AND Business Consulting Blog Post - Setup a successful café

How to setup a successful café

Café culture in India has witnessed a tremendous boom in the last few years due to factors such as expanding working population, increase in disposable income, change in consumer lifestyle and growing influence of western culture. Here we outline the factors you need to setup a successful café.

India is the world’s 10th fastest growing market for specialist coffee and tea retail chains, valued at Rs 25,700 million in 2018 and estimated to grow at 7% every year.

A café is all about the customer, their demands, new trends and delicious food and beverages. To illustrate, a café must offer free Wi-fi service and plug-points which helps customers carry-out their work peacefully. Unlike restaurants, customers should get ample time to relax. 

Some of the things to consider before you setup a successful café are outlined below.

1. Create a unique selling point

Before starting a café, it is important to identify a unique selling point, something that defines how the cafe stands out from the crowd. A few novel concepts across India include:

  • Roastery Café in Hyderabad roasts and processes coffee beans in-house. 
  • Kunzum Travel Café in Delhi targets travelers and avid readers. Visitors are encouraged to share stories about their excursions and can attend workshops by photographers and writers. It’s run by a team of travel writers. Another differentiator is that customers don’t receive a bill, the café lets you pay as you wish to.
  • The Gallery Café in Hyderabad is a great space for art enthusiasts. The industrial lights, the art corner, the music session are ideal for creative folk. 
  • Café Mocha is a popular coffee chain which draws inspiration from coffee houses of Morocco and Turkey where people gather to spend time over coffee and conversations.
2. Menu engineering

‘Quality over Quantity’ should be the motto. Focus on creating 10-15 great dishes. Also, the menu should reflect the theme of the café and at the same time ensure profitability.

While preparing a menu it is important to understand the prime real estate in a menu – what gets looked at in the first 100 seconds. A few ideas for a good menu include making section headings, emphasizing certain menu items either with an image or shaded/outlined box, including a brief description of dishes, etc. 

3. Ambience & design

The interior design, furniture, lighting, music, colors, etc. give the café character which influences how people perceive the café. The interior design should be aligned to the concept. According to Total Food Service, the average seating plan for a café is 15-20 sq. ft per person. The dining area approximately constitutes 60% of the total area where as the kitchen, storage and preparation area constitutes balance 40%.

Food Truck Empire has written a great article on the perfect layout to setup a successful café of any size.

4. Location

According to CNBC, around 60% of new restaurants fail within the 1st year and the No. 1 reason for failure is choosing the wrong location. Listing and analyzing potential locations based on the target audience makes a big difference to the success of any coffee shop. Good locations for cafés include college/university areas, shopping streets or malls. But, more importantly, the café must be easily accessible, have good parking, and be reasonably close to vendors and suppliers. 

5. People management

It is very important to hire people who are well trained, punctual and sincere. Scheduled training programs ensure quality of service. There are several categories of personnel in the café business: managers, chefs, servers, and hosts. Each person has a specific function but when the café is new some responsibilities get shared. Another important person in the business is the accounts manager who, will take care of profits, expenses, salaries and billings.

6. Marketing your café

Mark your cafe’s presence on social networking sites such as Facebook, Instagram, LinkedIn and Twitter. For example:

  • You could advertise promotional offers for first-timers, weekend-special offers, a contest or an upcoming live performance etc.
  • Put up a small section with photo frames, props and catchy captions where customers can take pictures 
  • Create your café’s website and highlight within the store
  • Invite blog-writers to write about your cafe, its USP and concept
7. Technology

Invest in technology solutions such as self-ordering kiosks, kitchen display systems, tablet menus, etc. to reduce the dependency on manual labour. Technology makes your business scalable and café’s are no different.

8. Investment

The investment required to setup a café will differ based on the concept, location, and size of the café. Some of the key costs in India include:

  • Interior design including furniture: INR 3 – 5 million (assuming INR 1,500 – 2,500 per sq. ft. for a 2,000 sq. ft. location)
  • License cost: INR 0.1 – 0.15 million
  • Kitchen and electrical appliances: INR 1 – 2 million
  • Total: INR 4 – 7 million
9. Operating expenses and profitability

Keep these benchmarks in mind while running a café. The numbers are expressed as a percentage of revenue. 

  • Rental: 10-20%
  • Labour costs (hiring & training): 20-30% 
  • Marketing costs: 10-20%
  • Food Costs: 30-40%

Profitability of a café can be as high as 30%. No matter how good your café, it won’t be sustainable without profits. Keep unit economics in mind as you build your dream.

Do you need help evaluating or setting up a caféGet in touch with us, the foremost management & business consultants in Hyderabad.

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