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HOW TO RUN A CAFE WITH BUSINESS PARTNER

HOW TO RUN A CAFE WITH BUSINESS PARTNER

HOW TO RUN A CAFE WITH BUSINESS PARTNER Running a cafe is not an easy task. There are several ways to run a cafe, via franchise, single owner operating, under a management or finding yourself a business pattern that can either operate the cafe with you or run as what...

Is Owning a Café Profitable in Australia?

Is Owning a Café Profitable in Australia?

Profit is one of the primary motives for starting a business of your own. Of course, you’ll also have the privilege of setting your schedule and being your boss, especially in the coffee shop industry; but the money-making potential will make or break you. So the big...

What is the coffee shop running cost in Australia for 2021?

What is the coffee shop running cost in Australia for 2021?

Would you like to run a coffee shop? In this post, we will show you the average coffee shop running cost in Australia for 2021! Australia has a coffee culture that is second to none. Coffee shops are a social hub, as many people meet their partners or friends over a...

WHAT IS A GOOD PROFIT MARGIN FOR A CAFE IN AUSTRALIA?

WHAT IS A GOOD PROFIT MARGIN FOR A CAFE IN AUSTRALIA?

  Are you looking for an answer to what is a good coffee shop profit margin? According to our experience, a coffee business's profit can range from 5% all the way up to 30%. So you might be asking yourself: what makes me go further to the left or right in that...

increase cafe sales: tried and tested strategies for 2021

increase cafe sales: tried and tested strategies for 2021

Looking for tips to increase your cafe sales? To increase cafe sales, you can: hire friendly staff, train your barista, expand your menu, introduce loyalty offers, offer free sampling, do social media marketing, set up an engaging website, upselling, loyalty programs,...

The average profit for a small cafe is about 5 percent, but large coffee operations tend to earn much higher profits. Direct costs average about 15 percent, so most of a small coffee shop’s expenditures go toward overhead expenses. Building sales volume makes a small cafe more profitable.

After owning several cafes, we’ve managed to get to the perfect formula to improve your coffeeshop profit. It is comprised of four components:

  1. Increasing cafe revenue;
  2. Controlling the cost of goods;
  3. Managing staff wages effectively;
  4. Correct product pricing.

IMPROVE YOUR CAFE PROFIT: HOW TO INCREASE REVENUE

We meet hundreds of cafe owners over the last 12 years in the business. One of the things we saw, cafe owners tired of doing business. They were mostly focused on coffee sales rather than a product mix. 

We saw many operators trying to set up a cafe simply focused on coffee sales.

Nevertheless, most of them failed by lack of product mix or volume. Despite being a much easier operation than a full coffee shop,it does not always bring enough revenue. The way of how to improve cafe profit would be adding more offerings to the menu.

In these cases, the only way to improve cafe profit is by being located within an extremely high foot traffic area, it won’t work. 

In most venues, the food side of the business is a very important piece of the revenue stream, and most importantly, we have seen in most cases, considerably pushing the coffee sales as well. 

We recently wrote about the best cafe model for 2021. In that post, we’ve talked about the tendencies and the best ways to increase revenue, it is worth checking it out. 

Another important element that will most definitely help you to improve cafe profit is adding takeaway operations if you don’t have one. Ask yourself as a consumer, how easy, how accessible is my cafe if I was going to grab a takeaway coffee?

growth graph representing cafe profit

HOW TO CONTROL COST OF GOODS FOR EFFECTIVE RESULTS

Firstly, let’s have a quick look at what actually is “cost of goods”. 

As cafe owners ourselves, in order to succeed, we found it critical to understand the cost of goods, simply because it was tied directly to the profit margins of our businesses, revenue, and inventory management. We believe that cafe owners that don’t have control of their Cost of Goods and don’t monitor it, regularly put their business at financial risk. When the coffee shop sells an espresso, for example, the cost of good account for the price of the to-go cup, includes the take way cup, the way lid, the coffee amount used, milk amount used, taxes and the labour directly tied to production.

In order to lower the cost of goods in a cafe, the owner may consider the following steps:

  • Always keep a close eye on inventory;
  • Buy large quantity or in bulk in order to have the economy of scale;
  • Compare suppliers price list, there is a big difference in price from one supplier to another;
  • Reduce food waste by redesigning the cafe menu that uses the same ingredients across several items;

 HOW TO CONTROL OPERATING EXPENSES TO INCREASE YOUR COFFEESHOP PROFIT

What are the operating expenses?

