Opening a Tea Room/Cafe

paulwf

First thing I'd say is that you don't actually have £35K to play with. If you signed a lease today you will need perhaps 2 months before opening, and you also need enough extra to live on to top up your profits for the next 6 months or so. If you are burning through £400 p/w that's £3K gone before you've even opened. You're going to need a few thousand to keep your business current account ticking along especially as in catering everything is cash on delivery. Yearly things such as music licenses are up front so your weekly average expenditure figures don't equate to your real cashflow situation as you'll have a lot to pay up front.

On a positive note though as long as you have security (i.e. a house) you might have access to bank loans around twice as much as you put in so you could have a pot of £90K...those loans need to be paid back though.

Anyway, as to fit out costs it is how long is a piece of string? What I mean is a bog standard set of outdoor table & chairs is over £100, will you have 1 table or will you have 10? Freezers can come in at £800 for uprights, will you need 1 or 4? Will you want a refridgerated display, if so that's another couple of grand. There are so many variable what you need to do is drill down to exactly what the concept you want is then work up from there.

I would issue the same advice as always on this forum...if you don't already have extensive experience in this trade get a job in it first. You will get paid while you make mistakes and get your training paid for, there is no more profitable decision you will make for your business! Secondly no one in catering will give you a second thought when you tell them you work 70 hours a week on the shop floor and that is before you get onto the daily admin. You will be working the equivalent of two full time jobs without any guarantee of profits and no holiday pay or sick pay. A lot of people dream of opening up a tea shop but it will be the hardest job you'll ever have if it is open 7 days a week. That's not to put you off but be realistic, it won't be a quaint tea shop it will be bloody hard work!!!

Horace

How about doing some proper research instead of asking family and friends? I know it sounds harsh but family and friends will always say what you want to hear even if secretly they think the opposite.

Proper research means looking at the location where you want to have the tea room, watching the footfall in the area, asking people if they would use a tea room.

Your figures are way out and you have over-estimated what you expect to take in a week, remember when you are starting out you won't have that and you probably wont earn enough to take a wage yourself.

I am not saying that a setting up a tea room can't be done but you need to be realistic. You will need insurance, certainly public liability, you will need hygiene certificates, premises, furniture, equipment. Suppliers and because you are a new business then you probably won't be able to have a credit account with suppliers and will have to pay for supplies up front.

I think you need to do a lot more research before you even consider opening a tea shop.

dottygirl

Davidj thank you for the link. It is a very informative site. OP I wish you well. x

paulwf

Pennywise wrote: »

Have you checked out whether £2k per week is achievable given the number of covers and menu. How many punters can you have in at busy times? How many punters per table? How long will they stay hogging the table? How much will they spend? Then estimate the occupancy percentages at each time of day. It sounds too basic, but you'd be surprised how many people don't do it and find to their cost that they could never have achieved their sales targets! I find it works best to work upwards when doing sales targets rather than guessing a total and working downwards. If you create a simple business model, you can do so sensitivity analysis to see what happens if you, say, amend the average spend, average time to eat, average number of customers at each time of day, etc. It's these numbers that will be the make or break of your business so you really need to know them at the planning stage and then can be far more responsive once you're up and running as you can compare reality against your plans and make adjustments quickly.

This is a great idea that every new catering business should be doing. If the average spend was £3 a head then you'd need around 100 customers a day, and to compensate for rainy days you'll need double that in peak season. Firstly you'll need lots of space as the regulars in my Costa seem to hog the tables for an hour at a time and secondly you'll need a good offering backed up by lots of promo to get 100 punters day in day out. If you can get the average spend up to £5 that'll really help and a healthy takeaway trade will be essential as this isn't limited by space, that should give you two areas to focus on

motorguy

Opening a coffee shop is a fairly standard 'dream' that a lot of people have and the idea is often triggered to fruition with redundancy and a lump sum.

Therefore what i would say is, make sure you arent trying to force your desire to open a coffee shop into a marketplace that cant support it, as opposed to looking at your local town and seeing what it needs, then meeting that need with a proposed business.

Its very easy to come up with turnover figures to support what you want to achieve, and also, as someone has said, family and friends arent the best people to ask.

The four biggies that arent in your figures are VAT, tax on your own earnings, ongoing contingency, and startup contingency.

VAT is self explanitory but is going to eat up a lot of your proposed £2K per week.

Tax on your own earnings - out of your £470 you're going to lose a sizeable percentage of whatever you take out of that as tax.

Ongoing contingency - your £470 net 'profit' out of which you will have to take your salary, means that on bad weeks / months you may not be able to take a wage. How will you pay your own bills when that happens? What happens to you if it happens for a say 9 months in a row?

Startup contingency - you wont hit the ground running and pull in £2000 a week from week one. So what happens if it only pulls in £500 a week for the first 10 weeks?

