So You Want to Open a Cafe?

Have you ever dreamed of opening your own cafe? Cafes make up part of the Australian dream I feel these days. A great cup of coffee, pleasant environment and bite of food is something that appeals to so many of us.

There are many pitfalls and in this post I hope to address a few of them:

  1. Staff are probably the number one reason why a cafe will fail.  There are a few reasons for this:
    • When in doubt have less staff on hand, not more.  When you start up it feels great having a vibrant team around you – and better yet they can do all the work!  Trust me when I say – be prepared to work as much of the cafe personally as you can, only employ when you have even more work to be performed than you can handle.  Sadly I see around 90% of small cafes that start up with first time owners – have HEAPS of staff.  It costs – and comes right out of your profits to take home.  You might love your staff but you need to be able to afford them first.
    • Always check with Fairwork or a human resources professional how much you should pay your staff.  You simply cannot offer a flat rate as its likely going to put you in trouble.  There are no less than 19 elements that need to appear on an employees’ payslip – and you need to be sure you have them correctly.  You also need to understand how the award works (when is overtime applicable for instance?).
    • Superannuation MUST be paid on time.  Do not be a single day late.  The penalties can end up being incredibly high.  There a 3 main elements to the fines.  1. There is an admin fee per quarter per employee of $20 2. There is interest applied to the amount outstanding 3. The superannuation paid late loses it’s ability to be a tax deduction. – Note particularly with this last one that if you are paying 27.5% tax – and the late paid superannuation is $10,000 then you are up for around $3000 in fines.  For one day late …
    • Single Touch Payroll.  If you are unfamiliar with using a computer this is going to be a headache as the programs that are needed (and it has to be via internet) can be pretty complex to set up.  This system has become compulsory for all employers since the 1st of July 2019.  The programs we have found that work reasonably well cost $5 per month and $10 per month respectively.
  2. Rent can play a serious role in a cafes success or failure.  To be frank, the lower the rent the better – especially in the first 2 years.  When you start out it is entirely possible you will not make enough a week to cover wages let alone rent – so the lower the rent the more resilient your cafe will be.
  3. Where possible attempt to avoid buying anything on credit.  This includes ovens, chairs, tables, and food/beverage purchases for the kitchen.  It is generally impossible to do this at the beginning as the amount of working capital needed in a cafe is hard to judge and nearly always more than is put aside.  However – the less you have on credit the more resiliant your cafe will be when hard times hit.
  4. Expect that some days you will have next to no customers.  It happens no matter how popular the business.  Try to ensure you have the ability to be flexible with staff in those instances.  Typical customer behaviour has shown for instance that if there is a cold snap – less people will go shopping for a day or two.
  5. Don’t underestimate the value of counting the cents when it comes to purchases of food and beverages.  10c a kilo can mean a great deal in profits over a year if you are using a large number of kilos each week!  When an order arrives to the kitchen ALWAYS check the products personally before signing off – classically you should be checking for what turned up, that the right amount turned up,  and that the price is what was agreed to.  Errors are more common than you think!
  6. Don’t underestimate the value of having a ‘point of difference’.  It will matter a great deal over time.  It could be the type of coffee beans, the way you make a milkshake or the types of cake or sandwiches you make.  But you need to establish something unique to your cafe.
  7. BRIGHT LIGHTS! Strangely enough people are bit like moths.  When the business is open ensure that the shop front is brightly lit.  This can just be down lights in the front window – but the idea is to ensure that if you view the business from across the street it stands out strongly.  It has been found that the brighter the shopfront the more people the business will attract.