Have you decided to pair together your love of coffee and passion of business to create your own cafe? Starting a business is extremely expensive in the beginning, usually much more expensive than many can believe, so it is important to consider all factors that could potentially be taking money out of your pockets during the startup process. Calculating the cost of opening a cafe is a great first step for your business plan.
Here at Brand My Cafe, we want to see you succeed. We want to see those beautiful thoughts and plans that you have in your head for your cafe come to life, which is why we wrote this article. Keep reading to hear about what to consider when calculating the cost of opening a cafe, and become a part of our exclusive Facebook Group, Food Service Brand Builders— a space dedicated for cafe, restaurant, and food service business owners to share helpful tips and experiences of owning a small business.
Factors for Calculating the Cost of Opening a Cafe
- Location
- Purchasing Equipment
- Suppliers
- Hiring Staff
- POS System
- Marketing
- Permits
In most cases, new small businesses aren’t profitable for the first six months to a year, so it’s important to plan ahead. Finding the necessary funds to start your own coffee shop can sometimes be difficult, so it’s important that you have enough
Don’t worry, not every step that goes into opening a cafe has to be ridiculously expensive. Unfortunately, providing you with the exact costs for each category is impossible due to a list of external and internal factors. But what we can do is break down each factor so you can get a better idea when calculating the cost of opening a cafe of your own. Also, be sure to read “Leadership Tips For Cafe Owners“.
Location of Your Cafe
Location is one of the most essential factors to help contribute to the success of a business, so it is important to get it right, right from the start. Open spaces in high trafficked areas do not stay empty for long, so it is crucial to conduct a good amount of research of an area before pulling the trigger on a space. It always helps to be familiar with the area before deciding to place a business there, so we recommend spending some time in the area you intend to open your business in.
Spaces in a desirable location are much more expensive than those in low-trafficked areas, so it is important to be prepared to spend the extra cash to get the best site.
When trying to decide how much you should be paying for rent, you need to consider the rent to revenue calculation. Start off with creating an estimated revenue calculation based off of your projected sales.
For Example:
If you are looking at a space that is $1,500 per month, that equals $18,000 per year. If you expect to make $200,000 in the first year, then that ratio would be 9 percent of your earnings. According to Chron Business, the recommended rent to revenue percentage should be in between 5 to 10 percent.
Brand My Cafe Pro Tip: If you don’t have the first few months of rent money saved up prior to opening, it might not be the right time to open your business.
Purchasing Equipment
Depending on what you plan to sell at your coffee shop, this will determine the equipment and appliances you will need to buy to start off your business. Below, you can find an estimated chart for the equipment you might want to consider.
These numbers come from Webstaurant Store:
| Equipment: | Estimated Price Range: |
| Espresso Machine | $1,000 – $6,000 |
| Espresso Grinder | $500 – $800 |
| Coffee Maker | $500 – $2,000 |
| Ice Machine | $1,800 – $3,000 |
| Sink | $300 – $600 |
| Refrigerator/Freezer combo | $4,000 – $6,000 |
| Blenders | $150 – $500 |
| Accessories (measuring cups etc…) | $300 – $600 |
| Total | $8,550 – $19,500 |
Keep in mind that the numbers above are just a rough estimate to what it will cost for just some of the basic equipment to get the ball rolling. Other
When picking out the right equipment for your needs, it is crucial that you have done your research. The fanciest espresso machine out there might sound like a great idea the first time you hear it, but is it realistic? It is important to find a balance between great quality and great price when picking out the equipment for your cafe. Take a look at “Things to Sell in a Coffee Shop Besides Coffee” for ideas on what else to sell at your cafe.
Suppliers
Starting off, we recommend getting different quotes from multiple different suppliers. Once you have a little more knowledge of the different prices, you’ll have the ability to truly negotiate. No matter what you do, make sure that you always have the ability to work with other suppliers. It is never good to put all your eggs in one basket in the business world. To keep your prices competitive for your customers, your prices with the supplier needs to be competitive as well.
Hiring Staff
Hiring the right people is crucial to the success of your business. Employees can truly make or break a business, so it’s incredibly important to hire and train people to align with your values and what you imagine your brand to be. Check out “5 Tips for Branding a Small Business” for tips on branding your cafe shop. What we recommend is really carefully hiring and training your employees to know as much as possible about the business, while emphasizing the importance of customer service. Also, take a gander at “Tools For Tracking Employee Performance at Your Cafe” for a guide on how to keep track of what your employees do at work.
Depending on how large you plan for your cafe to be will all depend on how many employees you will have to hire. Will you have counter service or waited staffing? Do you have cooks or does the barista make everything? It is important to look at averages in your area for the positions that you are hiring for. If you expect to get an amazing barista that has worked at Starbucks for the last ten years, chances are you are going to have to pay him or her much more than minimum wage. These are all decisions that you will have to take into mind throughout the hiring process. Make sure to look at “How to Motivate an Employee Who’s Underperforming in Your Café” for help on getting your employees to perform better.
According to PayScale, the average hourly rate for a barista is $10.12.
