How To Open A Cafe With A Limited Budget

It can be exciting to open a café and to do so with a limited budget can be overwhelming. Sometimes it can be difficult to know where to start. And the truth is, many of us have a few things going on all at the same time. So, here is a list of what to look for and helpful tips and tricks that can keep you on the right track. Some of this information may not apply to all of you but I do hope that helps.

To open a café with a limited budget first find the right location that meets your needs and budget, decide on a menu, create a budget, build a business plan, learn about zoning, permits, registration costs, legal fees, building costs, equipment/ inventory, and finally funding. 

Who doesn’t love going to that nice local café where they know your name, your favorite coffee, and how your family is doing? How about a place where you can get your favorite morning brew and grab a quick bite for breakfast or lunch? A place where you might see your kid’s teacher, a local political figure, police officer, or firefighter also grabbing their coffee for the day. This has always been the type of café that I enjoy going to. 

There are so many factors when starting a small business, then making that business a café just added more to your plate. Keep in mind that everyone does not have unlimited funds, so being a detail-oriented and frugal type of person, lists are the way to go. First, you start with a basic list. Then begin making sub-lists of the original lists. Thinking outside of the box is crucial here.

Next, comes the research on the items you have written down. Look online, check out books from the local library, and learn to ask questions from other small businesses in your area. 

Finding the Right Location

This is not something that you want to rush into. There are a lot of things to consider when looking for a location for a café. Below are some different locations that are can work with a limited budget. 

• One could be an adorable small storefront near the center of town that would be perfect for a café. While it is cute and a perfect setting, the cost of renting might be more than a limited budget can handle.
• The second location might be on the outskirts of town near where young families live. While it was not as perfect, the rent may be more affordable, but it may still be higher than you want to pay or can afford on the budget you have set for yourself.
• The third location, the rent is right within the budget, but the location is not in a heavy traffic area and the neighborhood is not very good.

There is a lot to consider before signing on the bottom line.

Observe traffic in all the areas and compare what the foot traffic flow could be and how much the rent of the location is. It’s all about balance. Too little foot traffic and there may not be enough customers. On the other hand, with too many customers at one time, you might end up losing business because they don’t want to wait.

Here are some other things to consider:

Is there

• enough parking spaces, 
• convenience for customers, 
• ease of deliveries, 
• demographics of the area vs the type of café to be opened,
• what will need to be remodeled, refurbished, or rebuilt,

Menu

Quality vs Quantity 

Knowing right from the start what is going to be served like sweets and savory treats with great coffees and relaxing teas. Deciding to start small and just offer a few things in each area will help with budgeting. This way, growing the menu will help to build customer retention. Here are some things that need to be considered:

• What is the cost of goods to make those sweets and savory treats?
• Can you maintain the quality of the food?
• Can you handle the quantity that will be needed?
• How many different items to serve? 
• Offering alternative menu items like gluten-free?
  • And what is the cost associated with this?

Bakery Supplied Goodies

Some great bakeries will supply sweets and savory treats for you to serve in your café. There are things to take into consideration when going down this avenue. Like:

• delivery schedule and cost for delivery
• cost of the goodies – the bakery you purchase the food from is going to charge you for the goodies because they are doing all the work
• are you selling the same things that the bakery you are buying from is selling?

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Creating a Budget

Here is where we get into the nuts and beans of this venture. Hopefully, you have answered some of the questions that were brought up earlier in this article. If not, you will need to find the answers to put into your budget. I would also suggest that you stick to the adage of “Thinking Outside Of The Box”. 

Two different types of budgets need to be developed. 

1. Startup Budget
   • There are a few free resources available by searching online for “cafe budget template startup business”. Here is the one by Monday.com
2. Monthly Operating Budget

• There are free resources available by searching online for “café budget template”. Here is the one by 7SHIFTS. This site also offers a paid subscription
• In doing your research, call the local electric company to see what the average kilowatt-hour usage is for the space you are looking at. This will help with your monthly budget. The same can be done with water, sewer, and telephone companies.

Business Plan

Wikipedia defines a Business Plan as a formal written document containing the goals of a business, the methods for attaining those goals, and the time-frame for the achievement of the goals 

Don’t miss this step in having a successful café. By having a good business plan in place, you will have a roadmap for how to structure, grow, and run your café. A business plan can also help you obtain business partners and or help you get funding. Investors want to see a return on their investment. A business plan helps them feel confident that they will see a return on their investment.

The Small Business Administration has many resources to help you write a good business plan. They even have a lean startup format. Check out https://www.sba.gov/business-guide/plan-your-business/write-your-business-plan which is what I did. There are other free and low-cost options available, just search.

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Permits, Registration Costs, and Legal Fees

Some general licenses and permits are needed depending on where you are opening your café. Some licenses and permits are required to be renewed annually. Several of these include:

• food handling permit
• building health permit
• sign permit
• resale permit – for charging sales tax
• business license – for city, county, and state
• building permit – to comply with applicable building and safety codes

Legal Fees

Talking with an attorney is a good idea regarding the issues that are going to happen and how to create a plan to handle the issues that come up. This blog can help to answer some questions and help you think of other questions. https://www.hoganwillig.com/blog/why-your-restaurant-needs-an-attorney Then you can find an attorney in your local area to talk to. 

Building Costs

Here is a short list of building costs that may need to be dealt with when designing and building your space, some may be included with your rental agreement:

• power supply/ lighting
• water/ plumbing 
• storage and displays
• interior design/ furniture
• music system
• signage

To stay within a limited budget, there are many ways to reduce the initial outlay of funds for building costs. This can include shopping at 2^nd hand stores or consignment stores for furniture, display pieces, and signage will help keep costs down.

Another budget-friendly idea is to talk to family and friends to see if they can help with manual labor, like helping with the installation of a music system, or installing shelves, painting, designing, and installing building necessities versus hiring a professional.

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Equipment and Inventory

Buying vs Leasing

Where to start – research and ask/answer a lot of questions. While there will be some equipment you have to buy or should buy, there are others you can get second-hand or lease. Some equipment, like a coffee grinder or an espresso machine, you will want to buy. This is the backbone of the café. Investing in reliable, high-quality machines will cost a bit more at first, but it will save time and money in the long run. Again, make a list, ask, and answer these questions:

• What inventory do you need?
• Could I find good equipment that is used? 
• Could I lease equipment? 
• What is the difference in cost over the long run?
  • Is there a warranty? 
  • What about servicing the equipment?

There will be some inventory that you will have to buy, there is just no way around it. And if you have found a location to lease that used to be a restaurant, some of the equipment/inventory may already be installed, it may have to be moved depending on your design layout.

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Funding Sources

There are many different sources to get funding for your café. And this is where your Business Plan is going to come in handy. Why you ask. Investors want to see the roadmap that you have created that shows the structure of your business, the operating plan, and the planned growth of your café. These investors may include:

• family 
• friends
• partners

Not all funding has to come from investors, here are some other ideas:

• crowdfunding has become popular over the past few years
• bank business loans, including U.S. Small Business Administration-backed loans
• credit cards and lines of credit

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Frequently Asked Questions

To learn more on how to start your own coffee shop checkout my startup documents here

Please note: This blog post is for educational purposes only and does not constitute legal advice. Please consult a legal expert to address your specific needs.