Opening a cafe means fulfilling your dream. You would be surprised to know that the United States ranks highest in coffee consumption. Americans consume 400 million cups of coffee every day according to recent cafe business statistics. Is the cafe business profitable? It is one of the main and valid concerns to start a cafe business. The cafe business is one of the most profitable and satisfying businesses in the world but it also comes with its difficulties and hurdles. In this article, we will explain how to start a cafe business successfully in 2021.
You have often seen people enjoying coffee with their favorite snacks in the coffee shops while discussing business and pleasure regularly before the pandemic. Now, Lockdown has been lifted and many countries are moving back to their old lifestyle.
This is why 2021 is the perfect time to start a cafe business. People are open to new ideas and opportunities. It is a new beginning and they are eager to explore their city once more. Thus, you have the advantage to attract customers with minimum effort and kick start your business overnight.
What are the pros and cons of starting a cafe business?
It is always wise to weigh your pros and cons before deciding to start a small-scale business. Especially when it comes to learning about “how to start a cafe business”. you see, opening a coffee shop whether it is a mobile or non-mobile cafe you have to deal directly with the customers.
Therefore, it is the best cafe business strategy to realize your advantages and disadvantages and use them in your favor, and find appropriate solutions for them.
Pros
- Opening a cafe means now you are part of something bigger. Now you have the opportunity to impact society and be an important part of everyone’s life.
- You have the advantage of time. You can open a cafe on your own time. It is not necessary to have a full day shift, you can simply choose to work on the prime hours and utilize the rest of your time for your other important aspects of life.
- The best part of a cafe business idea is you are fulfilling your dream to start a cafe business and interacting with new people every day.
- You have the chance to be a part of the community which gives you the feeling of accomplishment.
- Another perk of opening a cafe is the huge profit ratio.
Cons
- Staffing can be a bit challenging, It is upon you to make the hire and fire decisions and that can be a bit difficult for many people
- Collecting funds and investments to start cafe business opportunities is very challenging. Until you start making money you have to find a steady flow of money to buy raw materials, staffing, and equipment.
- The process of opening a cafe will hamper your work-life balance. You won’t realize it before but launching your cafe is a time-taking process.
What tools do you need to start a cafe business in 2021?
Cafe business proposals are of different types. You can either start a cafe, coffee store, coffee stand/ bar, drive-through coffee shop, takeaway cafe, online cafe, or coffee food truck.
Whatever cafe business you set your mind to starting. You will need a few necessary tools and equipment. These tools will consume most of your startup cost and require maintenance costs from time to time.
List of the tools you need to start a cafe business:
- Automatic drip coffee makers- Black coffee is always in demand and you can attract a whole new market if you want to turn your business into a success.
- An Espresso machine- You would be surprised to know that 30% of the population likes drinking espresso. Therefore, you need to invest in a high-quality espresso machine.
- An industrial coffee grinder- Well, you cannot open a cafe without a coffee grinder if you want your business to make a profit. Freshly grounded coffee can make a huge difference in the flavor and aroma of your coffee.
- POS system and website- If you want to make a social and online presence then you must have a website. The POS system will not just help to make the sale but it will help you to track your inventory and manage the daily accounting.
- Industrial blenders- many cafes also offer frozen drinks to keep up with the trend you need to spend a good fortune on high-quality industrial blenders.
- Ovens and toasters- many coffee shops offer snacks such as sandwiches, burgers, muffins, toasts, and so on. You will need ovens and toasters for freshly cooked snacks accompanying the coffee.
- Pickup supplies- Many people prefer coffee on the go, for that you will need a large number of cup holders, and paper bags for your customers to carry their orders.
- Refrigerators and freezers- No matter what type of cafes you open, you must have refrigerators and freezers to store your dairy products.
- Shelving- you need the proper shelves to put your pump, containers, syrups and store your mugs, plates, and other essential equipment to use regularly. Shelves are essential to efficiently organize your tools and equipment.
- Containers, pumps, and storage– to store large amounts of coffee beans, sugar, milk, and water you will need the containers and a storeroom. You will also require pumps to measure and pour the number of essentials to make the perfect coffee every time.
- Security system– Every business needs one or a kind of security system for the protection of their employees, customers, and cash such as alarms, cameras, and a secure cash register.
What is the basic setup cost for opening a cafe?
