What do I need to start my own coffee bar?

A basic guide to starting a coffee shop.

Starting any new business can be quite a daunting task. Opening a coffee bar is no different.If you have never done anything like this you probably have many questions. With this document we hope to answer most of the questions you may have. This will help you to decide if you actually want to proceed with business or not. If you decide to proceed it will make life a little easier.

Disclaimer:

Please note that this information is not financial advice and is only intended to assist you in assessing whether or not his business is for you and to give you an indication of the funds and knowledge required. There is no substitute for getting advice from a qualified business advisor and/or a good accountant with business experience.

Before we continue we want to bring the following important points to your attention. (The amounts given were based on prices in 2021)

1. Setting up a coffee shop is generally quite an expensive venture. Generally speaking a coffee shop or coffee bar makes coffee using an Espresso machine. The coffee machine with its accompanying equipment will set you back around R80 000. If you want the best equipment available this cost can go up to R350 000 and even more. Then you still need fridges, blenders, hot water urns, kitchen equipment(depending on your menu) furniture shop fitting etc. It would be safe to budget for a minimum cost of R300 000 for a basic coffee bar. Depending on the size of your setup and the complexity of your food offering the costs can increase dramatically. A mobile setup (trailer) will cost between R250 000 and R350 000.
2. Rent is one of your major expenses and can kill your operation very quickly. Shopping malls are incredibly expensive and the owners are absolutely ruthless if you can’t pay your rent. It is however important to have good visibility, more than enough parking and easy accessibility. Less visibility will result in more marketing spend and effort to get customers into your store. 
3. You will require working capital to cover 3-6 months worth of expenses.
4. Running a coffee bar is hard work. It is not for everyone. Many people have romanticised the idea of coffee shops but end up selling or closing their shops within months after opening because they cannot cope. Long hours and lots of stress is part of this business.
5. You have to love what you do. If you are not passionate about coffee and about serving customers this is not for you.

If you are still keen to proceed - Great News.

Where to start:

All business advisors will tell you that you need to have a business plan before you do anything. Setting up the business plan may be a little bit daunting if you have never done anything like this so our first step is to try and make it a bit easier by asking a number of questions, which when answered will make the next step easier.

Questions:

1. Why do you want to open a coffee shop and not another type of business. Are you passionate about coffee and serving people. 
2. What is your vision for your shop? What do you see? A small coffee bar serving mostly take aways with light snacks? A big bustling coffee shop with a full food menu or perhaps a mobile coffee trailer? You need to know this so that you budget for the type and size of space you will need wrt rental cost and shopfitting.
3. Do you just want to serve good quality coffee or do you want to go into the niche of speciality coffee? (this will influence the type and cost of equipment you should be budgeting for as well as your menu costing)
4. If you want to have a fixed location do you know where you want to open your shop? Do you have an idea of the type of premises and location you are looking for.
5. Are planning to manage and work in the shop full time? If so, you need to budget for a salary for yourself. If not that may mean you need to hire a manager(depending on the size of the shop) or be sure you have a very reliable employee that can open and close and do your cash up for you.
6. Do you have cash reserves you can use to finance the setup cost and your first three to six months of operating costs? Banks generally do not finance start up businesses. 

Budgeting for equipment and furniture (Rand values are approximate and will vary depending on the size of shop and the level of equipment bought)

1. Espresso Coffee Machine  - R65 000-R250 000
2. Grinder - R15000-R50 000
3. Coffee small items - R5000 - R10 000
4. Cups & Saucers - R60-R80/ cup & Saucer
5. Cutlery - 
6. Blender - R4000-R10 000
7. Urn - R1200 -R1500
8. Underbar Fridge - R20000 - R25000
9. Upright Fridge - R10 000
10. Cake Fridge (optional) - R60 000
11. Cake glass domes - R350 each
12. Chest Freezer - R3000-6000
13. Ice machine (Optional) - R12 000 - R25 000
14. Tables - R1000-R2500 each
15. Sandwich Toaster - R5000
16. Chairs - R350 each for plastic & aluminium, around R1100 for a wooden chair
17. Microwave oven - R3000
18. PA system for music - Get quotes
19. POS system - There are free options  and very fancy expensive systems. There are too many variations to give you a number.
20. Alarm System - R10 000
21. Generator (if your landlord does not provide an alternative power source) - R15 000 - R100 000 depending on your power requirements

Add a Kitchen: (The kitchen equipment will change dramatically on the size of your kitchen and depending on the type of food and complexity - this is a very basic list)

1. Stainless Steel Tables
2. Gas Cooker 
3. Microwave
4. Shelving
5. Double basin stainless steel pot sink
6. Oven (Optional)
7. Heavy Duty Mixer(Optional)
8. Chip Fryer
9. Extractor hood (Require if you are deep frying and/or flame grilling)
10. Kitchen utensils (Knifes, Spoons, Mixing Bowls,)
11. Fridge
12. Dishwasher (Optional)

