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cost to open a coffee shop

How Much Does it Cost to Open a Coffee Shop?

Date: August 20th 2018        Author: Joshua Phillips

Opening a coffee shop doesn’t have to cost the earth.

But it all adds up quickly. The cost of opening a coffee shop can get expensive if you’re not keeping a watchful eye on your spending. The best way to counteract this is to make a budget and stick to it.

It’s tricky to anticipate what to budget, though.

So, we’ve done all the hard work for you, and added up all the costs associated with starting a coffee shop you’re likely to come across.

Chapter 1

How much will my coffee shop's lease be?

Leasing a cafe is always a daunting prospect. Your lease might be your biggest expense, but there’s a lot of factors that affect how expensive it will be.

The biggest factor is whether you opt for a freehold property or a leasehold one.

Leasehold means that you rent the property from a landlord, while you own a freehold property outright. As you can imagine, freehold properties are far more expensive.

Commercial leases last for far longer than residential ones: the average length of a commercial lease is seven years.

There are other factors that affect how much you’ll pay for your lease:

  • Where the cafe is. Locations with higher foot traffic command a higher price, as they tend to get more customers. That said, location isn’t necessarily everything, and you can create a good business in a less-than-optimal location.
  • What licenses the property holds. Buildings with an up-to-date A3 license go for more, as getting one can be a pretty drawn-out task, and an expensive one, depending on your local authorities. Holding a license already is a big draw.
  • What condition the property’s in. Unsurprisingly, properties in better nick are more expensive. An empty shell will tend to be less expensive than a fully kitted-out cafe, but putting your own stamp on a place can be costly, especially if you have to fit a new kitchen or ventilation.
  • How much similar properties cost. Commercial estate agents are much like residential ones in that they’ll charge pretty much what they think they can get away with. The local property market has a huge bearing on this.

But how much does it cost to buy a cafe?

Leasehold:

In London

£100,000 – £500,000

In the rest of the UK

£50,000 – £150,000

 

Freehold:

In London

£500,000+

In the rest of the UK

£100,000 – £350,000

Chapter 2

How much should I spend on furniture and fittings?

It’s entirely possible to kit out a coffee shop on the cheap — sub-£1,000 cheap. There’s a reason that so many cafes go for mismatched vintage decor, and it’s not just for aesthetics.

But there’s a catch.

To be able to do this, you need to have a properly-fitted kitchen in your property already. Unless you’ve got a particularly vast space or really out-there plans for your cafe, fitting a kitchen will be your biggest expense by a long way.

Once you’ve got this and pesky things like ventilation and access sorted, all you need is a lick of paint and some tables and chairs.

If you’ve not got a kitchen, though, then costs can add up fast. Commercial equipment doesn’t come cheap, and nor do contractors to fit it all. And if you need to do building work to get your cafe up to scratch, then costs become even higher.

furniture icons
If you’re just redecorating, though, then your biggest expense is likely to be a commercial espresso machine. These can cost as much as a small car, but you can cut your expense by buying a second-hand machine or even by leasing one.

So, your costs can vary quite significantly.

But how much does it cost to fit out a coffee shop?

A coffee shop that’s already fitted out:

Cheap

£1,000

Expensive

£5,000

 

Just a shell:

Cheap

£10,000

Expensive

£50,000+

Chapter 3

How much will I need to spend on staffing and payroll?

Staffing and payroll spend will be one of your biggest expenses. And unlike your lease and your fit-out, there’s not much room to manoeuvre due to wages being so low. Go much lower and you run the risk of bumping up against minimum wage limits.

crowded bar


You need staff, though. That’s a given. You can pull shifts, sure, but you can’t run the whole cafe on your own.

Unless you’ve got a really small coffee shop, you’ll need two baristas at the very least. Otherwise long queues will build up and customers will get bored and wander off, never to be seen again.

But what does a barista earn?

In London, the average hourly wage for a barista is £8.41 per hour. Assuming that they’re working an eight-hour shift, five days a week, they’ll make £16,820 yearly.

Outside of London, that figure’s slightly lower. Baristas make an average of £7.86 per hour across the UK as a whole, which works out at a yearly salary of £15,720.

If you’re offering food as well, then chances are you’ll need a chef. A chef’s salary is higher than a barista’s. They make an average salary of £20,457 in the UK as a whole and £24,174 in London.

So how much will it cost to staff your cafe?

A small cafe with two baristas:

In London

£33,640

In the rest of the UK

£31,440

 

A larger cafe with two baristas:

In London

£57,814

In the rest of UK

£51,614

Chapter 4

How much should I spend on initial stock?