Well, depending on the size, services, location, and equipment your basic start-up cost should be between $30,000 and $300,000. There are many key areas that you need to focus on before you start a cafe business.
As we told you earlier, there are several types of cafes you can open and earn a considerable profit. The best part of opening a cafe is you can make money while opening a new cafe. You only need the basic equipment and tools at the beginning and you can develop further into a theme while making monthly earnings.
Your basic setup cost will mostly involve the raw materials, equipment, staffing, rent, licenses, and insurance for cafe business, preparing a menu, POS, and website. You only need to maintain the basic setup cost for few months as the ROI is quite high due to the fast-growing industry.
How do you prepare for launching a cafe business in 2021?
Now you have learned your pros and cons, basic setup cost, and tools you will need to make the cafe business proposals to the investors, creditors, and other parties. The next step to learning how to start a cafe business in 2021 involves the legalities, license, and insurance for a cafe business, knowing your competitors, cost structure, and so on.
You need to be very focused and attentive if you want to turn your cafe into a success. Indian F&B industry and America’s FDA regulations hold promising cafe business opportunities for startups and existing cafes and restaurants. Thus, it is the perfect time to open your cafe if you want to become an authority in your niche.
A few key areas to focus on to learn how to start a cafe business are the following:
- Decide on the theme and concept of your cafe
- Arrange sufficient funds and investors to run your operations smoothly for the first few months.
- Meet your competitors or do a thorough online search to evaluate your financial standing and the cost incurred on your cafe business idea.
- Choose a location that is easily accessible by foot and car. A perfect location can do wonders and make your cafe popular overnight.
- Learn about the legalities and get the required license as soon as possible
- Start hiring. You don’t need much staffing but hire the minimum and skilled staff to smoothly run your cafe
- You need to work on your menu. Add varieties to your menu. You can also add a frozen drink or milkshakes and snacks to compliment your main drinks.
- Meet your local vendors and suppliers and collaborate with them to get a continuous supply of raw materials at a minimum rate
Find out the best security measures for your business. Set up a POS system, secure cash register, and website for marketing and advertising.
Market Research
The key to achieving your goals in time is thorough market research. You need to make a detailed business plan and then implement it step-by-step. The first step of planning starts with market research such as knowing about your product and services, legal requirements, pay structure profit ratio, cost incurred, and competitors.
One cannot even launch a business without detailed market research and then making your cafe business strategies.
Business Name and Logo
Selecting a business name and logo is a crucial task and you must remember whatever name and logo you will choose will stick with you forever. Therefore, you need to be creative and smart while selecting a business name and logo.
You can also take the help of the online business name generator and check its originality and liking. As you are looking for a name for your cafe business. Try to make it catchy and attractive. It should be imprinted in your customer’s minds so whenever they think about coffee your logo and name should come to their mind automatically.
Niche Selection
When it comes to niche selection to start a cafe business people get confused. Yes, you all will be serving coffee but you need to add something extra and stand out among your competitors. The factor can be anything: your theme, your aesthetics, your coffee mugs or design of your cafe, or your menu itself.
While selecting your niche you have to carefully examine your location and make sure your cafe compliments the surroundings and can attract the population in that area. You can add an extra bar such as smoothies or add a breakfast menu to provide an edge to your cafe and that will become your niche.
Many coffee bars offer weekly trivia contests or provide a play area for kids to grow their popularity. This distinct factor will make people talk about you and encourage other people to check out your cafe business idea.
Select your target market
“How to start a cafe business, what is your target market, and is cafe business profitable” are some of the crucial questions to ask if you want to open a cafe in 2021 and become successful. If you have done your research thoroughly then you would know that there is a different type of target market among coffee drinkers.
Your target market consists of drip coffee, drinkers, specialty coffee drinkers, and coffee shop lovers. You can also distinguish the target market based on their age group such as 18-24 and above 25. Only 40% of the students and business workers prefer coffee every day if they get it at a cheap rate.
On the other hand, people above the age of 25 prefer at least one cup of specialty or regular cup of joe every day. 77% of coffee drinkers love a coffee shop that offers different varieties with some delicious snacks or desserts. Depending on your location you can target the high-end coffee lovers who prefer specialty drinks and don’t pay much attention to the cost.
Skillset
You need to have social and interpersonal skills. Your one cup of coffee can make or destroy your and someone else’s day. you carry a huge responsibility on your shoulders and besides dealing with customers you have other aspects to take care of such as staffing and pay structure.