Operating expenses:

1. Rent (First payment is normally 1-3 months deposit plus first month rental) Rentals vary dramatically depending on location but can vary from as low as R100/m2 in a low foot traffic area to R275m2 (or more) in a strip mall and even higher in bigger malls. The big malls often charge a levy on your turnover as well. 
2. Salaries (Identify all the positions required and do a job description for each position - Initially one person can fulfill more than one position)
3. Water, Electricity, Security & levies - The landlord can give you an indication of costs based on previous tenants but you should budget for R5000-R10000.
4. Armed Response fees - check with your local armed response company. Always pick the company that has a visibility and presence in the area.
5. Monthly POS fees (if applicable) - These days there are many options available - some for free and some really expensive. It depends on the size and complexity of your business. Shop around - ask for a number of quotes and demonstrations. Some systems are available on rentals but watch out they can work out very expensive in the long run. Check on license fee structures - some companies charge a hefty fee per user or per workstation.
6. SAMRO License fees - Every company that plays music be it recorded or a radio station or Spotify or whatever is required to register with Samro and pay an annual license fee.
7. Pest Control - You are required to have a monthly pest control service and may have to provide the health inspector with a certificate to show when your last service was done. Shop around - DO NOT sign long term contracts with providers. 
8. Insurance - Ask for a good number of quotes. It is generally better to work through a broker that can advise you on what cover you need. A good broker can save you a load of money not always by being the cheapest but by ensuring you are correctly covered and he will fight your case with the insurer if required.
9. Stock Purchases- Once you have drawn up an inventory of what you need to open your shop-price all items and budget accordingly. Ensure that you have cash available to replenish your stock at least three times.
10. Accountant  - get a GOOD accountant - the best you can afford. Cheap accountants will cost you a lot of money and aggravation and maybe even your business!
11. Advertising - In the beginning you need to spend a substantial amount of money on advertising and promotion to make sure you get as many clients through the door as quickly as possible. Just posting on Facebook and instagram is not going to do it for you especially as you will only have a small amount of likes. Budget to spend around R5000per month on social media ads. You should also budget to do some promotions like flyers or discount vouchers(or a buy one get 1 free voucher) 
12. Bargaining Council Fees - This is small money but the registration is very important to avoid penalties.
13. Maintenance (Allow an amount per month for small unforeseen repairs)
14. Equipment servicing - Check how often your equipment requires servicing/cleaning by authorised personnel and budget accordingly. Chimneys and extractors must be cleaned according to pre-determined schedules to avoid the risk of fire.

Registrations

1. If you are going to operate your business in Close Corporation or private company you need to register the company with SARS for tax purposes - Your accountant should assist with this.
2. Business License with municipality
3. COA - Certificate of acceptance with local department of health
4. Fire Department approval - you need to submit plans of your shop to the fire department for approval.
5. SAMRO - playing music in a public place
6. Bargaining Council
7. Tax - PAYE and VAT(if applicable)
8. UIF and Compensation commissioner

Lease:

1. Zoning - Ask your landlord for proof of zoning that the space you are renting is approved for a restaurant.
2. Make sure before you sign the lease that the number of toilets on site conforms to Health department requirements
3. Contract Duration - Do not sign a contract for longer than 12 months on your first lease. Ask for at least 1 months beneficial occupation. (Free rent)
4. Permissions - get written permission form the landlord for ALL changes you need/want to make before you sign the lease.
5. Act of God - Familiarize yourself with the “Force Majeur” or “Act of God” clause in the contract. Ensure that the rental contract makes provision for a rental holiday in the case of any event that may be described as an “Act of God” (eg. Covid 19) - Many businesses failed during the Covid-19 pandemic due to landlords that demanded full rental during the lockdown.
6. Familiarize yourself with the lease in all respects but in particular with the clauses regarding to maintenance and repairs of the building to make sure who is responsible for maintenance. Some lease agreements place the full onus for maintenance on the lessee. You want to avoid that at all costs.

Staff & Training:

1. It is very important that you recruit the correct staff from day 1.
2. Check people’s qualifications and referrals - do not accept their word.
3. If you are employing a foreign national make sure they have valid and legal residence documents and work permits - There are massive fines and imprisonment for you if you employ an illegal foreigner.
4. Get a labour consultant to assist with good quality labour contracts  - this will save you lots of headaches later
5. Make sure that you know what the minimum wages in your area are for the different positions - Remember that even if someone agrees to work for a lower pay it is still illegal.
6. Many employees claim to be able to do a job that requires a specific skill set eg a Barista or chef. Make sure they can do what they say they can do through external assessments of very good references.

You can also read this article published in the Coffee Magazine.