Starting your own business is a great way to take control of both your finances and future, and it comes with the added advantage of being your own boss. But before you decide to start a cafe, it is important that you spend time learning about what it takes to run a successful hospitality business. This may include reaching out to coffee shop owners and learning from their experience to determine what works and what doesn’t. And the great thing is it also means going to different cafés to get a sense of what you want your business to be like. Consider what you will learn from other companies and what will set you apart.
So then, how much does it cost to open a cafe in Australia? While there is no one-size-fits-all answer to this question, this article outlines the primary and necessary costs new cafe owners must factor in when deciding to open a cafe.
Buying an existing cafe
Instead of setting up a café from scratch, buying one could save you a lot of time, effort and money. Doing this allows you to overcome the hassles of finding a suitable location, negotiating over a lease, spending money on a build and going through permit processes.
Buying over an established business would allow you to adopt the goodwill of the brand, equipment, rental contracts, suppliers and even staff. If you intend to get financing, bankers and investors are also generally more comfortable dealing with an existing business that already has a proven track record.
However, buying an existing business doesn’t mean you are bound to any previous café concept. You will still have the freedom to explore unique ideas or make changes as you see fit. Costs for existing cafes vary considerably and may depend on location, profitability and a range of other factors.
Location is a defining quality for a successful cafe – but keep in mind that prime real estate often brings with it higher rental costs. Ranking as one of the higher sources of a café’s expenses, cost of rent is mostly dependent on location. For instance, rent in Sydney would likely be higher than rent in Newcastle. The general rule of thumb is that your rent should never be more than 15% of your income, so if you’re paying $38,000 per year in rent, make sure that you are earning at least $250,000 per year in overall income.
Commercial coffee machines are a lot more expensive than domestic ones. A good semi-automatic espresso machine can cost you anywhere between $2,000 and $5,000, while super-automatic machines range from $5,000 to $20,000.
Other costs for equipment and setup might include:
- Kitchen equipment (e.g., dishwasher, ovens, blender, fridges, toasters, microwaves, etc.)
- Storage spaces (e.g., containers, cupboards, shelving, etc.)
- Serving equipment (e.g., crockery, napkins, trays, utensils, takeaway cups, glassware, etc.)
As a nation, we love our coffee – but this means there is a demand for high-quality brew. Considered as one of the biggest expenses in a café, the quality and amount of beans bought should depend on the target market for your café and amount of coffee you expect on selling. Listing the other key items of stock and ingredients for your café is important to determine the recurring costs on food items to account for.
As the first point of contact with a customer – both new or old, a barista plays a very important role in educating customers and creating an effective customer experience. The professionalism and speed of your barista has a large impact on your business. The average hourly rate for a barista in Australia is $25.69. Approximating the monthly cost of a good barista as well as other staff you will require will enable you to ascertain the total staffing costs required for your cafe to effectively function.
New cafes should also invest in the right technology to operate efficiently and streamline day-to-day operations. For instance, by using an online food ordering system in Australia, you can give your customers the flexibility to place orders whenever it’s most convenient for them and pick up food as needed. A good POS system will also help a café to automate processes, take and record orders, transact payment and keep track of sales. Investing in the right POS system will save a café time, money and a lot of potential headaches, and should be an investment consideration for any new café.
How to fund your new cafe
The cost of opening a new cafe in Australia can range from $200,000 to $500,000+, depending on the size of your venue, type of lease, location, and operational requirements. This is a significant investment, and raising the capital needed to get your business off the ground can be difficult. However, there are a few options available to assist first-time small business owners.
Bank loans are a popular source of capital for first-time small business owners, and the major banks provide a variety of options. You can also learn more about how to apply for a business loan by visiting the Australian Government’s business advice website.
Government grants and funding
Financial assistance packages and initiatives to assist new businesses are regularly developed by the federal and state governments. Throughout the year, state governments launch new initiatives based on factors such as employment rates and economic stability. As a result, it is important to stay current on the latest support available for your business in your state or territory.
To estimate the startup costs of your business, you can also use this free government resource.
No two cafes are the same, so it can sometimes be challenging to estimate exact costs to open a café. But with thorough planning and a willingness to explore your options, you can effectively evaluate your start-up costs.