Well, operating expenses in a cafe refers to all expenditure that is not directly tied to the production of goods and services, the list below is a summary of operating expenses:

  • Rent
  • Utilities 
  • Office Supplies 
  • Subscription fees
  • Sales and Marketing
  • Wages or salary
  • Insurance
  • Accounting and legal costs

Now, how did we improve the operating expenses in our cafes? The more you sell the more you will dilute the operating cost.

It is common knowledge that staff wages are one the biggest expenses in any business, hence we always focused on how to improve and reduce the overhead in our cafes. Other ways we found to be cost-effective with payroll was by ensuring to have less high performers in higher wages than several rather than several low performers earning small money and not motivated enough in the team.

Afterward, there is nothing wrong with pushing high-performing workers to outperform their activities, they are super motivated and willing to contribute. On the other hand, we found that it was a nightmare to push low performers to work hard in the busy times, there was always a complaint or two. We also found the more staff we had the less productive the team was and the more it was weighing on the cafe’s payroll.

We tended to hire people with a healthy lifestyle and passion for hospitality, they are much more likely to outperform in the job. If the payroll cost is exceeding 30% of the total revenue, then the business margin is starting to be compromised. 

HOW TO PRICE YOUR WAY TO SUCCESS

There are 3 direct elements that will affect the margin in a business: product price, volume, and mix.

How many times have you seen a cafe selling Coffee + Bacon egg roll under $10? Years ago, it was a common practice, about 10-15 years ago when cafes had much lower operating costs.

Nowadays, “Cost of Goods” and “Operating Expenses” are very high, and not having the correct pricing strategy will directly harm the profit of the business. We are strong believers that if the product is great people will pay the price.

If we were to create a business to sell cheap products, we would have to have an obscene volume to offset. Which is usually not feasible for a local cafe, such as a coffee shop. Otherwise, we would be better off getting ourselves a job, we thought. People selling products at very discounted prices are jeopardizing their businesses.

Besides, from a consumer perspective cheap discounted deals pass the perception of a not-so-good business, struggle survive.

WholeSale coffee

HOW TO RUN A CAFE WITH BUSINESS PARTNER

HOW TO RUN A CAFE WITH BUSINESS PARTNER Running a cafe is not an easy task. There are several ways to run a cafe, via franchise, single owner operating, under a management or finding yourself a business pattern that can either operate the cafe with you or run as what...

Is Owning a Café Profitable in Australia?

Profit is one of the primary motives for starting a business of your own. Of course, you’ll also have the privilege of setting your schedule and being your boss, especially in the coffee shop industry; but the money-making potential will make or break you. So the big...

What is the coffee shop running cost in Australia for 2021?

Would you like to run a coffee shop? In this post, we will show you the average coffee shop running cost in Australia for 2021! Australia has a coffee culture that is second to none. Coffee shops are a social hub, as many people meet their partners or friends over a...

WHAT IS A GOOD PROFIT MARGIN FOR A CAFE IN AUSTRALIA?

  Are you looking for an answer to what is a good coffee shop profit margin? According to our experience, a coffee business's profit can range from 5% all the way up to 30%. So you might be asking yourself: what makes me go further to the left or right in that...

increase cafe sales: tried and tested strategies for 2021

Looking for tips to increase your cafe sales? To increase cafe sales, you can: hire friendly staff, train your barista, expand your menu, introduce loyalty offers, offer free sampling, do social media marketing, set up an engaging website, upselling, loyalty programs,...

How to price a cup of coffee in Australia?

 If you are looking to know how to price a cup of coffee, is your intention really just to know what is your cost? Of course, you want to calculate the revenue that a cafe business will bring you. To efficiently price a cup of coffee here in Australia, these are...

HOW TO START A COFFEE BUSINESS IN AUSTRALIA?

Looking to start a coffee business in Australia and don't know where to start? How good would it be to get advice from an experienced coffee owner? You’ve landed the right place: in this post, we'll share with you which steps we took to create not only our own coffee...

What is the cost to open a cafe in Australia?

If you plan to open a cafe soon, the following question has surely crossed your mind: how much money do you need to open a cafe in Australia? Obviously, the costs might vary a lot, especially if you compare buying an existing business with starting your own café from...

Make your cafe successful in 2021

Many people start a coffee shop thinking that it will be an easy-to-manage lifestyle-driven business. It surely CAN become that, if you know what you are doing. But just having a cool name and offering cheap breakfast combo options is not enough to stand out. So the...

Cafe Owner Salary: How Much can you make In Australia?

Are you looking into making an investment in the coffee business and wondering how much cafe owners actually make? This definitely was a question in our head when we started in the coffee business as well. In Australia, the annual cafe owner salary averages between...