Expenses to Keep in Mind when Opening your Own Café

Running your own café is up there as one of the top entrepreneurial dreams. The good news is that the number of independent coffee shops in the UK continues to grow year on year. As high street retail continues to decline, more of us are reclaiming the space for social and leisure activities. That seems to include hanging out in cafés and drinking coffee!

So running your own coffee shop isn’t the pipe dream it might have been a few years ago. But it’s still not a venture for the faint-hearted. To make a success of a coffee shop venture you’ll need to do your homework, take a good degree of risk and be prepared to work hard for long hours.

Of course, you need to make that risk as calculated as you possibly can. That means knowing your numbers. Start with footfall. Nothing beats the old-fashioned approach of standing outside potential premises with a clicker and counting the number of people passing by at different times of the day. Make a comparison graph for the different venues that you are considering.

Next, identify your likely costs and get quotes for your start-up costs and estimate your direct costs and overheads. Here is an overview and checklist of all the cost areas you should take into account:

Coffee Shop Start-up costs

These are the one-time costs that you’ll need to invest up-front to get the premises in shape and ready to open. They are likely to include:

  • Building improvements, frontage and signage. Focus your budget on a great first impression. And don’t forget the toilet, make sure that nothing is chipped or broken there and that it is always immaculate;
  • Kit-out with tables, chairs, crockery etc. Vintage trends are in fashion at the moment, particularly for community or co-working style cafés, so you may be able to make savings by cashing in on that trend with second-hand and mis-matched furniture and crockery!
  • Kitchen equipment. Again, there are savings to be made here with second-hand equipment.
  • Machinery. This could be a start-up cost if you buy the machine up-front, or if you lease, then it will be an ongoing cost. The latter may be worth considering to ease cash-flow management, but check the terms of the contract very carefully – more than one business has been bankrupt because of outrageous lease terms. Essential machinery should include a coffee machine and a Point of Sale (POS) system. In addition, depending on your customer base you may want to consider a frozen drink machine. An FBD Partnership offers a wide range of beverage dispenser options.
  • Licenses and legal costs. You’ll need A3 planning permission for a catering outlet. You will also need to pass health and safety and food hygiene regulations. The various leases and regulations involved in running a catering outlet can be complicated, so make sure you run everything past a lawyer and that you make provision for that.

Direct costs

Food and beverage. This is literally the bread and butter of your business! Industry markups for the catering industry are 200%. So you should expect to charge at least 3 times the cost of the ingredients. Drinks attract an even higher markup.

Café Overheads

Everything else is a regular ongoing cost. That includes:

  • Premises costs, including the rent or mortgage and the business rates.
  • Insurance – get quotes from a broker for public liability, employee liability, contents, stock and buildings insurance.
  • Salaries. This should cover the costs of all the people you pay to work in the business, including chefs, serving staff, cleaners and other maintenance personnel. You should aim to keep total salary costs to less than 50% of total overheads. If you employ permanent staff, don’t forget to make provision for holiday and sick pay in addition to other potential staffing costs like maternity leave. You should also get your lawyer or accountant to put provide staff contracts and terms.
  • Marketing and advertising. Don’t under-estimate this, especially in the early days when you’re establishing the venue. You need to include a launch event and these days ongoing social media is a must.
  • Other. Other regular costs are likely to include waste management and pest control.

So, do your homework and find suppliers and quotes for all of those items before you even begin to think about menu plans. Hopefully it will all add up and you’ll be able to open the doors of your very own coffee shop in a perfect part of town. And of course the most important number is the number of people who love your welcoming atmosphere and amazing cuisine and who keep coming back and telling all their friends about you. If you can hit those numbers, it will all be worthwhile.