Start Right Retail
How much does it cost to start a Café?
Start Right Retail
What is the cost of opening a café in the UK?
How much does it cost to start a coffee shop? There is no one answer to this question, as the cost of setting up a coffee shop varies enormously from one business to another, depending on a number of key factors, from location and size, the vision of the proprietor and the type of café they are trying to start, and their skill and discipline in planning and budgeting.
A general range for a small to medium sized independent café is £25,000 to £120,000 - though it is easy to spend a great deal more than that, and it is possible, with tremendous fiscal discipline, to start on less than that. This guide will take you through the factors that influence the costs of setting up a café, the major expense categories, and how you can make your capital go further.
Key Factors Impacting Set Up Costs
There are a number of key factors that influence the cost of setting up a café. Perhaps the biggest is the range of options the café chooses to offer their customers, especially in terms of food offerings. This will dictate your kitchen needs, its size, and its sophistication, all of which will have an enormous impact on start up costs. It will also increase the amount of space the café needs front of house to serve customers, and increases necessary investment in furniture, serving ware and staff, to serve the customers.
The cheapest café to set up will be a small unit, serving only takeaway coffee, serving very limited food options, which were prepared elsewhere, e.g. premade sandwiches, delivered fresh daily. The most expensive café to set up will be one with a substantial food menu,
An intelligent approach to designing your menu is to try and base your food offerings on high margin items that don't require extensive effort and sophisticated, expensive equipment to prepare. What this will look like will be different for different cafés with, different styles, different clienteles, different locations, etc. but this is the best way to approach the problem.
Location is another factor which will have a big impact on start up costs - premium locations will demand premium rents, while less desirable locations will of course be cheaper. The obvious tradeoff here is that location will be the number one factor affecting the amount of customers that enter your café, so skimping on location can be a fatal mistake for a café. Striking the right balance on not overpaying for rent, while still acquiring a good-enough location is essential to success.
Rent on a quiet high street in a small town might start around £12,000 per year, while rent for a similar premises in a prime location in a major city could easily cost three or four times as much. In terms of start up costs, it makes sense to consider not just your deposit, but also the rent that will be paid while you set up your café, before opening. In some cases this might take weeks, most often months, and occasionally half a year or so.
Equipment
Equipment is one of the biggest contributors to the cost of setting up a café. Any coffee shop will need a high quality espresso machine. Commercial Espresso Machines cost between £2,000 and £13,500, depending on size, brand, features and quality. A large, high quality espresso machine is vital if you want to serve coffee to a lot of customers quickly, which is especially important at peak times. Very busy cafés, like many Starbucks, will in fact have two large espresso machines, but this is rare for independent cafés. Smaller, more relaxed cafés can get by with smaller espresso machines, but even the smallest commercial espresso machines are expensive, costing £2,000 - £3,000. Small machines will limit your peak service capacity, and given that a lot of cafés' revenues are concentrated in just 90 minutes or so of each day, limiting your capacity in this way can be a big mistake.
Refrigeration
Refrigeration is the other high cost equipment category for cafés. A coffee shop will need a variety of different types of refrigerator, and high quality commercial refrigerators are quite expensive. Cafés will need undercounter refrigerators to keep milk cold and easily accessible to baristas. Undercounter refrigerators typically cost £250 - £540 each, and a service area will typically have around four of them.
Some combination of standing refrigerated displays, upright coolers and beverage coolers - displaying wares like soft drinks, water, sandwiches and pastries - will be necessary, placed strategically to entice customers into purchases. These will cost in the region of £500 - £2000 each, again depending on size, brand and quality. Behind the scenes a café will also need freezers and larger fridges for storage of perishable ingredients, bulk supplies, and backup stock. A 566 litre kitchen refrigerator, which should be sufficient for a small café not preparing food can cost £700 - £1,500, while a large 1,200 litre fridge, better suited to a café with a substantial food offering, will cost anywhere from £1,400 to £2,400. Add in the cost of a freezer, and it is easy to see how refrigeration equipment can cost several thousand pounds.
Other equipment, from coffee making tools and utensils like grinders, tampers, frothers etc to appliances like dishwashers, blenders, ice-machines, Point of Sale (POS) system, till - some of which are optional, and some of which are not, will add thousands more to the bill.
