This is your ultimate guide on how to start a café business.
Starting a business is a risky venture.
There’s the possibility of failing, regardless of the business size.
A café wouldn’t have been a good business venture some years back, but Starbucks has changed the game forever.
The rise of coffee shops led people to think of offering more value, which is how the idea of cafés came.
There has always been confusion that coffee shops and café shops are the same things.
Our easiest form of differentiation will be that all coffee businesses are café businesses, but the reverse isn’t the case.
A dictionary calls a café a small restaurant that sells light meals and drinks, including coffee.
While a coffee shop, just as the name implies, does more or less just coffee.
Now in this conversation, we will first consider the advantages and disadvantages of this business.
After that, we will consider the steps we have curated on how to start a café business.
How to Start a Café Business – Advantages
The main reason why the advantages and disadvantages are important to use is for comparison.
We know everything here on this planet called earth has its good side and its bad side, including business.
The goal for you is to make sure the advantages outweigh the disadvantages when you weigh your options.
This way, you are sure this is the right business for you, and you can move forward with starting.
For the advantages, you have things like;
- It gives you the opportunity to do something that you are passionate about.
- You have the chance to be your own boss.
- It creates a sense of community as you interact with different people.
- With a café, you can craft your business menu how you want.
- It is a growing business enterprise with a lot of profit margin potential.
How to Start a Café Business – Disadvantages
The disadvantages of starting a café business would include things like;
- It is almost impossible to run a café from home or online. The need for a physical location increases the startup cost.
- You will most times be fully responsible for everything.
- There are a lot of competitors you will be dealing with.
- It can be capital-intensive, regardless of how small you want to start.
The Industry – How to Start a Café Business
Now that you’ve decided that the advantages of this business outweigh the disadvantages for you, we can move on to know more about the industry.
According to Marketwatch, robust growth is expected in the café industry between 2023 and 2028.
This is something we are already witnessing with the rise of cafés all over the US and the world.
This is seen as a good thing as it improves the industry’s market value, but it is also a bad thing.
With a lot of cafés open in the US, the competition for customers becomes quite tough.
Even if cafés sell more than just coffee, almost all their revenue comes from their beverage menu.
Cafés make up one-third of the restaurant industry, with a value that is around $12 billion.
Calculations even helped predict that the growth rate over the next 10 years will be around 3.6%.
It has always been a booming business, and they are so many numbers available to prove that.
See for yourself here.
How to start a Café Business – 9 Basic Steps
1. Background Research on the Business/Industry
The first thing you are to do is research to get insight into the business.
Look at everything there is about the industry and your environment before you start.
This will help define the best route to take and also show you the best entry point into the market.
It is important to understand that you will invest a lot of time and resources into opening your café.
This is why spending as much time as possible to understand things before starting is important.
One of the ways to do this is to learn all the lessons that experience has to teach us.
Go to café owners and find out from them what it took to start the business and get their advice.
Study the industry trends also – what are the shifts currently happening, and how do they play to your advantage?
Your competitors will provide another case study to research before you start your business.
Do a SWOT analysis and understand everything about their business and how it can affect your own business.
This is the point where you find out your leverage points and your weak points.
Your leverage points will help you outshine your competitors.
Your weak points, on the hand, will help you improve your business.
2. Work on your Niche and Business Model
The next thing on the list will be to work on the business model, business structure and niche.
As we said from the definition, a café is basically a small restaurant where they sell light meals and drinks.
So how do you go about your café and make it unique, valuable to your customers and profitable to you?
This is the question we answer when picking out a niche, but the business structure is something we need first.
There are so many structures to pick from, and they all come with their advantages and disadvantages.
What is important here is picking the one that will work best for the type of business you want to run.
Since we are looking at how to start a café business, the end goal is usually going to be an international franchise.
Once this is the case, our suggestion for a business structure will be a limited liability company (LLC).
This is because of its protective advantage with your personal assets when and if issues arise.
In terms of the café, there are a few business models you could consider here.
We have take-out cafes that focus on quick services and mainly take-out orders.
There are restaurant cafes that give you a fun dining experience when you are there.
Lastly, there are casual cafes which mainly cater for people on the go who need a quick meeting place.
The amount of space needed and the type of services offered are different for each of these places.
3. Properly Document Things; How to Start a Café Business
There is a need for a business document regardless of the type of business you want to start.
The business plan is basically the document that outlines everything as regards the business you are starting.
