If you’ve ever been tempted to stake a claim in the large and dynamic UK coffee market with your own cafe – you’ve probably wondered how much it would actually cost you to get off the ground.
We recently published a guide on how to set up your own coffee business that dealt with many aspects of the topic but didn’t go too deeply into the costs and factors that affect them.
So in this article we take a look at how all of the different aspects of setup could affect the cost of a business just starting out and discuss how to make the best choices for your budget.
All aside from choosing which roaster to use in buying your beans at wholesale prices
Let’s dive in!
Location, location, location
Where you choose to open your business could be the single biggest factor that affects overall costs.
You need to think about both what sort of location is required and the kind of deal that you will make to use the property.
Probably the most expensive option is to buy the premises outright, and this will come with many risks and additional costs such as surveying, conveyancing, increased insurance and any overheads if you need to rent out other parts of the building.
In most cases you’ll simply rent a property and it will be important to choose somewhere that you can afford.
As a rule of thumb, your rental costs shouldn’t exceed 15% of your projected sales – ideally try and get this down to 10% or less by negotiating on your contract and considering several options.
The property will also need to be safe, secure and commercially viable as a café – ideally with some passing trade.
Coffee Shop Fixtures and fittings
Your own business is a chance to stamp your unique style on a business and nowhere is this most obvious than in how you decorate your premises.
The furniture and décor are all important costs to consider but first up you’ll need to think about any building work that you would like to have completed to remodel the infrastructure.
Make sure that you get a few different quotes if you need decorating or remodelling.
Fitting costs and timings can vary dramatically between tradesmen and service providers so it helps to have more than one option.
Similar to the decorating and renovation costs, there are certain branded items that will need to be considered.
Your brand will need a logo and signage, as well as printed items such as menus, brochures and business cards.
You might also want to get branded merchandise such as takeaway cups (both for in-house and reusable takeaway use), aprons, t-shirts and hats.
These costs can be staggered over time as your business grows, so set out a plan for the minimum required set of branded goods to begin with.
Coffee shop machines and equipment is widely available from commercial suppliers so you should be able to find options at a decent price.
Unless you’re purchasing a fully or partially fitted shop, there are several pieces of equipment which are essential including:
- The machinery, such as espresso machines
- Cup and dishwashing equipment
- Refrigeration equipment for milk and other ingredients
- One or more tills to accept payment
- Heating and lighting (aside from the built-in systems)
- Any equipment needed to prepare and store food
Remember that purchasing brand new equipment outright isn’t your only option.
Commercial espresso machines can cost thousands if purchased new but you might be able to find second-hand options or even lease them for far less.
In order to staff your new shop there will be certain costs to take into account, both in setup and on an ongoing basis.
Employing staff is an administrative challenge but it is also essential to enabling you to scale.
First up we have the actual recruitment costs. Even if you do all of this yourself, there is still a cost of your time and attention involved.
Next is training costs. If you hire experienced staff then this should be relatively simple, but every café has its own quirks and individuality that will need to be learned.
Finally we have wages and benefits. Along with salaries you will have to pay employer’s tax and National Insurance contributions.
You may also have holiday pay, pension contributions and other responsibilities – there’s plenty of advice on the HMRC website to help.
Insurance and licenses required
You need to make sure that your business is adequately protected and complies with all local regulations.
Insurance costs will depend on the type of business that you intend to run, the size of the shop, and its location and building.
You should probably budget at least £1,000 per year for insurance but be sure to get expert advice from your solicitor or accountant with experience in your local requirements and options.
Buying & funding a coffee shop
If all of these setup costs and work are starting to feel like they are adding up to a huge task, there is one way to shortcut everything;
Simply buy one that is already up and running!
Obviously there’s no easy answer to the question how much does it cost to buy a coffee shop; it will vary considerably depending on size, location and the state of the premises.
This acquisition will also be the purchase of a business, so you will need to carry out due diligence and negotiate based on the current performance and future potential of the company, taking into account any changes that would occur if you took over.
Making a business plan
Estimates of the total cost of setting up a new coffee business range from £20,000 to £100,000, but there are so many variables involved that it is difficult to give a useful answer on the total cost.
Your own acceptable cost range will depend on what finance you have available and what your projected sales are for the location and style of the shop.
This information will be fleshed out in your business – and this is really where you should start to plan out your own coffee company.
One major factor that will also affect the cost is whether the coffee shop is a franchise or an independent shop.
Purchasing a franchise is a very different process to setting up your own business and there will be a range of both fixed and scalable costs that will need to be considered for it.
A coffee shop franchise cost will depend on the company and type of deal offered. There should be lots of help and support from the franchise license provider that will make things easier, but you will be buying in to a major business and there is a significant cost for this.
To purchase a franchise or license a big brand, you will also likely need to prove your business’ financial stability and experience in the industry or capacity to succeed.
An independent shop won’t necessary cost any more than a franchise, in fact it could cost a lot less, typically anywhere from £20,000 to £100,000 in total.
But by setting up your own, you’ll be trading the support and brand recognition of a big name for the freedom and flexibility of building your own business.
Hopefully the advice above will help you make this process a little easier along the way.