Cafe start up costs and ways to stay on budget
If you’re planning on opening a cafe in the near future, one of your first questions is likely to be: how much would it cost to open a cafe? It can be difficult to come up with a quick estimate because of all the factors that determine the amount of money you’ll have to invest.
If you are thinking about how to open a cafe and stay within your budget, consider all major expenditures from the very beginning. You should always try to make realistic estimates on the lease, interior design and building renovation, kitchen and front-of-house equipment, employee payroll, menu, and the cost of your inventory.
It seems pointless to give any exact numbers because the actual cost will vary depending on where you’re located and the cafe concept (grab-and-go, co-working or cat cafe). Instead, let’s consider how the choices you make and the approaches you take can influence your start-up costs for a cafe. This will help you prioritize your expenditures, and cover all the essentials while avoiding overspending.
Good lease for your cafe
Premises near business centers, malls, areas with a lot of foot traffic, and tourist attractions will guarantee you the steady influx of customers that you need to make a good profit. These locations are closely monitored by the major market players and don’t remain empty for long.
For entrepreneurs who know the importance of a lucrative spot for a cafe, money is no object when they get a chance to secure a desirable location. However, it’s best to remember that paying an exorbitant amount for your rent may cause your cafe start up costs to skyrocket and undermine the profitability of your business.
Commercial space is rented on a cost-per-square-foot basis and the cost significantly varies depending on location. For example, according to Bizfluent.com, within New York City, you can rent premises for $10 to $4,000 per square foot.
To be realistic about how much it would be reasonable for you to pay for your lease, calculate your projected revenue and research average occupancy costs in the area. Knowing the figures you’ll be able to estimate rent that you can afford.
According to the research on occupancy costs by RestaurantOwner.com the total occupancy costs (rent and additional fees for property taxes, insurances, etc.) for a profitable business should be no more than 6–10% of the gross sales.
In round numbers, let’s assume that your projected sales add up to $1,000,000 per year. The rent you can afford ranges between $1,000,000 X 10% = $100,000 and $1,000,000 X 6%= $60,000 per year.
Say you need a 1,000-square-foot space to run your cafe and can afford annual rent of $60,000. It means you should look for a location you can rent for $60 per square foot per year, or $5 per square foot per month. In this case, you should be looking for available premises for $5000 per month.
If your landlord’s first offer doesn’t fit in your estimated budget for opening a coffee shop, don’t give up straight away. Quite often landlords ask for as much as double the amount that they really expect to get. That’s their opening tactic: they ask for as much money as they think a tenant might be willing to pay.
During the early stages of opening a cafe, tenants often make emotional decisions after falling in love with a location for their business, but landlords usually have a much more pragmatic approach. For them, it’s an investment. A landlord’s major concern is whether or not you’ll be able to pay the rent based on your business plan.
So, negotiate, and use your rent-per-day calculations to make a better case for lowering the price. If a landlord sees that you have a realistic and cool-headed approach to business, they’ll choose you among other potential tenants and may significantly lower the price per square foot.
Even having a tight budget you can lease a space for a ‘hole-in-the-wall’ cafe, as small as 1.5 meters by 2 meters, like for example, the Double Mac Espresso in Sydney. It’s outfitted for maximum efficiency, but remains highly functional and profitable.
When planning, strive to minimize the time when you have to pay rent before you can begin earning money. For this, negotiate two or three months of free rent after the lease is signed. Usually, landlords will be willing to make this kind of concession.
Sign a contract with a landlord only after you decided on the concept and interior design and have a team ready to buy materials and get to work immediately. By arranging for construction work to happen during your free rent period, you will be able to further optimize the cost of opening a cafe.
Design that focuses on operation, not decoration
After you have signed your lease agreement and got the keys to the premises, it’s time for your contractors to create a functional and attractive space. Your goal at this stage is to make renovations fast enough to open on time while avoiding issues with construction and staying on budget.
When revamping the premises, focus on the convenience of the workspace and on complying with industry standards and codes. There is some room for cutting costs with the design and decoration of your cafe, but you can’t afford to lose focus of the essentials.
The costs of opening a cafe and re-configuring the space you’ve chosen will include contractors’ payrolls, building materials, furniture, equipment, and decorations. To create an efficient floor plan and trendy design that meets local health and building codes, you’ll have to employ professional interior designers and commercial fit-out experts.
In London, the cost of outfitting a small (20–50 seats) cafe ranges between £150,000 and £300,000 if everything is built from scratch and you’re buying new equipment.
If the premises were previously occupied by a food service operator and require only superficial repairs and re-design, you can hire a freelance designer, a restaurant consultant, a construction crew and coordinate their work yourself.
If your premises require a great deal of reconfiguration, it’s best that you employ an agency specializing in layouts and interior design for food service businesses. They’ll advise you on how to reduce the cost of opening a cafe and help you turn your renovation efforts into a turnkey project:
Collect information on your project (concept, menu, square footage, interior dimensions, etc.)
Make a design and floor plan to visualize how your concept fits the place taking into account operations, flow of customer traffic and the required seating capacity.
Select the equipment your kitchen staff needs to store and prepare the dishes on your menu, to service counters for front-of-house employees and the right furniture to accommodate your customers.
Sort out all of the paperwork: specifications and price quotations on the equipment and furniture, descriptions of construction materials, certificates for the health department, warranty information, etc.
Coordinate the work of construction workers, consolidate your equipment and cabinetry package, design it into space, and install it after the build-out is completed.
When hiring a reputable agency to revamp your premises, you’ll pay a higher design fee. But you can expect to get the right documentation and for your business to be in compliance with regulations, without compromising on the future efficiency of your operation as well as shorter lead times and lower costs for equipment and furniture.
