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How To Start A Coffee Shop or Cafe Business (Step-By-Step Guide)

How To Start A Coffee Shop or Cafe Business (Step-By-Step Guide)

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Has it always been a dream of yours to start your own coffee shop or cafe?

If it is, then you are in luck because we’re going to be going through the step-by-step process from A to Z on how to start a coffee shop or cafe.

We will be building our own little coffee shop together, to give you examples of what this would look like, putting all these steps together.

Now without further ado, let’s dive right in.

1. Identify Your Why

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The first step in building your cafe’s identify is your Why.

Identifying your Why is not some kind of cliché activity.

Your Why should not be things that people talk about just for the sake of talking about it. It is the motivating factor that pushes you out of bed to work 12, 13, 14 hours a day, go back home and then repeat this whole thing day in day out for years to come.

It is the sole reason of your existence. The reason of why your cafe exists. This is what you stand for. It is your light post.

By having a guiding post, you have a lighthouse in the middle of a storm that guides you through all the hardship – it becomes that light of yours.

This is a necessity for any business out there.

When building a business, without this lighthouse, you’re going to get lost. You’re going to be running into hardships – issues with your staff, the city, health authorities and cash flow and without this light post, without your why, you’re going to become lost.

You’re going to give up way, way faster than if you were to identify your why. This becomes your story and factor of why people will come to you. This becomes a reason of you pushing through all the hardships.

Now I understand that this concept is very hard and very difficult for people to visualize and conceptualize, which is a reason why, for every step that we have, we are going to build this restaurant together, we’re going to build this cafe together. And this cafe’s name is called Wilson’s Cafe.

Now let’s dive into Wilson’s Cafe’s “Why”.

Wilson wants to build this café concept in order for him and his friends to come and hang out. He wants a place where he doesn’t feel obligated to spend a lot of money. He wants a place to actually hang out with his friends to communicate with his friends to play games with his friends. He just wants a place outside of his home and for him and his friends to gather together, creating a sense of belonging.

This is the reason why he chose to create a cafe concept and that is his why.

As a side note: Wilson’s “Why” might seem very, very out there, in the clouds or feel quite generalized but it is completely fine.

Having a “Why” statement does not have to be rocket science. It could just be something that feels right to you. This is what motivates you to jump out of bed and what motivates you through all the hardship.

For Wilson’s Café, if I can create a place where all my friends can come and hang out and feel belonged, it’s worth it.

2. Identify Your Concept

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Do you envision a cafe that has seats for people to come and sit and enjoy their food?

Or do you envision a space where people can come in grab and go? Is it going to be a food truck kind of cafe where people can come and go as they wish and have minimal seating?

At the end of the day, identifying your concept is key in order for you to know what you’re trying to build.

If you guys want to know more about key concepts of restaurant types and cafe types, definitely check out this article here as I dive deep into the four different restaurant concepts and the pros and cons of each one. This will really help you to know if building something like a café is right for you.

Wilson’s Cafe is all about creating a space for people to connect and feel belonged, being free from all the different distractions. So, the concept for Wilson’s Cafe would have a comfortable intimate seating.

We’re going to have a lot of comfortable seats which allows people to come and sit for hours to come, because all I want to do is to create a space for people to feel belonged. We’re going to decide on this café to be a dine-in cafe.

As a side note: when we’re choosing the different concepts we need to identify the different types of stress level we want. Do we want to have waiters and waitresses serve our customers? Or do we not want to have to deal with extra labour like that? Do we want to have a place that is going to be a lot more investment or do we want to have a smaller space for people with a grabbing go?

All these things need to come into consideration when deciding on the concept that you choose for your cafe.

3. Choosing Your Location

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Location is key.

We always want a location that has high foot traffic. But with high foot traffic comes high rental costs. This is where you determine how much traffic you want and how much money you want to spend.

If you have deep pockets and you want to spend $10k in rent every single month, then you can perhaps have a coffee shop in a very highly dense location such as a downtown financial district.

Identify your budget and if you know you have lower budget, then the walking traffic would be less.

Aside from foot traffic, there are also other variables you need to consider:

  • Visibility: How visible is your storefront? How visible is it for drive by traffic?
  • Accessibility: The more accessible the location is, the higher the rent will be.
  • Crime rate: The level of safety for your customers. Do you know that the downtown Eastside has a population of drug dealers? Is that something that you’re okay with?

All these different variables can be a bit overwhelming, but they all come into play when it comes to the rental rates. This should in on your mind when you’re deciding on a location, and whether it’s going to be a good fit for your concept and your Why statement.

