How to start a café or coffee shop
Thinking of turning your coffee shop business idea into a reality? Startups has the ultimate guide to brewing up a perfect business in the café sector
In recent years, the UK has been steadily moving towards the kind of well-established café culture that countries like France and Italy are famous for.
An explosion in coffee chains has left few of the country’s high streets without their own branch of Costa or Starbucks. In fact, Costa is the most successful coffee brand in the UK – it was the most visited coffee shop in Britain in 2018, according to Statista. The brand boasted 2,422 stores across the UK as of the 2018 fiscal year, and was recently acquired by Coca-Cola.
Furthermore, as the nation’s pubs continue to struggle, there's a growing market for boutique and independent cafés that offer an alternative place to catch up with friends, relax with a book, or even do some work.
Convenience is one of the key elements driving consumer behaviour – indeed, “convenience and the rise of non-specialist outlets” was recently identified by Seasons for Coffee, a coffee product and advice brand. So when choosing a location for your café, be sure to consider how convenient it is to get to – is it close to transport links, as well as shopping centres and other amenities? Alternatively, you could also explore the possibility of offering coffee as an additional service within a convenience store.
Plus, it's now easier than ever to set up a simple store or pop-up with limited equipment – taking payment on your phone using a mobile card reader, for example. This means that starting your own café or coffee shop is becoming an increasingly accessible venture – so what do you need to know?
How to write a café or coffee shop business plan
When writing a business plan for a café or coffee shop specifically, you’ll need to consider:
- The overall industry, and how your business will fit into it – are you catering to the growing trend for premium products? Are you offering an independent alternative in an area with a lot of chain brands?
- Competitor analysis – following on from the above, the business plan needs to show a clear understanding of your intended area and customer base, as well as how your café will cater to a gap in the market
- Sales and marketing – for a coffee shop, this means outlining how you plan to price products, along with which items will be available on the menu. Similarly, if you have any ideas for promotions or other purchasing incentives (such as deals or loyalty schemes), include them in this section. See the dedicated marketing section for more information
This is in addition to the standard requirements of any business plan, such as account information and financial forecasts, as well as details of the management structure and operations plans.
You can learn more about what to include, and get help to create your coffee shop business plan, using our business plan template page.
While choosing a convenient location is key, when it comes to running a café, coffee quality is still paramount. With the continued interest in premiumisation and sustainability in the industry, people are becoming increasingly aware of where their coffee is sourced and how it’s roasted. This connects with the growing conscious consumerism movement.
However, while some coffee brands are expanding rapidly, it appears that customers are nonetheless enticed by the intimacy of an independent coffee shop.
Starbucks struggled through the recession, and was forced to close a number of stores across the UK. Fast forward to 2019, however, and the company now has 995 UK stores – the second highest number of outlets for coffee shops in the country.
While the estimated value of the UK coffee shop market stands at £10.1bn (according to the Allegra Project Café UK 2019 report), there are still opportunities within the sector. Indeed, approximately 95 million cups of coffee are drunk each day in the UK.
What’s more, high street café culture is booming – according to data published by The British Coffee Association, 80% of people who visit coffee shops make a visit at least once a week, while 16% visit each day.
Financing your café or coffee shop business
Premises, equipment, staff… all of these things take money. Fortunately, there are a number of options available if you're just starting a business and need to raise finance. While many people start businesses using their own savings, or money borrowed from family, there are also various other paths to pursue.
Despite the phenomenal success of Costa and other chains, coffee shops are not the kind of business to set up if you're expecting a quick multi-million pound exit. Profit margins will only become significant if you open multiple outlets, and even then, your initial costs will be considerable. If you’re feeling particularly ambitious, it may be worth investigating if you can get a business loan to help you get started.
However, if you're after a lifestyle business which provides you with a modest income, then setting up a coffee shop could be a great decision.
Startup loans – the Startup Loan company is a government-backed scheme, where you can borrow up to £25,000 with a fixed interest rate of 6% p.a.
Business loans – business loans are similar to startup loans, except they are not just for new businesses and don’t have the same caps. Click on the link to compare business loans with KnowYourMoney.
