June 12, 2015 3 Comments

It seems everyone wants to open a cafe. It's become to 'go to' business idea and when one poses the question of why, the answer invariably, is either for a lifestyle change or because it's an easy way to make money. Both of these answers can only come from people who either haven't worked in the industry, haven't done any research or both.

There are so many things that need to be considered before taking the plunge. The question I have is...How badly do you want it?

I don't write this as the absolute authority on building cafes but I've built 5 before so this blog is an attempt to give you some idea of the things that most people seem to neglect when they are considering a move like purchasing or building a cafe. In particular, building a cafe from the ground up.

Firstly, ask yourself the most important question of all. 'Why am I doing this?' 'What is my goal?' If you have to think about the answer for longer than a few seconds, you're in strife. If your answer is about making money or about a perceived 'lifestyle change' to allow you a load of spare time you never had before then think again because you're about to work harder than you ever have before.

If your answer is because you have a passion for the industry, that your are hospitable by nature and that you're prepared to do 'whatever it takes' to achieve your goal then you're on the right path.

Secondly, you need an idea. There are literally 1000's of cafes out there. There are cafes everywhere. Too many in fact. Forget what you're going to call it. That will come later. The first thing to decide is an image or a brand that you are trying to create and ask yourself some questions. What is your target market? Who are you aiming towards? What do I want my brand to portray? You've got no chance if you attempt to mimic others so determine the image you are trying to create without copying everyone else and ensure that every decision you make from this moment on is in line with this image. Once all of these questions are answered, the name of your business will come to you without much trouble at all.

Finding the right site is the next thing. Where is the best location to build my business? If your target market is young families with kids then the CBD mightn't be the right location. If your dream is to service the corporate world during the business hours of Monday to Friday then building in the suburbs is probably the wrong move. I don't believe the location is as critical as others make out as I'm of the belief that creating a 'destination' means it can go almost anywhere. Create something 'different' and something of quality and people will find a way to get to you. Remember this though. The rent you pay is determined by the area of the floor space of your site and in parts of the Melbourne CBD there are sites that can cost around $2200 or more, per square metre per year. Do the maths on a site of 50 square metres and you're up to $110,000 + GST per year. That's a lot of coffee.

You'll need a budget. Where's the money coming from? Will you need finance? Are you funding it yourself? How much money do I need? The answer to the last question is about 20% more than you think.

If your plan is to gain finance from a bank you'll need to provide more information than you can possibly imagine. They don't just hand out business loans like they used to. Loan negotiation can be tedious and, without some sort of collateral, extremely difficult. You might even be asked to provide banks with a breakdown or your proposed equipment purchases before they give you any money and as obvious as this may sound, repayments can be a killer. Believe me. The more money you can put in the better off you're going to be.

While we're on the subject of money, think about this. Building the cafe of your dreams means a designer and a builder or shop fitter. Sourcing and filling these positions takes time and research. Take notes from every cafe you frequent and note some ideas that appeal to you. Then develop a short list of of designers and builders you wish to contact.

A designer will ask you questions about everything that will no doubt make you think about things you hadn't even considered. Keep in mind that weeks can go by between an initial briefing meeting to the first drawings and then changes upon changes will take place until a final design is approved. When I say 'approved' that means approved by you. We haven't even begun the process of having these designs approved by your landlord yet. Depending on your landlord, this can be a nightmare.

By the time you get to the shop fitting process, a lot of the tedious work has been completed. Shop fitting includes joinery, plumbing, electrical including lighting, concreting, painting and so on. It also includes furniture. The fit out is your biggest cost. I've known people to spend $30K on a fit out. I've also known people to spend $1m or more. The only advice I can give you is to continually do your maths and ask yourself...How many plates of food or cups of coffee do I need to sell each week to be able to make repayments on expensive loans for a fit out? Am I likely to sell more coffee if I spend $100K than I would if I only spent $60K?

There are so many other costs that need to be considered. You'll need surveyor permits, permits and certification from the council and the health department. You'll need building permits, food registration and ultimately you'll need insurance. All of these could easily total around $10K.

Your landlord will require a bank guarantee, which might be $10K or $50K. It could be even more. This is a cost that must also be considered. You'll need working capital so that you've got some cash in the bank to get the doors open in order to buy stock, pay wages etc. You'll need a months rent in advance.

Then there's the miscellaneous costs to get your business open. You'll need signage, graphic design for logos, staff uniforms, POS equipment, music system, equipment and machinery which might include coffee machines and grinders, refrigeration, food display, kitchen & cooking equipment and dishwashing equipment. The list goes on.

You'll need opening stock, cutlery, crockery, floor mats, chopping boards, tongs and food storage tubs. You'll also need cleaning products like detergents and sanitisers, mops and buckets and so on and so on.

We haven't even spoken about the biggest ongoing cost of all. Staff.

And if if all of that sounds tough, then following all of this, one has to work on and in the business. These businesses require manpower and many hours to make them successful and success doesn't happen overnight. But that discussion however, is for another time.

As I said earlier, I've opened 5 cafes over the last 20 years and as we get ready to open the next Black Velvet store I can assure you the nerves and apprehension are still overwhelming. I'm still learning and am still talking to as many experienced people as I can to gain advice and assistance.

If you are considering taking the plunge and you would like to make contact then please get in touch. Black Velvet can assist in all things coffee as well as some help and advice on how to get started.

I'll ask the same question I asked earlier. How badly do you want it?

3 Responses

david mobbs
david mobbs

October 15, 2018

Nice article. A rare find i think, not too many talking as straight as this about the big issues of fitout.
I think we have allready begun the plunge! Oh shit!
I’ll take helpful advice any time thanks!


January 07, 2019

Thanks for sharing your experience, hope your business continues to succeed.


October 28, 2015

Hi that is a good article about start up cafe. for me I have a passion for this industry. I work in community service and making just enough to pay my bill. I opening an existing cafe because I have this opportunity from my family support, I had run a restaurant before. I take this opportunity into cafe business because so I could earn a better living.

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