7 point plan for setting up a cafe

1.Go work for someone else first

Learn from what they do right and what they do wrong. Learn about what customers want, hiring and training the right type of staff and fostering team work, systems, financial management, building a culture of great customer service, food costing, menu planning, margins, wastage control etc…

Learn that running a cafe is hard work and long hours and that it is definitely not a “lifestyle” choice. Learn that having great coffee and great food is essential but not sufficient for success, and figure out what else is essential… And while you are at it, even if you have run a successful business before, read everything you can lay your hands on about small business development – [a good start is that old chestnut “The E Myth” by Michael Gerber]

Done this? If yes proceed to 2. If no because you want to be your own boss, or have not got the time, or just can’t be bothered because it seems unnecessary, then stop now – do not open a cafe – it will end in tears. The number one cause of cafe failure is the owners lack of practical cafe experience.

2. Make sure you have enough working capital

We have seen promising cafe operations die a slow and painful death or simply never make real money because a lack of working capital strangles the growth potential of the business and leaves the owner stuck in survivalist storekeeper mode instead of being able to focus on improving their business.

Not only do you need enough cash to set up but you also need working capital to support the first few months of trading while you build up turnover and pay your creditors. Relying on the first big GST refund is not enough!

3. Get the right location, or forget it
Location determines the customer type determines the profit potential of the business. You need to be in the right place to attract customers who will want what you offer, and you must offer what they will want. Notice that different precincts have different types of customers, and go where the type of customer you seek is to be found. Simple, but lots of people get this wrong, and once you set up you are stuck with your location.

4. Understand your point of difference
You need to fully understand what is your point of difference in a crowded market place, be able to articulate this to your staff, and enact this for your customers. It’s not enough to simply believe that you will be able to do everything better than the cafe down the road, and assume the customers will flock to you for this.

5. Think very carefully about the “fit-out”
The design and decor of your cafe is not your long awaited opportunity for creative self-expression! The most successful hospitality sites feel good to spend time in. Analyse why. Start with your customer demographic – already determined by choice of location. What sort of people are you pitching too? What do they feel comfortable in? What will they aspire to? What will generate interest but still satisfy the fundamental human need for the cafe to be a “third place”

Ergonomics matter. Consider all the functional requirements of your working spaces. Form follows function. Your menu plan determines your kitchen requirements, which determine your layout and design of the functional areas. Your coffee supplier can help you with the coffee workstation design.

6. Set up systems before you open
So many new cafe owners discover after a few months that they have been really busy but made no money. It’s vital to analyse sales and costs and run weekly profit and loss reports right from week one. Buy a till that allows you to itemise every item you sell, and preferably one that will download detailed daily sales reports into a spreadsheet for analysis. If you don’t like doing this stuff, maybe you should not be in business.

7. Your cafe will mirror your competencies, or lack of…
The quality of your planning will set the boundaries for your business. By the time you open, basics like location, type of clientele in your area, rent and most overheads will be set. And most of the factors that articulate the identity of your business to your prospective customers, like street presence, image, decor, comfort, vibe etc will be in place.

Once you are trading you will find that there are only a limited number of variables that you can manipulate to manage the effectiveness of your business. Broadly speaking, you will manipulate human resources, menu planning and cost control. These will determine the quality of your customer service, the attractiveness of your offer, and the profitability of your business.

And don’t forget that you will be saddled with your own limitations. Your skills at staff management, menu planning, cost control, customer service, and doing the books late at night when you are too tired to think straight, are the tools you have to work with. In the first few months, you simply won’t have any spare time to go out and learn how to do these things better. Which brings us back to point [1]…

Still want to set up a cafe? Meticulous planning and attention to detail will enhance your chances of success. Good luck! And give us a call, we are here to help.

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