You should also consider how you will keep track of your finances. It's best practice to use a business bank account to separate your personal and business expenses and income, and you’ll have to if you’re starting a limited company. If you need a business account, Know Your Money also compares a number of them – find out which business bank account is best for you here.
Concept, branding and design
It's not vital for you to have worked in a café before, but as with any business, industry experience goes a long way. If you don’t have any prior experience, it's a good idea to spend at least a few weeks working in a similar establishment to the kind you want to open.
If you choose a business to learn from that’s in a different geographic 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. It's important to make sure you’ve spent some time considering the business from more than just a customer's point of view.
This includes thinking about the type of company you want to create: do you have plans to become a big brand eventually? Or do you want your coffee shop to keep its small and local vibe for the foreseeable future?
And in turn, consider what your café can bring to the scene: whether that’s a focus on a certain type of bean or drink, a particular atmosphere you want to create, or an overarching ethos (e.g. charitable, eco-friendly).
As part of the design process, you’ll need to create a floor plan – you can either hire a professional to do this for you, or use floor planning software to do it yourself. Some of the most well-known software packages are RoomSketcher and CADPro.
Essentially, a floor plan will divide the space into customer-facing areas and dedicated work spaces. Ensure you meet any legal requirements, such as building and accessibility regulations.
Also, think about the layout of the space, including decoration, along with how your staff will interact with customers. You should also consider what your logo will look like, and where it will be positioned. These are some of the main points to consider when creating your café concept, and contribute to how your coffee shop will be branded and designed.
One of the most well-known coffee brands around the world is Starbucks. For inspiration and advice that could benefit your own brand, think about the beverage giant’s marketing strategy, and the process it followed to create such a remarkable brand.
Your café stands to benefit from having a website that provides the key details that your customers need to know. This includes contact information, opening hours, what’s on the menu, and where to find the café.
But a website goes beyond a business listing: think of it as an opportunity to further showcase your brand and reach a wider audience. As your coffee shop grows, you could write a blog that responds to industry developments, or highlights the social good your café is doing. Be sure to include any awards or nominations that your café may receive, too.
An ‘About us’ section is a great way to connect with customers and create a sense of community. Plus, it’s an opportunity to reinforce your café’s USP.
If you want to sell products online (such as coffee beans or bespoke cakes), then you’ll need to set up an online shop. Not sure which platform is best for your business? Check out our guide to the best ecommerce platforms for more information.
Also, if you want to host events (whether personal or private hire), then a website will allow you to easily and quickly manage registrations and bookings.
The biggest decision you'll have to make when thinking about how to start a coffee shop is regarding your premises. When looking at prospective sites, location and size are the two main factors you need to consider.
Mintel research found that 79% of Brits purchased an out-of-home hot drink in 2017, while this figure increased to 90% for younger millennials aged 18-27.
So when choosing a café location, it may be worth looking for a busy urban area with a lot of foot traffic. However, these types of properties are expensive and the amount of square feet you will be able to get will be less than if you choose a more suburban or rural location.
Equally, you may have envisioned a spacious, airy coffee and tea shop with room for large sofas and coffee tables covered in newspapers or books – bear in mind that this may come at a price.
And as the premiumisation trend continues, it may even be more profitable to forsake the perfect location in favour of investing in better beans. The important thing is to be flexible – focus on visiting a range of properties, big and small, in busy and quiet locations.
Researching your market is essential: look into the locations that are popular among branded coffee shops, as these are the areas that have been identified for drawing in a good trade. If these shops are too busy during peak times, there could be room for an independent alternative.
It is also important to know your competition. Consider what the most popular brands are offering, and how you could improve upon that.
While the size of the property you will buy or rent is intrinsically linked to its location, you should know roughly what sort of size and square footage you need. You should also be aware of how many covers (i.e. people seated) it can accommodate, as this will help you when going through property adverts.
You need to be clear about your requirements: you’ll require a large seating area, a kitchen, a coworking area, a performance space, and/or a small retail section. A rough guide to café sizes is as follows:
|Size||Number of covers||Area (in square feet)|
Think about what you need from your coffee or tea shop, what is already provided, and what you would need to add yourself. When viewing properties, take the layout into careful consideration. Imagine your service area is fully staffed, and that you’re dealing with a bustling sitting space decked out with tables, chairs, and lots of customers in need of a caffeine injection.