Kitchen
Perhaps the biggest impact on a coffee shop's set up costs will be the type of kitchen, if any, that they are developing. Setting up a commercial kitchen to prepare a diverse menu of in house food offerings can double set up costs. Alongside commercial cooking equipment, which is very expensive, you will need to invest thousands, and perhaps tens of thousands of pounds on ventilation, plumbing and installation.
On the other hand, Simple Cooking equipment like microwaves, panini presses, commercial toasters however can be a great way to open a substantial revenue stream at a relatively low cost.
A café can of course dispense with a kitchen entirely, serving only coffee, beverages, food and pastries that have been prepared elsewhere and brought in. In any large city in the UK there are numerous companies which prepare sandwiches, pastries etc. fresh daily for delivery to cafés to be sold by them. This will naturally reduce the cafés margins, but will also substantially reduce their set up costs as they can dispense with the need for a kitchen, and the infrastructure costs, regulation, licences and space requirements that goes with that.
If you don’t have the start-up capital to purchase all necessary equipment immediately, you can lease important items like refrigerators, freezers, dishwashers and most importantly espresso machines. This can reduce your initial start up costs by tens of thousands of pounds. It has the added benefit of allowing you to assess your equipment needs in practice. Instead of trying to guess your needs in advance you will be able to see if you have adequate refrigeration without buying too much refrigeration or spending too much on too large an espresso machine, when you only need a medium sized unit, and so forth.
Fitting Out
Alongside the cost of Equipment, the other major expense category in setting up a café is fitting out. Fitting out is the process of preparing your space to receive customers. It involves things like painting, decorating, and furnishing your space. Some spaces, if they have been used for a similar purpose in the past, may require a very small amount of time, effort and capital to fit out, while other spaces may require extensive work, including things like plumbing, lighting and flooring, which can be very expensive and take months of work.
If you are doing a lot of work on an unprepared space like flooring, plumbing, plastering,and painting, you may want to negotiate with your landlord to secure a fit out contribution from them. A fit-out contribution is a financial payment or allowance provided by the landlord contributing to covering some of the costs of improving the space - after all this work will increase the value of their property.
A counter, an integral part of any café, can be quite expensive to install assuming your property does not already possess one. A high quality counter set up from which to serve your customers custom made by carpenters to suit your space and needs, with space on top for equipment and displays, undercounter room for refrigeration, and connections for plumbing and electronics will cost £2,000 - £7,000, depending on features, size and materials. There are carpenters which specialise in this area, so shop around for the best deal. This is one of the most important features of your café so it is important to get it right.
A more cost friendly approach can involve using prefabricated shelves/ counters which you assemble yourself. This is much more difficult to get right, but it can be done – and can bring a big cost saving. Minimalistic, creative approaches, when done right, can be aesthetically pleasing as well as friendly to your bottom line.
Other Costs / Finishing Touches
To complete your set up you will need to stock up on your initial inventory, both of foodstuffs and coffee, but also of ‘non-food’ inventory - cleaning supplies, paper goods, disposables. You will need servingware for your customers, dishware, glassware & cutlery for sit in customers, and paper cups, lids, napkins etc. for takeaway customers. (£400 - 3,000)
There are several different licences, registrations and certificates a café will need to be aware with, comply with, and pay for. For example, a commercial gas safety certificate, which will cost £100 - £300 pounds, depending on the number of gas powered appliances you have. Needing but not having your gas safety certificate can lead to fines of up to £6,000 and jail time. In total, depending on what licences and registrations you need, costs can range from less than £200 into the thousands. You can learn about what licences your café needs in our Guide.
You may pay for professional services like interior designers, architects, and lawyers. The latter two are vital if you are applying for planning permission, and possibly dispensable if not. If you do engage their services, these professionals can be very expensive - hundreds of pounds per hour for a run of the mill lawyer - so this can add thousands of pounds to your set up costs. If you have to apply for extensive planning permission these costs can easily run into the tens of thousands of pounds.
Another thing to consider is working capital. Working capital is cash you have available to cover operating expenses as your café gets up to speed. It’s also a cushion for when things go wrong while you’re setting up, for delays, unexpected problems and nasty surprises which will happen more often than not.
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