For Wilson’s cafe, we’re choosing a location that is around $2k to $3k in rent, and it’s a location that is 10 minutes away from the university, right in front of a bus stop.

Choosing a location that has drive-by traffic and is relatively smaller because we need to be able to justify the rent which is at $2000 to $3000.

Never fall in love with one location just because everything looks right. Once you fall in love with it, you neglect all the variables and being analytical. You’re now using your emotions – you’re willing to pay additional premium, because you fell in love with the location.

Look at multiple different locations and by then you’re going to be able to choose the right location for your cafe.

4. Create Your Budget

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The fourth step in building up your cafe is to have a budget and your costs all identified.

We’re talking about the rental cost for your location, budget for rent, equipment, and build out costs.

I highly recommend choosing a location that has already built out to save on costs.

For instance, a unit that already has a grease trap or washroom will cost significantly less than a unit that doesn’t have any of those. It will also shorten the time it takes in your renovations. It is why you see new restaurants or cafes open at locations that were a food business before hand.

Aside from build-out is your equipment. How much are you going to be able to spend on your equipment? Do your budgeting based upon the different equipment that you need for your cafe.

Every setup is a little bit different, but the basic components are: ice machine, under counter cooler, stand up freezer, coffee machine, and POS system. These are all fundamentals for your operation and it’s not something that we want to cheap out on.

To keep equipment costs down, we always want to bargain or buy second hand.

Now where are you going to be able to get them? It is okay to go the auctioneer sites. And a lot of times they items from restaurants that closed within a year or two years of operations. In most cases, they are in great condition and is 40% off.

Make sure you calculate the costs it takes for you to operate your business and how much it will cost for you to break even.

Without understanding your costs, you’re going to be basically rowing in the dark. You don’t know how long you’re gonna last and you don’t know how much you can afford for marketing. You don’t know how much you can afford to be without business from for months and which is a reason why having clarity on your costs is essential. for your cafes success

For Wilson’s cafe, we’ll be cutting down our build out costs by choosing a location that was previously a cafe. So we’re basically only doing lipstick renovation: some painting, some wall graphics and new furniture.

We don’t need to do any structural change, which is reason why our cost is much lower than expected.

The furniture will be leased and we go to auction near sites to source our freezers and coffee machine. This helps us keep our build out costs so below $100,000.

5. Craft Your Branding

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The fifth way to build out your cafe is branding.

What does branding mean?

Branding is everything that your customers experience, whether it be the logo to the interior designed to how you put together your menu to the uniforms to how your website looks, your social media. All of this comes into branding.

Many people make the mistake in thinking that branding is just your logo. It is way more than that.

It is essential for you to understand and identify all the different branding pieces right from the get-go. So then that way you can find alignment across all the visual aspects that your customers would see, whether it’s your logo, your banner, the sandwich boards, all this thing needs to be able to align in order for you to create this coherent image for your customer.

And at the end of day, it’s all about the experience.

Branding is about the experience that your customers feel when they come into your cafe.

The branding for Wilson’s Cafe is going to be hip. It’s going to be inclusive and instagrammable because at the end of day, our clientele is amongst friends.

So we’re talking about the millennial crowd that we want to be able to hit, which is a reason why everything in there is that modern but instagrammable friendly vibe to it. We also have a communal table right in the middle. Everyone can pull in together, we’re going to have board games on the middle. This would make people actually feel belonged and connect with each other.

We’ll also have side tables for the couples that just want to come in, enjoy a cup of ice cream, enjoy a cup of coffee, and just chat. And that’s the ambience that we want to be able to create.

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Music-wise: we can play smooth jazz music to further give a really relaxing type of feeling. And to add a bit of colour, we’re going to have a lot of greeneries in our shop. Not only do plants add to our comfortable ambiance, but young millennials also love greeneries! They love that hip feeling to it.

And that’s the branding that we’re going forward for Wilson’s cafe.

6. Crafting Your Menu

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The next step in creating your cafe is menu design.

It is huge when it comes to the profitability of your cafe. A lot of people think that you know what, I’m just going to sell coffee, sandwich, and that’s it.

You need to understand one thing: your menu should be relevant all year-long.

Meaning that you’re going to have food offerings that as acceptable for your customers throughout the whole year.

This is one mistake that we made very early on with our ice cream shop. Initially, we were selling ice cream and we were super busy during the summer months. Once we got into the winter months, we were not busy at all. We were in the Reds because we didn’t have items for customers during the wintertime.

