How to start a café or coffee shop
Thinking of opening a coffee shop business idea? Startups has the ultimate guide to brewing up a perfect business in the café sector
Things you may find helpful to consider when opening a coffee shop are:
Other useful links:
– Register your coffee shop company name with our preferred company formation agent
(external site, opens in new tab)
– See if you can get a Start Up Loan to help you start a coffee shop business idea
(external site, opens in new tab)
The cafe industry
Over the past couple of decades the UK has been steadily moving towards the kind of well-established café culture countries such as France and Italy are famous for. An explosion in coffee chains has left few high streets without their branch of Costa or Starbucks. As the pub industry continues to suffer heavy blows, there’s a growing market for boutique and independent cafés offering an alternative place to sit and read the paper. According to research published by The Local Data Company in 2012, there are around 5,000 coffee shop brands and 5,500 independent coffee shops across the UK. Recession or not, us Brits want our coffee and we want it fast, with almost half of consumers valuing convenience of location over brand of coffee. Perhaps that’s why coffee shops are opening up in such large quantities across small distances – Holloway Road, north London, holds the record with 24 along one stretch, closely followed by Gloucester Road, Bristol at 23.
However, quality still overrules convenience and according to Allegra Strategies, people are becoming increasingly aware of factors such as where their coffee is sourced and how it is roasted. Customers are seeking out the best quality caffeine fix, with two thirds of consumers placing quality as the most significant factor in choosing a coffee shop. By far the most successful coffee brand in the UK is Costa, which boasts 1,400 stores across the UK and recently announced plans to open 350 more.
However, while some coffee brands are expanding rapidly, it appears that customers are nonetheless enticed by the intimacy of an independent.
Starbucks have struggled through the recession and have been forced to close a number of stores across the UK. Yet just a week after implementing a radical plan to add a personalised touch to its service, by toning down the logo and writing names on customers’ coffee cups, the US-based company experienced a 9% increase in sales.
It may be worth considering seeing if you can get a Start Up Loan (external partner site, link opens in a new tab) to help you with financing, and mentoring to start this business idea. You'll also need to think about registering your business, either as a sole trader or as a company - if a company, then Smarta Formations (external partner site, link opens in a new tab) are an organisation that can help you set up.
If you think that this £2bn industry has reached its peak, think again. Jeffrey Young, managing director of coffee analysis firm Allegra Strategies, forecasts there will be more than 7,000 branded coffee shops within the next few years and nearly 18,000 outlets including independent and non-specialist shops.
Are you cut out for starting a cafe?
Who is starting a cafe suited to?
Despite the phenomenal success of chains such as Costa, this is not the kind of business to set up if you’re expecting a quick multimillion pound exit. Profit margins will only become significant if you open multiple outlets and even then your initial costs will be significant (It may be worth considering seeing if you can get a Start Up Loan (external site, opens in new tab) to help you with financing starting a café.
If you’re after a lifestyle business which provides you with a modest income this could be a great business to start.
However, you need to consider the amount of work involved. Any business in the catering or hospitality industries involves hard physical labour. Unless you afford to employ staff from the outset, running a café will involve standing on your feet for the vast majority of the day.
It’s not vital that you’ve worked in a café before but as with any business, industry experience goes a long way. If you’ve never worked in a café or coffee shop before, it’s a good idea to spend at least a few weeks working in a similar establishment to the kind of one you want to open. If you pick a business in a different area there won’t be any issues with competition and you’ll find people are surprisingly receptive to offering advice if you’re honest about what you’re planning to do.
When doing her research, Sahar Hashemi, the co-founder of Coffee Republic, spent a day on the Circle Line, getting off at each of the 27 stops to investigate what type of coffee was on offer. Either way it’s important to make sure you have spent some time considering the business from more than just a customer’s point of view.
To help formulate your coffee shop business plan you may find it useful to download our free business plan template.
Next page: Finding premises and rules and regulations.