friendly and detailed website for customers to visit. They can find out more about you and your business story as well as your menu and info on upcoming events. Here’s one tip: remember your keywords. This is what people will be searching when they’re trying to find businesses like yours. For example, include ‘afternoon tea’ and ‘high tea’ if that’s one of your main draws.
Take beautiful pictures of your food and drink for your website and social media. Customers will get a better sense of what you’re offering, and pictures may tempt them into coming to your café. Driving loyalty is important online too – you can achieve this through your newsletter. Offer an exclusive discount off their first booking or order when they sign up.
Plan for bigger events when your coffee shop will be busy. “They need to be looking ahead to Christmas. Big style,” said Lloyd. “This Christmas will be the biggest hospitality boom we predict for years. You need to be looking to Christmas and what’s going to make you unique.” He suggests speciality coffees like gingerbread lattes or other special syrups.
“We do our own Christmas cups for the independents. They can then play a massive part in the café’s own marketing.”
He warns of a ‘humongous drop in January’. “You’ve got to make it really work October, November, December. Then cash off, have a good Christmas. February and March will be when it starts to pick back up again.”
As you can see, setting up a café is quite a process but don’t let that put you off if you believe in your idea.
Reading industry magazines like Caffeine and going to coffee events with other baristas and roasters will give you an introduction to the community. If you’re still unsure, try working in someone else’s coffee shop for a few days to gauge if it’s something you could do long-term.
This article originally published by smallbusiness.co.uk.