Opening a cafe requires much more skills than just brewing a perfect cup of coffee and meeting new people. You must have the skills to negotiate with your vendors and suppliers, identifying your legal structure, license, and insurance for the cafe business. It involves management and accounting skills.
You must know about customer service and acquisition strategy, promotion, staffing, pay structure, food safety, inventory, management of capital expenditure, or maintaining cash flow.
Well, do not expect one person to have all the knowledge, thus you must have the skills to hire an accountant or other helpers to launch a successful cafe.
How to Source raw materials to start a cafe business?
You can simply divide the raw materials to start a cafe business into main 2 categories- Agricultural raw materials and Culinary ingredients. However, if you are looking forward to opening a franchise then you should consider places and furniture as raw materials and it is wise and cheap if you prefer only one company to collaborate to get your locations such as First Capital Reality or FCR.UN provides property on lease for cafe businesses in the UK.
For Agricultural and culinary ingredients you should look for your local trade market or collaborate with farmers directly like Nestle. Sourcing the raw materials depends on the size of the business and location. Thus, we would advise you to search for your local suppliers of raw materials and collaborate with them or you can counsel with your nearest authority like Michigan State University Extension.
How to set up your price structure?
There are a few factors that you need to consider before setting up a price structure. The first factor is your target market and the area you are going to serve, second is your competitors.
If your target market mostly involves students and the working class then your pay structure has to be cheap and at competitive rates with a variety of options to stand out among your competition.
If your target market is high-end customers with less competition then you can set a high price structure by offering specialty coffee drinks. We would also suggest you check out the menu and rates of your competitors to set your price structure.
Do you need an Office?
Well, you cannot run a cafe without an office or a coffee shop. Depending on the size of the cafe you are opening you must have a working space even for online cafes, takeaway cafes, or typical coffee shops.
It’s all about location. You need your cafe location that is centrally located, has higher visibility, and can be easily accessed by foot or car. Try to avoid the upper floor locations as they have low visibility. You should also prefer to get the center market or on-road location with higher visibility to attract customers.
Finance arrangement
Finance is the backbone of every business. Until you start getting a continuous return on your investment or ROI you have to arrange the finances to source your raw material, license, insurance, rent, staffing, and daily operating cost for the first 6 months at least.
Three methods of arranging finance to start a cafe business:
- Self-Funding
- Loan
- VC/ Angel Funding
You can either opt for self-funding if you have enough money in your bank to invest or opt for a loan. On the other hand, getting an investor is the cheapest and most secure way of arranging finance but convincing an investor to invest money in a startup is quite difficult.
Do you need to hire?
To open a cafe you need to hire three types of staff.
1. Kitchen staff – For cooking and food preparations.
2. Service Staff- if you are opening a coffee shop then you will need a waitress, housekeeping staff, etc.
- Management staff- You might need an accountant, cashier, store manager or website developer, or marketing and advertising staff.
It is not essential to hire every type of staff but it also depends on your skills and the size of the cafe you are opening. We would also advise you to make the hiring decision slowly and carefully. Start-ups run effectively and long-term if you indulge in multitasking and save the cost of hiring a large number of employees.
What could be the possible hurdles in a cafe business?
A few possible hurdles to starting a cafe business are as follows:
- Keeping up with the latest market trends and customer demands can be very challenging. You have to stay aware of all the new trends and implement them immediately.
- Lack of funds is always an issue when you start a new business. You need to keep alternatives or extra funds in your hand to deal with unexpected expenses.
- There is no health care coverage for employees thus, staffing cost a lot. You need to take private health coverage or insurance to maintain a steady environment.
- Managing inventory is a crucial part of running a successful cafe. Shortage or lack of stock can cost you the loss of customers and harm your brand value.
- Staffing is an integral yet most challenging part of a cafe business. You must hire the right staff and train them to perfection to improve your customer service and reduce the cost of hiring.
Conclusion- How to start a cafe business in 2021?
Running a cafe business is similar to any other service-based business. It requires the full attention of the owner in every aspect of the business or a chosen responsible person to manage the daily operations smoothly.
We hope our complete guide on “how to start a cafe business” would have answered all your questions and provided you with insights into cafe business strategies to turn it profitable. Recent cafe business statistics have shown that 2021 is the perfect time to start a cafe and become an authority by 2025.