High street businesses are a fantastic way to burn up large sums of money. You will burn up that £35K very quickly in startup costs and getting the business going, then because of the fact that you will see lots of cash coming through the till it will be difficult to spot - or want to see - that its losing money slowly. Even a £250 a week loss on average is going to put you, personally, in debt by £12,500 after just one year.

Be very, very, very careful.

Savvy_Sue

As promised, previous threads: here is the most recent which as I say has some cracking advice, especially once you come to look at actual premises. But here is probably an even better one, illustrating how much thought you need to put into catering if you want to make a profit. Oh look, here's another! Cautionary tales, aren't they? And there are more, these are just what I found by searching the forum for 'coffee shop'.

Now I know the cautionary tales may not be directly equivalent, but trust me, the bottom line in catering is the bottom line, whatever kind of catering it is!

mizzbiz

Is now really the time to open a tea shop/coffee shop? Really make sure you research this very, very carefully as independent shops like this near me are shutting down all the time. Starbucks is always heaving but the others don't get a look in. A few years ago this was the business to be in and there was plenty of money to be made. Now, it's probably the fastest and most painful way to lose all your redundancy money. Check out the bricks'n'mortar threads on UKbusinessforums retail area. There is a lot of good advice in there and you will see a lot of people struggling with retail outlets at the moment.

It's certainly not a business I would want to be in.

On the other hand, if there are none in your town, it is a touristy style place etc, then you're onto a good thing. I think the chances of this are low.

Be realistic. DOn't be blinded by your 'gut feeling' that this is a good idea. Look at the cold hard facts and listen to what they are telling you. You'll save much heartache if you do.

jexygirl

Gp on tea and coffee is HUGE! But - you need turnover and lots of it, particularly if you are static in a building, with rent, rates, refuse, insurance, staff, utilities, phones, paper, printer ink, chalk pens, cleaning products and blah blah blah. And don't have a clue about buisness or in fact the buisness and the ways to make it work. Its about learning to be a bit savvy- the mistakes we have made over the years, I am considering a book - I look back and cringe how naive we were and sometimes still are, even with us both having years of industry experience!

If you take the plunge with zero experience, it will likely fail - sorry - it will.

Go get a job and let someone pay you to learn, and you will learn alot in a short space of time, about regulations, H&S, costs, busy and slack times, markets, extras, do's and dont's etc.
It is only by working for others, that you can see what you think works or doesnt or could be done differently and better.

If you are adamant on self employment, spend 1k of that redundancy on a decent catering trailer (don't dismiss it till you read on!). You will learn as you go, with less of a financial commitment, and have something to sell on if it doesnt work for you, as well as learning some of the ins and outs of the trade, how to make deals, how to discuss and haggle, how to deal with busy spells, how to be prepared, what makes and brands work and are most cost efficient to you, and what matters to you in terms of time working and not, as well as how much time other aspects such as books, maintenance, clean downs, ordering, paperwork etc. take to do, and make your mistakes without your life savings depending on it.

Do fairs, festivals, shows, car boots, work out whether it is worth the pitch fee once you know how many coffees you need to sell based on price per cup and GP, and how realistic that figure is. Cut your teeth with little or no risk, make the contacts, know the market, learn the trade. It is like anything, you can make a cup of tea - but selling one is alot more than boiling a kettle.

Then decide whether you want to move to the massive commitment of a premises - and if you do decide to, you will be much better prepared on pitch / location /costs and more likely to succeed as a result.
GL
Jex

oldtoolie

Do you have experience working in a coffee shop?. Why not get a job in a coffee shop and see how it is done from the inside. And/or take a restaurant management course at a further education college.

davidjwest

OK thanks, looks like you've managed to persuade me to give up on the idea.

However, I'm a persistant blighter who doesn't give up quite that easily - I've come up with a spreadsheet that works out all kinds of figures and assuming a footfall of 80 customers a day spending on average £4 each with a profit margin of 80% I would be able to make a profit of £25k per annum which is about the minimum I'd want to make it worth my while. This is what I'd be looking to pay myself.

Alternatively 105 customers spending £3 at 70% would have a similar result.

This takes into account wages, rent, cost of ingredients, VAT, utilties, insurance, rates and everything else people have mentioned in this thread.

This makes a lot of assumptions but it is early days yet as I wouldn't be in a position to start the business until early 2012 so plenty of time for more research.

I will be planning trips to my target areas to do a thorough investigation to see if there is the potential market and what how many customers existing businesses are handling. I will then identify target premises and contact landlords, the councils etc to find out what my costs for rent etc are likely to be and how many covers I can fit into the premises. I'll ask the landlords for discounts or even a rent free period while I get the business up and running etc.

I'll also be planning a sample menu with costings to see what my profit margin will be and will take wasteage into account too.

Many thanks for all the valuable information!

One final question - I assume I don't need to register for VAT until I hit the £73k level with regards to income. After that is VAT backdated to take into account the first few months before I hit the level and going forward would you then pay VAT on everything even when the new tax year starts? What happens if in the next tax year you don't hit the threshold etc?

Thanks!