So I learned the hard way to have items that is good all year-round. Afterwards we made adjustments and offered hot chocolate and hot items. That allowed us to balance off the revenue for a whole year instead of just banking on the summertime.

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You also need to identify high-profit margin items and mix that with items that don’t have much margins.

For instance, if you’re creating a cookie, the cost may be around 50 cents and you sell for $5. This large allows you much more margin to play with and to actually compensate for items that has lower margins.

Creating a profitable menu means having a balanced mix. It allows you to have more profits in your pocket at the end of the day if you understand the math and the cost of goods sold behind everything.

The items that you sell and the numbers is crucial to your cafe’s success.

Now for Wilson’s cafe, we’re going to be offering drip coffee, espresso, ice cream and sandwiches. And on top of that we’re going to be offering to-go items. The reason why we have a wide range of items is so we have a food item that allows people to come in for breakfast, lunch, dinner, and takeout. That way I can run up my revenue.

And on top of that, I’m creating a lot more items that are high-end margins that were subsidized for my sandwiches, which costs a lot more to make, and I’m going to make a lot less money with it.

7. Put It Down In A Business Plan

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Now that we understand our concept, location, branding and menu, it’s time to put everything together into the business plan.

Why do you need a business plan?

First of all, you need a business plan for your own guidance. This becomes your own roadmap that allows you to have clarity and to go and actually from point A to point B.

Business is only a vehicle to bring us from point A to point B. So identifying this whole roadmap to the best of your ability is key to your success. If you don’t have this roadmap, it’s like rolling in the dark. You don’t know where you’re going and you just going to be going in circles.

If you guys want to learn more about how to build a proper business plan, definitely check out this article where I dive deep into all the components necessary for a business plan.

Another reason why having a business plan is crucial for your success is because if you like funding, if you want investments from either angels from banks or venture capitalists, you need a business plan.

Your family members, angels, investors, and venture capitalists don’t know the vision that you have in your mind. They don’t know where you’re trying to go. They don’t know your roadmap. If you ask them for money, they’re not going to give you money.

Whereas if you have a solid business plan that has everything well thought out and answers all the questions that your investors are going to be asking, then you’re going to get your funding for you to start your cafe.

Now with Wilson’s cafe, I put in the concept that we have, the current target audience, where we want to be in the next year, where we want to be in the next three years, and where we want to be in the next five years. We have our financial projections created and we’ve submitted to the bank.

Since we had a solid business plan that gave the bank confidence in lending us money, they gave us a $200,000 to start our cafe.

8. Assemble Your Team

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One of the most important part of running a cafe is your staff.

Without your staff, you’re going to be left without arms, you’re going to be left without legs, you’re going to be running everything by yourself. And that’s not what we want to do.

This is reason why having proper staffing is so important.

Right from the get-go, we need to identify the business culture. This comes back down to your Why. You need to hire people that believe in your Why and the mission that you want to achieve.

When they are bought into your Why and mission, they’re going to be on the same boat as you and going to be all rowing in sync.

The best way to hire these individuals and weed out those who don’t fit your business culture is having clear values to look out for in your hiring process. That way, you can hire all-star staff for your cafe, which will have common sense and high motivation.

When it comes to training, you need to create your own policy manuals that manage the different expectations that your staff might have for your company and that you have for your staff at the same time. This creates a much better culture because now that everything is written everything is clear and cuts any misunderstandings.

Now with Wilson’s cafe, not only do we have a policy guidebook that sets the right expectation, we also have manuals created for every single role: From Barista to Cashier to General Manager.

Why is that the case?

It is because I don’t want to be at Wilson’s Cafe working 12 hour days if I don’t have to. I want to be on the beach sipping on Pina Coladas or doing business development to expand the cafe. So for me to be able to do that, I need to make sure my team knows what they’re doing and can be sufficient without me being there.

The faster that I can take myself out from the business, the faster I can work on the business and create an environment that is going to be belonging for everyone that comes in.

And having a solid manual is just part of it. You need to make sure your team is motivated. That means incentivizing them by giving them proper training and growth opportunities, not penny-pinching them, and weeding out the bad apples.

At the end of the day, creating Cafe is not rocket science, you just need to follow some of the fundamental steps to do that.

Basically, I broke down how I built my ice cream shop and turned that ice cream shop into a seven location chain, which ended up being acquired. So that way you can to can build a successful cafe out there.

You can find more resources on how to market your food business or how to train your staff on this site.

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