How to start an internet café

Key areas to think about when starting an internet café are:

What is an internet café?

It’s 17 years since Cyberia, the UK’s first internet café, was opened in Whitfield Street, London. There are now thousands of such cafés dotted across the country, with even the most remote areas featuring a web surfing service.

However, the future of the internet café appears uncertain to say the least. With 73% of all UK households now online, the need for internet cafes has declined dramatically, leading to a fall in occupancy which has been accentuated by the recent economic downturn, and the dwindling popularity of PC games – which many enthusiasts used to play with their friends on café networks.

Matthew White, owner of @ Cyber Café in Carlisle, Cumbria, started his business in 2003, with 10 workstations. When he spoke to us in August 2011, he said he was thinking of reducing his terminal count because footfall and occupancy have declined dramatically.

“We see people coming in if they’re on holiday or if their internet access is down, but the numbers aren’t what they were. We’ve got the occasional die-hard gamers, but they’ve matured and grown up now. The next generation are all console gamers, not PC gamers.”

To survive and prosper in this tough market, a prospective internet café owner must diversify, offering a range of services on top of the core internet connection. Matthew White diversified into PC repairs and sales around 2006, and has since branched out into web design, database design and repair call-outs. He says that the internet café now accounts for just 15% of his business; without the new revenue streams, he may have been forced to stop trading.

Other entrepreneurs have prospered by using their internet café as a conduit to other enterprises. For example Jude Jayasuriya, proprietor of the Sun Internet Café in Lincoln, uses his network connection as a way to entice potential customers for his property management service.

Jayasuriya told us that, as a result of the economic downturn and changing customer habits, his internet café has suffered a drop in footfall of more than 50%. However, the property management arm has remained buoyant; in fact, the café, once pivotal to the business, now accounts for less than half its revenues.

So it seems there is still a place for the internet café, provided entrepreneurs are inventive, resourceful and realistic in their offering.

Setting up a internet café business

As with many businesses, start-up costs for internet cafés can vary wildly depending on a variety of factors – and the additional services you choose to offer to make your venture viable. A significant part of your budget will be taken up by the premises you choose – you can read more about this in our business premises channel.

Once you have chosen a suitable space for your café, you will need to set a budget for all the equipment and add-ons you plan to provide customers.

Jason Deane, of internet café chain Quarks, says: “Our own branches have cost between £17,000 and £150,000 to start, so the amount is hugely varied.

“I know people who have done it successfully on a shoestring budget, and others who have failed on a huge budget. Personally, I think the absolute minimum will be around £20,000 – as long as you can pull a few favours!”

An internet café’s network connection is relatively cheap; in fact Matthew White, of @ Cyber Café in Carlisle, told us he secured his connection for a fee of just £55, adding that the charge can now be as little as £15. However there are manifold other costs to consider.

Each PC workstation typically costs around £400, and networks can range from £500 to £1,000. An internet timing system, designed to ensure customers do not exceed their time limit, can set you back a further £500, and you might also end up forking out for printers, faxes, scanners and CD burners to improve your offering.

These costs are just a guide, as internet cafés vary in size and what they provide. If you just want to offer a few computers with no extra services, or just an ordinary café with wifi access, you can start the business on the proverbial shoestring.

But such a basic offering is unlikely to deliver significant revenue; to make the business sustainable, you’ll have to offer additional services. The total cost of your café will completely depend on the additional services you offer – each will carry its own specific costs. For example, if you plan to offer food and drink alongside your internet service, you’ll have to think about refrigeration equipment, display counters and a food preparation station, each of which will cost hundreds of pounds.

 Finding a business premises

Whatever you have in mind for your internet café, and whichever additional services you wish to provide, you’ll need to think carefully about your location; securing the right premises for your internet café will be one of the most important decisions you make with this venture.

Given the decline in footfall and revenue suffered by internet cafes over recent years, if you’re planning to offer nothing more than a basic internet facility, you probably won’t be able to afford high rents; premises in a prominent location, such as your local high street, will only be attainable if you plan to offer ancillary services that will bring in extra income.

Your choice of location should also be tailored to the audience you’re targeting. If you intend to build a core of regular customers, it might make sense to choose premises off the beaten track, with that all-important community feel. Alternatively, if you think your business will hinge on passing trade and casual business, a more prominent location might be necessary. Conduct market research on the pros and cons for your internet cafe and phone cafes directly and ask questions.

A Startups member says “We are looking at setting up an internet cafe, and have found what we believe to be good premises in a good location. However, as this is the first time of renting a property for business, I was wondering what kind of questions we should be asking the rental/estate agent at the first viewing, and the process of business space/shop rental?”

Member Chris Learmonth responds: “A couple of retail clients got caught out by business rates & rent reviews. Make sure you know what all the outgoing of the property are when you take it on & also when these might change. I’d also suggest you don’t tie yourself into the lease for too long so try & get an early get out option and also the right to re-assign the lease to some-one else should your business plans change in the near future. If you can identify them, speak to a local business association. They tend to know the local landlords pretty well & should be able to help you with their particular quirks.”

Read more here about how to calculate business rates

How to make a profit with your  internet café

When planning the various services your internet café will offer, you need to think about what services are being offered by the businesses which surround you. For example, it would be foolish to spend valuable capital on expensive colour printing services when your café is surrounded by cheap printing providers.

If your business is situated in one of the few areas in the UK that doesn’t have a Starbucks or Coffee Republic, it makes sense for you to offer coffee and other refreshments to your customers; however, if the neighbourhood is already home to a popular, established coffee shop, then branching into this area might not be such a good idea.

Jason Deane, of internet café chain Quarks, says: “It all comes down to this: what is the best possible service, and you need to be very clear to the last detail what that service is, you can provide for the money you have?” Deane says. “Will this work with your plan? If not, can you raise more money? If not, can you change it? If the answer is no, think carefully about proceeding.

“This market is very competitive and internet access is a commodity, nothing more.

“Therefore, your service has to be different and priced accordingly. Even hugely successful entrepreneurs have discovered the internet access game is not easily won.”