Some of the things you should include in your business plan would include;
- Name and contact details of the business
- Management information
- Mission statement, goals, aims, and objective of the business
- All the costs that go into running the business
- Funding and every other financial plan
- Working hours, working structure and other work information
- Competition and an analysis of them
- Marketing and pricing strategy, etc.
Documentation is an important feature of any business as it acts as a guide before and after you start.
The fact that this will be your guide is one of the reasons we suggest everything is considered and documentation.
Sometimes we feel like we do not need something at that time, but it is good to document at the start.
For example, you might find it weird if we ask you to document your scale-up and scale-down plans right now.
Something might happen – a partner might want out tomorrow, or your customers become overwhelming for one branch.
Making the documents or planning to scale them might seem rushed and open you to making mistakes.
Also, with proper documents, you are seen as professional in the eyes of potential investors and partners.
4. Learn the Skills and Get Certifications
Remember that a café is still a restaurant; hence, you will serve meals, so some culinary skills will help.
Luckily for you, there are a lot of schools that offer this knowledge all across the united states.
You only need to pick one that is close to you and get certified in the art of cooking for the public.
Also, there is a part of making beverages, as most cafes make more than they sell ready-made beverages.
So you should consider having some barista skills as they will come in handy in your café.
Some cafes also serve alcoholic beverages – so if you have plans of doing so, add bartending to the list.
Now the truth is having all these skills might be too much, and this is where you employ capable staff.
To make up for the skills, you lack and to help you build a formidable team to improve customer experience.
It does not just cut it to have the skills alone but also certification, as it gives your guests assurance.
For a café or really any kind of restaurant – experience is the important part of everything.
So, you must invest heavily in providing the best customer experience as it is the way to win here.
5. Brand Your Business to Stand Out; How to Start a Café Business
Branding becomes more important when looking at restaurants.
For any business out there, the process of branding would start with getting a business name.
Your name has to be a customer magnet on its own – this is a way to ensure customer acquisition and retention.
There are so many other things you will have to do after you have sorted out the brand name.
One of them is deciding what the brand colours would be and picking out a brand logo.
Things like catchphrases and slogans are also good for the business but are not the most important.
When it comes to a café, two things you should take very seriously are your ambience and tone.
How does your café look and feel; what will the customers see when they walk through the door?
For tone, you are concerned with how you communicate with your customers at your café.
Communication here includes how your staff addresses them, how your menu looks and every other thing.
This is why we suggest you employ the services of a branding specialist, an architect and an interior decorator for this.
6. Do all the Necessary Registrations
Now, registrations will be very important to you when you are starting any business, regardless of the type.
This depends on where you are doing the business and by where we mean state.
The laws vary from place to place, but there are some that are general to the country you find yourself.
You go to the IRS website and register to get an employer identification number (EIN for short).
Once that is settled, you can go register so you can be able to pay your taxes and receive tax benefits.
Now, since you are operating in the food sector, there will be a lot of regulations here and there.
You have to be prepared for routine, impromptu inspections and registration with all the appropriate bodies.
It will be wrong to skip one and have that one be the reason the authorities close you down.
7. Implement all From the Planning Stage
We know we said no step has more importance when you are looking at how to start a café business.
But it is just so tempting to say that this is the most important of them all here.
Almost everything we have been talking about had to do with planning and strategy until now.
Now we go into implementation, which simply means acting on everything you’ve documented in the business plan.
So if the plan was initially to go to the bank to take up a loan, then you should be doing so now.
If you are looking to fund the business from your personal funds, it is time to separate it.
Take the funds from your personal account to your business account as it has advantages.
The advantage is that you can track your spending and the business finances properly from there.
Overall, refer back to your business plan and follow the guidelines outlined there.
8. Strategize to Market Your Business
Overall, marketing is the last phase, and this is what ushers your café into the minds of people.
Your café will only be successful if it is in the face of customers, and marketing is how that is done.
Waiting till the business is fully functional before you strategize on marketing is never a good idea.
This is why we suggest it is done even before you begin the whole process of starting.
Social media is the best place to spread the word about your business when you want to market.
So you can use social media in conjunction with other traditional marketing strategies to promote your business.
Conclusion for How to Start a Café Business
Now, that’s how you set up a thriving cafe business.
There is a lot of potential in the market, and this has made a lot of people interested in what is available here.
This is also why you have chosen this as the line of business you want to venture into.
That being said, running a business, especially a café business is not all sunshine and roses.
Therefore, you should put a lot of time and effort into achieving success.
Wishing you the best of luck.