POS System
There is so much that goes into starting a business, it is hard to make sure everything is accounted for. POS systems are there to make things a little less complicated for all of your transactions. A POS system stands for “point of sale” and can be a huge help with keeping track of everything from sales to inventory. As a newborn business and fresh business owner, it is important to get something that is not only cost-efficient but relatively easy to use and understand; which is why we recommend Square.
Square is a free and easy to use software that helps with sales, customer management, inventory and so much more. Square is used on an iPad and has been taking the country by storm in recent years. A great plus of Square is that it does not cost extra money to add additional registers. Is anything in the business world actually free? No, we all (hopefully) know that but to start out with the program, at its basic form, is free. For you to get a better idea of how much money you will be spending with this software, we have compiled together a list. Information on this list was found via the Square website.
Square Pricing:
| Square App | Free |
| Square Reader for Magstripe | Free for first, each additional $10 |
| In-Person Payments | 2.75%…That’s for every tapped (mobile payments), dipped (chip cards), and swiped (magstripe cards) payment. |
| Invoice Transactions | 2.9% +30 ¢ |
| Card-not-Present Transactions | 3.5% + 15¢ |
| Square Virtual Terminal Transactions | 3.5% + 15¢ |
| Card on File Transactions | 3.5% + 15¢ |
| eCommerce Transactions | 2.9% + 30¢ |
| Reader SDK Transactions | 2.5% + 10¢ |
| In-App Payments SDK Transactions | 2.9% + 30¢ |
| Online Payment APIs Transactions | 2.9% + 30¢ |
Want to learn more about Square? Head on over to their website! Square is not the only POS system that you can utilize, but in the beginning of the business’s life, it makes the most sense (for us at least).
Marketing
Creating a brand identity within your community is extremely important. To emphasize the importance of a company’s brand, swap out the word brand with “reputation”.
- There can’t be a reputation if nobody knows who you are
- Having a great reputation makes people want to spend their money at your business.
- Having a bad reputation makes people not want to spend their money at your business.
When thinking about how to get the public to perceive your brand the way you want, there are many different marketing steps that need to take place. From creating your logo to the advertisements on social media, you will have to execute points of your marketing plan to draw attention to your brand. Check out “6 Coffee Shop Branding Tips” for more branding tips for your coffee shop.
Your Logo
Your logo is the face of your company, so it’s important that you put a great deal of thought into it. The logo is what customers pinpoint as the recognizing factor with your brand. Make sure your logo is
Take a look at “3 Ways to Get a Coffee Cup Branded” to see how you can customize your coffee cups.
If you are artistic, you can create your own logo through a software, such as Adobe Illustrator for little coats. If you are willing to spend a little extra cash, you could pair up with a freelance artist in your area. Typically doing this could cost in between $250-$800. If you wanted to spend a few thousand dollars, you can always reach out to a design agency to create a logo for you.
For more on why a logo is important and some tips and tricks of designing one, check out our article “10 Things to Think About When Designing a Cafe Logo”
Brand Exposure
Getting your name out in the public before opening is a great way to get the public excited about your brand. We recommend creating social media pages like Instagram or Facebook and begin posting what your up and coming business is all about to peak the interests of potential customers.
Since money is going to be tight in the beginning, creating an Instagram or Facebook account is free and incredibly easy. Begin posting aesthetically pleasing shots of sample drinks or how the shop is coming together to get people interested and excited about your business. A few ways to draw attention to your account are: giveaways, collaborations, hashtags, and geolocations!
Cheap Alternatives to Social Media
Any way that you can think of to get your name out there, do it! Participate in pop-ups, making appearances at local festivals and farmers markets. Call your local news outlets to let them know that you’re ready to take the town by storm and how excited you are for everyone to come to your cafe! Any way you can think of getting people excited for your brand prior to opening can turn your opening day into a “don’t want to miss” opportunity!
Permits
Ah yes, we have saved the best for last. Everything that you have read up to this point means absolutely nothing if you do not have the ability to legally run your business. Depending on the state and area that you live in, the list of permits you will need can vary. What you 100% will need is a business license. Every business in the United States needs this license to operate legally. Prices vary in between $25-$500, depending on your location. Other permits that you will most likely need include, but are not limited to:
- Foodservice License: $100-$1,000
- Employee Identification Number (EIN): Free
- Food Handler’s Permit: $100-$500
Starting a business is fun and exciting, but it is also extremely stressful. It is so incredibly important to make sure that you have the correct funds in your pocket at the end of the day to survive. Again, we would like to reiterate that, in most cases, new small businesses aren’t profitable for the first six months to a year, so it’s important to plan ahead.
We hope that you found this article helpful and eased some stress and answered some questions that you may have had regarding the costs that go into starting your coffee shop. Be sure to also take a look at “How Much Does it Cost to Start a Coffee Shop” for more calculating tips.
Calling all small business owners! Become a part of our exclusive Facebook Group, Food Service Brand Builders— a space dedicated for cafe, restaurant, and food service business owners to share helpful tips and experiences of owning a small business. Check it out and share your coffee shop stories with us!
Thank you for reading! Do you need further help in calculating the cost of opening a cafe? If you have any more questions, please feel free to leave a comment below. Also check out our Instagram or Facebook for more brand inspiration for your business.
Brand My Cafe helps small & medium-sized businesses, cafes and foodservice brands grow their identity through custom coffee cups, coffee sleeves & more.