When you start up a coffee shop, you’ll need to stock up on a lot. You’ll need to buy everything from coffee beans to flour to cooking oil.

This won’t come cheap — but you won’t need to spend like this on supplies again. After you’ve filled your pantry, your next orders will be smaller ones to stock up on things you’re running low on.

coffee shop supplies
That said, there are ways to keep costs down.

There are a few non-negotiables that you have to buy, no matter what. Like coffee, and milk: running out of these is not a good look. But you don’t have to buy things that aren’t essential, like flavoured syrup.

Instead, you should wait and see whether people ask for them, and if enough people do then that’s a sign that you ought to buy some.

You should focus on buying the essentials and things that are a priority for you, rather than buying everything you can get your hands on, regardless of whether you need it. At best, it’ll take up precious pantry space, and at worst it’ll go off and you’ll have to throw it away.

But how much does it cost to stock up your cafe?

Cheap

£1,000

Expensive

£3,000

Chapter 5

How much should I spend on marketing?

The good news is that you can market your cafe’s opening for absolutely nothing. Utterly free. Not a penny.

It’s easy to leverage your local contacts in order to build up a buzz about your new cafe. This is called word-of-mouth marketing, and it’s an incredibly powerful way to spread the word about your opening.

It works so well because people are more likely to trust the recommendations of their friends and family over any advertising or marketing.

coffee shop marketing

And it doesn’t cost anything to post on social media platforms like Facebook, Twitter, and Instagram, and get seen by people in your local area.

You can use free scheduling tools like Buffer to automate your social media posting. That way you don’t need to remember to post. Just queue up your updates and they’ll post automatically, leaving you free to set up your cafe.

But you’ll reap the dividends if you put money into your marketing. The most effective type of paid marketing for coffee shops is social media advertising. Social media adverts give your business greater visibility, because they get seen by many more people.

One of the main draws of social media is that you can target who sees your adverts. This means that they’re only seen by the people you think are most likely to take action — this might be people within a certain distance of your new cafe, or in a certain age range, or income bracket.

Social media advertising doesn’t have cost much. In fact, because you normally pay based on how many people see the advert or how many people click on it, you can keep costs down. Just keep the audience for your adverts small but precisely-targeted.

social media icons
And it’s worth figuring out the most effective way of making a splash once you’ve cut the ribbon. This might be through offering customers tasters or a freebie, or double stamps on their loyalty card during your first week’s trading.

Marketing doesn’t have to cost you much, but whatever you spend will really benefit you later on.

So how much will marketing your cafe cost you?

Cheap

Free!

Expensive

£1,000

Chapter 6

How much will insuring my coffee shop cost?

Finding insurance for your cafe is never going to be fun, but it’s a necessary evil.

At the very least, you absolutely need employers’ liability insurance. It’s a legal requirement if you’re going to employ people.

If any of your employees get injured while working for you, employers’ liability covers you for any claims that they might make against you and your business, as well as any legal fees.

Beyond that, any insurance is optional. You don’t need to insure your business in the same way that you do a car. That said, insurance is really something you should have.

You should have public liability insurance, which works in much the same way as employers’ liability insurance. If a member of the public is inured in your cafe, then public liability covers you for claims they might make, as well as legal fees.

There are a few other things you should look for in an insurance policy for your cafe. You’ll need product cover, in case your stock gets damaged or stolen, as well as equipment cover.

It may also be wise to get turnover cover. This means that if you’re forced to shut down due to unforeseen circumstances, your insurance will cover you for a portion of the money you’ve missed out on.

The details of your insurance cover will depend on a vast number of factors, but you should aim for £1,000,000 – £5,000,000 worth of coverage.

Many commercial ins

But what will these policies cost you?

Cheap

£100 per month

£1,000 per year

Expensive

£350 per month

£4,200 per year

 

The Grand Total

Let’s do some maths: how much does it cost to open up a coffee shop?

 

table

 

 

Cheap

Expensive

Leasing

£50,000

£500,000

Fixtures and fittings

£1,000

£50,000

Staffing

£31,440

£57,814

Inventory

£1,000

£3,000

Marketing

Free!

£1,000

Insurance

£1,000

£4,200

Total

£84,400

£616,014



Big numbers, right? Well, you don’t have to pay it all at once.

The figures we’ve quoted you are spread over the first year. If you’re leasing a property then you’ll pay the lease month-by-month, and if you buy the freehold then chances are you’ll take a mortgage out.

And you’ll probably pay your staff month-by-month. It’s important that you take the timing of these payments into account when you’re forecasting your cashflow, though.

Once you’ve done this you might find that you’ve got a lot more money to play with than you thought.