Britain’s cafe culture is big business. With 1.7 billion cups of coffee sold each year in the UK, and the number of outlets set to grow from 18,000 to 21,000 by 2020, the industry isn’t set to dry up any time soon.
The likes of Costa and Starbucks are familiar high street fixtures. Meanwhile, even pubs are getting in on the act, with Wetherspoons emerging recently as a more popular breakfast destination than Pret A Manger or Caffe Nero. But it’s not just the big chains that are driving growth. The cafe sector also presents exciting opportunities for first-time business owners — especially those who can bring fresh ideas and a personal touch to the table.
Would-be cafe owners need to think carefully about where their business is going to fit in this thriving, yet competitive, market. Detailed planning on make-or-break factors such as location, pricing, and the type of customer experience you offer, will greatly enhance the likelihood of your cafe becoming a success.
Full English or latte to go? Mapping out your concept
From the start, be clear on what type of cafe or coffee shop you see yourself owning. This will have a huge influence on other decisions you’ll make during the planning process. A coffee shop which focuses solely on specialist beverages requires a completely different approach to a cafe which offers a full breakfast and lunch menu.
Coffee shops compared to food-led cafes
Compared to a coffee shop, a food-led cafe requires you to dedicate a greater proportion of floor space to cooking areas and storage. But with the requirement for bigger premises and greater investment in cooking equipment, comes the potential for a higher level of per-customer revenue. In simple terms, bacon sandwiches can be more profitable than slices of carrot cake — but only if enough of your customers actually want bacon sandwiches, and are willing to pay above the price it takes to make one themselves.
A food-led cafe is more likely to appeal if you come from a strong catering background. But even if you’re experienced, operating solo can be tough. Decisions such as whether you’re going to offer table or counter service, and how the cooking area is structured, will determine whether you’ll need to hire extra staff.
Defining your proposition
Commuters, shoppers, break-time workers, tourists, lunchtime diners, casual passers-by: this is just a handful of the distinct groups who keep the trade going, and growing. Each group has its particular needs, preferences, and buying habits. For a new cafe owner, aiming for universal appeal may appear attractive. But trying to be all things to all people, may mean that you fail to give any particular group a good enough reason to come to you.
The big chains are currently locked in a price war. This means that ‘great coffee at an unbeatable price’ is no longer a good enough USP. If Wetherspoons can offer perfectly drinkable coffee at 99p a cup with free refills and there’s no way you can match that without making a loss. Therefore, you’ll need to identify reasons other than price why customers should choose you.
Why should customers choose you?
For this, consider profiling your potential customers based on age, occupation, spending power, and buying habits. If you’re going to be based in a large commercial centre, for instance, you may want to focus on providing an express take-out service for office workers in a hurry. For a more residential area, is there a market for a toddler-friendly coffee shop and meeting place?
High street cafes are often visited by different types of customers at different times of day. This raises the possibility of marketing your business to multiple customer profiles. In the morning rush hour, for instance, you could focus on a take-out service for commuters, with the option of rolling out a more extensive menu later in the day aimed at shoppers.
The best coffee in the world?
Other cafes market themselves on the sheer excellence of their product. Foodies and coffee connoisseurs are more willing to go out of their way for a quality experience. This means being positioned right next to a station or in a shopping centre becomes less of a priority. Could you partner with a popular local bakery to make your cake selection really stand out?
Boutique cafe Fernandez & Wells, is a great example of how you can reap success from a partnership. It began sourcing its food from independent suppliers and specialising in homemade cakes. Similarly, Nude Espresso targets customers who ‘know their coffee’, focusing on the quality of their product: niche beans from across the globe.
Choosing your premises and kitting out your cafe
Most cafes require A3 usage classification (cafes and restaurants). When looking at premises to lease or buy, ask if it has this classification already. If it doesn’t, you’ll need to make an application to your local authority. However, there’s no absolute guarantee that your application will be granted.
Never take the leasing agent’s comments on footfall for face value. For instance, a certain premises might appear to be well-positioned to attract commuters, but if it happens to be just the wrong side of the pedestrian crossing before the station entrance, it might not be as desirable as you think.
The previous owner
Taking over an existing cafe can mean that all essential equipment is already in place. However, be clear on why the previous lessee or owner is moving on. Examine their accounts, and make sure there aren’t any reasons why that property is no longer suitable as a cafe.
Keep costs down
Look for smart ways to keep the cost of equipment and refurbishment to a minimum. For example, leasing rather than buying cold storage units and cookery equipment can help reduce your initial outlay. Going for a ‘shabby chic’ look, with reclaimed furniture and minimal wall and floor coverings will give your cafe a cool, individual feel, as well as keep refurbishment costs down.
Simple tweaks to the layout and the facilities you offer can work to attract specific customer types. Wi-Fi is a must for attracting a work-while-you-drink clientele. Also, setting aside an area for buggies, and a well-planned baby change area could attract parents.
Setting your Prices
Just a few pence on a cup of coffee can mean the difference between a profitable or loss-making business. Your menu pricing calculations need to take into account what customers in your area are willing to pay. They must also factor in supplies, staffing costs, utilities, rent, council tax, and the cost of repaying any loans you may have taken out to finance your new business.
Getting ready to open
You’ll need to notify your local authority environmental health office as well as HMRC. Consider spreading the word about your new cafe by visiting local businesses in person with flyers. A website and social media presence are also essential for reaching out to would-be customers; start an online conversation with them.
If you’re thinking about starting a cafe, visit our help centre for hints and tips on how to finance and market it.