As part of getting your café up and running, you’ll need to ensure you dispose of its commercial waste correctly. Whether you choose to hire a private company to collect it, or opt for the service provided by your local council, this is an essential part of operations.
Some providers offer specific services for the hospitality sector, such as collecting glass, food waste, or coffee grounds. To help you choose a provider, read our guide to the best waste management companies.
Of course, it’s ideal to reduce the amount of waste created in the first place as much as possible. Not only does this help to save money (less waste means fewer collections), but it’s good for the planet, too. Look for a provider that offers coffee cup recycling, and learn more about business recycling in general.
Before you negotiate the lease or purchase of a property, you must also check what commercial classification it currently falls under. If the property does not already have the correct classification for a coffee or tea shop, you will need to get planning permission from your local authority. You can use the Gov.uk licence finder to help you.
A café or coffee shop will most probably be classified as an A3 use class, although this will depend on the local authority. Planning permission for A3 use permits the sale of food and drink to be consumed on premises. For example, if you take on a property with a different class (e.g. a shop, which falls under category A1) and want to use the premises as a café, you’ll need to get the planning permission to change it to an A3 use class.
To learn more, and to apply for a licence, visit the Gov.uk page on food business registration.
Equipment, utilities and supplies
Here, we outline the equipment, utilities and supplies you’ll need to start your own coffee shop. We’ll also look at the process of sourcing equipment, utilities, and suppliers.
Opening a café or coffee shop requires a lot of equipment. Some of it you’ll need straightaway, while other items you may be able to get further down the line, depending on your business requirements.
Essential kit includes:
- Coffee makers – espresso machines, as well as drip and cafétieres, plus equipment for any other specific drinks you offer e.g. pour over/filter
- Coffee grinders – ensure these are suitable for commercial use
- Cooking devices – e.g. ovens, toasters, sandwich presses
- Cooling and storage – e.g. refrigerators, freezers, shelving/cupboards
- Food containers – for syrup, ingredients, milk etc.
- Security devices – e.g. alarms, CCTV cameras, water detectors
- Payment equipment – this includes a card reader, an iPad and/or a till, plus software. For more information on payment equipment, read our guide on small business POS systems
You can choose to buy some items outright from the beginning, or you can hire them on a rental or lease basis. For example, espresso machines are notoriously expensive, and it may be more sensible to rent one. By contrast, food containers are likely to be cheaper to purchase.
You’ll need to think about the type of coffee you’ll choose for your café. Consider which (and how many) strengths will be on offer, and do your research about where it comes from and how it’s produced. When choosing suppliers, be sure to do taste tests (with coffee that’s been correctly prepared) so that you can know what your customers will experience.
Also, check out a supplier’s record – have they won any awards or other industry recognition? Are they FairTrade and/or organic certified? Be sure to review the contract from a potential roaster as well – would you prefer an exclusive supplier, or to be able to use beans from multiple roasters?
Beyond this, the supplies you’ll require will depend on the type of café you run. For instance, the supplies used in a café that specialises in plant-based foods compared to a coffee shop that offers rum and other alcoholic beverages (like London-based Grind) are going to be very different.
You’ll also need to factor in non-edible supplies, like plates and cutlery, including both those used in-store and for takeaway. Plus, take into consideration the aprons or other items that your staff will need to wear or use.
You can find suppliers in the following ways:
- Asking other small business owners for recommendations
- Attending trade shows and industry events (such as Caffé Culture, Coffee Shop Innovation Expo, and European Coffee, Tea & Soft Drinks Expo)
A card machine is an essential piece of equipment for your café. While cash is still popular, it’s good business sense to offer customers as many payment options as possible. Read our guide on how to take card payments to learn more.
As well as the device itself, you may need to enable online payment methods, such as a payment gateway. This will be the case if you’re offering online ordering or other ecommerce options.
Any business in the catering or hospitality industries involves hard, physical labour. Unless you can afford to employ staff from the outset, running a café will involve standing on your feet for the vast majority of the day.