Design fees depend on the size of the project, its complexity, your deadlines, and the designer’s expertise. Usually, the design fee comes to 10–25% of the construction costs.
If you are looking for inspiration for the design of your future cafe, Pinterest and Instagram are good places to start searching. But you keep coming back to the same question: how much money do you need to open a cafe? Get a better idea of how much your furniture will cost you by visiting WebstaurantStore!
Point of sale software and hardware
Even if you’re going to open a small cafe, you’ll require a coffee shop POS to take orders and payments.
If you choose a cloud-based solution, you’ll be able to use an iPad handheld pos system with a compact set of additional equipment. Our monthly subscription plan is also affordable, starting from $45. Just make sure it has all the features you need:
A tablet POS app that allows you to create your own floor plan for your dining area, so that waiters know when to assign orders to tables.
An inventory management tool for you to know in real-time what products are in stock and get low stock alerts.
A menu management tool that allows you to set different sizes for your cups, drinks with different toppings, syrups, extras, etc.
Marketing tools for running promotions and loyalty programs, like happy hour, discounts, and bonus programs using POS built-in features.
Statistic reports and dashboards for tracking your best-selling menu items, most productive employee, and your busiest hours.
Cloud POS system for cafe, like Poster, helps to reduce startup costs because it doesn’t require significant investment yet ensure an excellent working experience.
Cooking and coffee making equipment and appliances
If a consulting agency helps you with opening your own cafe, they can assist you in selecting and buying all the essential coffee shop equipment and supplies for your kitchen. They may be authorized resellers of one or several vendors or just recommend a reliable supplier in your area.
If you have to decide on equipment and supplies on your own, you can begin to understand how much it will cost you by using the recommended cafe supply set from WebstaurantStore. There you can find prices for everything from larger cafe equipment to disposables.
As an owner of a fully functional cafe, you’ll have to consider a huge selection of commercial kitchen equipment and meet countless vendors. Before you open your own cafe and run it for a while, it will be quite hard to decide what equipment is essential to buy and what you can do without.
If you have a menu by the time you start looking for equipment, it’ll ease your decision-making process. It’ll also let you answer the question of how much does it cost to open a cafe more precisely. You can start by getting basic information online from food service buying guides.
Cafe equipment price range
Frappe and smoothie blenders
3-Compartment sink for back-of-house area
Food service equipment (microwave, toasters, blenders, etc.)
Coffee accessories (espresso tampers, frothing pitchers, measuring cups and spoons, scales, etc.)
Disposable сoffee shop supplies (paper hot cups and lids, custom coffee sleeves, napkins, etc.)
Office equipment (PC, fax/printer, phone, furniture, file cabinets)
New or used, brand or no-name, expensive or cheap? Be careful with your choices because the decisions you make while buying equipment are going to determine the cost of running a cafe.
Your team and payroll
A couple of months before opening, you’ll start putting your team together. From then on, the employee payroll will add up to your startup costs. Interviewing and hiring people takes time. It’s best that you estimate the number of employees you will require for each position as early as possible.
How many people you’ll need to hire depends on the concept and size of your cafe as well as on the number of planned working hours and shifts.
Think in advance about interviewing extra employees in case you need to replace any employees further down the line.
If your cafe is small and you serve only coffee and snacks, then you can make do with two front of house employees per shift. Your cafe can be open 8–24 hours per day and you can set the number of shifts accordingly.
If you have a good location with 12 tables or more, then you’ll need at least three people per shift. Additionally, you’ll need to hire two or three more people to rotate shifts among your staff and give them days off. The number of cooks and other back of house employees will depend on the number and the complexity of the dishes on your menu.
Remember to check how high minimum wage is in your area. You may access this data online on governmental websites like this. You can also use services like glassdoor.com to get stats on the average salary for each different position in your area.
Sourcing and supplies for your cafe
You will only be able to accurately determine how much it costs you to produce food after you’ve already been running your cafe for a while. In the beginning, you should get detailed quotes from suppliers and find out ways to negotiate better prices.
The quality of your products is going to have a strong influence on your cafe’s reputation. If you offer unique dishes made from fresh, sustainable, high-quality ingredients, you have will be more likely to impress your customers with delicious and healthy food.
Choose your products and suppliers carefully. It’s better to find a couple of decent farmers or vendors who may charge a higher price, but which will help you catapult your dishes and coffee to citywide (and maybe even nationwide) fame.
Try to find a mentor in your area who has operated or consulted a successful local restaurant. The advice you’ll get from an expert will save you a lot of money in the long term, and keep a lot of delicious food out of the trash can.
When you sign a contract with a supplier, always reserve the right to cooperate with other suppliers, especially if this supplier cannot guarantee you stable prices.
Check out the prices of different suppliers, as well as the terms they offer. To find a food supplier near you, check out websites like LocalHarvest.org or FMI.org.
Consider the following sample cost range for opening a cafe:
Let's assume you're opening a small (20–50 seats) cafe with 6 employees and simple menu in a big city in the US. Then your minimum expenditures may make the following.
- Rent $5000 for the first month.
- Renovation $10000.
- Cafe equipment $25000.
- Cloud POS solution subscription price for the first month $45.
- POS hardware bundle $500
- BOH employees wages for the first month $4000
- FOH employees wages for the first month $11000
- Initial inventory and supplies $10000
- Initial marketing expenses $455
Every cafe is different, so costs will vary greatly. While some owners may be willing to pay a fortune for interior design for their cafe, others may prefer to outfit it themselves. The final startup costs will change according to your own needs and desires. We hope our article will help you get started with your new business!
And if you're looking for a Storehub competitor, read more about Poster!
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