Taking on staff is a highly legislated area, so you’ll need to understand and follow regulations on everything from health and safety to managing holiday requests. How much of the process you do yourself, and how much you outsource to a HR company, will depend on you, your vision for your business, and your budget.
Some top tips to consider when recruiting in the hospitality sector include:
- Culture – what type of atmosphere do you want to create, for both your staff and customers?
- Attitude – café staff are the face of your business, so it’s crucial to hire people who reflect its ethos and brand
- Experience – want perfect latte art with every pour? In need of standout dishes? If so, seek out experienced candidates for more skilled roles (such as baristas and chefs) so that your café can offer top-quality produce from the outset (and while other team members receive training)
There are a number of ways to promote your café, including:
- Social media
- Loyalty programmes
- Traditional marketing
When it comes to marketing a café or coffee shop, be sure to use social media. Creating content tailored to your target audience and the platforms they use is an essential part of social media marketing.
Whether you film your baristas making the perfect cup of coffee, or share photos that your customers have taken, this type of business is highly visual – making it ideal for social media platforms. But it’s more than that just advertising – social media also offers an opportunity to engage and interact with your customers.
Whether you opt for a card that’s stamped per purchase, or a digital app that allows customers to collect points, loyalty programmes are a key part of marketing a café or coffee shop.
Not only is this an incentive for people to return to your coffee shop, but if you use a digital system you can collect valuable information as well, such as common orders or popular visiting times.
While it’s easy to focus solely on digital marketing, remember that cafés and coffee shops are often central places in a local community. Be sure to connect with people face-to-face as well.
Options include printing and handing out flyers in your local area, as well as printing banners and posters. Plus, reach out to nearby offices and other companies to let them know you’re new in town.
Currently, there is no law that states you must undertake formal training to open a café or coffee shop.
However, you must ensure that you and anyone else working with food at your business has the appropriate level of training and/or supervision to do their job properly. The legal responsibility lies with the business owner, so make sure you have all the information you need.
You’ll need to be clued up on the basic principles of food preparation. Make sure you check out our restaurant and sandwich shop guides, as many of the principles for those kinds of businesses will also apply here.
The Food Standards Agency (FSA) is the body appointed by the government to be responsible for all food safety standards. The FSA can provide you with advice on all food hygiene matters, and offers an information pack called ‘Safer food, better business’, which will help you to comply with the law and make your premises safe for the public. The publication covers key aspects of serving food, including contamination, cleaning, chilling, cooking, management, and keeping a food diary.
Your business must also be registered with the local authorities. You can and likely will face inspections in the future, and a failed inspection is bad for your café in a number of ways: either legally (you could be closed down), in terms of business (bad publicity and referrals) or morally (as people could be taken ill or even die from contaminated food).
In order to avoid such pitfalls, you should follow the Hazard Analysis Critical Control Point (HACCP). This is an internationally recognised and recommended system of food safety management that focuses on identifying the ‘critical points' in a process where food safety hazards could arise, and puts steps in place to prevent things from going wrong.
Take a look at the rules and regulations section of our catering guide, as the same restrictions on food preparation will apply.
Your café or coffee shop will need to be appropriately insured – this is to protect you, as well as your customers.
There are a range of providers out there who can offer cover that is tailored to your unique business requirements. However, you’ll usually need the following types of insurance:
- Building contents – this protects your café’s stock
- Business interruption – with this type of cover, you’re insured for profit losses if you’re made to stop trading temporarily
- Employers' liability – cover for the health and safety of your employees
We’ve ground down into the details of setting up and running your own café or coffee shop, covering everything from regulations and recruitment through to marketing and market research.
Now it’s time to put the ideas into action and get your business up and running – and sorting the equipment you need is an ideal next step. Do you need more information? Or are you ready to compare quotes for iZettle card readers? If so, simply complete the form at the top of the page.
Here’s a recap of some of the most useful links from throughout the article:
- World Coffee Portal Project Café UK 2019
- Gov.uk Licence Finder
- Gov.uk Food Business Registration
- Safer food, better business
- HACCP guidance
In addition, check out the links below to learn more about relevant industry organisations and events: