The essential guide to opening a cafe or coffee shop

Considering opening your own coffee shop? Read our guide to planning and opening a café.

Despite our international reputation as tea drinkers, the UK has become a nation of coffee connoisseurs.

The last few decades have seen us switch our affections to the bean with coffee consumption steadily narrowing the gap with the traditional cuppa.

The market is growing again after a lull during the early 2020s – by January 2024, the number of cafes and coffee shop customers began to return to pre-COVID pandemic levels.

The UK coffee shop market is growing, and opening a café can be a great choice if the location, concept, staff, and business plan are right.

Is opening a café or coffee shop right for you?

Opening a coffee shop isn’t for everyone – and if you’re picturing a kind of slack-paced Central Perk café found in an episode of Friends, then the reality of running a coffee shop may come as a shock.

Like any catering business, making a coffee shop successful requires skill, stamina, and hard work.

Many people open a coffee shop without knowing what’s involved or having the experience needed to get it off to a good start.

If you’ve never worked in the food services industry, getting some experience working in someone else’s coffee shop is a good idea.

This will help you understand the scale of the work involved and learn the ropes regarding suppliers, marketing, and customer service.

You don’t need specific qualifications to run a coffee shop, although it’s a good idea to take courses on general business skills such as bookkeeping and marketing, as well as key topics such as catering and food hygiene.

Additionally, having barista training and a good knowledge of the coffee-making process would be useful.

Here are some skills that would come in handy if you’re thinking about starting a coffee shop:

leadership and team management
barista skills and food safety knowledge
financial literacy
customer service
adaptability and problem-solving.

Watch this: What goes into making a cup of coffee? Fine Dining TV reveals how your daily espresso goes from bean to cup.

The pros and cons of starting a coffee shop

Opening a coffee shop can be exciting, combining rewards and challenges.

Thinking through the pros and cons can be helpful before you take the plunge.

Here are some examples to consider:

Pros

direct customer interaction – having a business which is open to the public allows you to build relationships with the local community
community impact – you can create a space for the local public and support local businesses
brand building – opening a business gives you the chance to build your own brand
financial independence and potential for growth – although there are initial set-up and ongoing costs, you could build a stable income stream and go on to open additional locations.

Cons

possible high operational costs – costs can vary and could include salaries, supply costs, and general maintenance
regulation compliance – when opening a café, owners must follow health and safety regulations
competitive market – you will be in a competitive market, with many established chains and independent shops
high initial cost and financial risk – starting a coffee shop requires an upfront investment, and there is the possibility of financial loss.

Should you buy an existing coffee shop or start your own?

When considering starting a business in the hospitality industry, there are typically three options to choose from:

buying an existing business
investing in a franchise
starting a new business from scratch.

So, which one would work best for you?

Buying an existing coffee shop

Buying an existing coffee shop could be a smart move for aspiring business owners.

One of the biggest advantages of this option is that the business is already up and running, which means you could start earning an income straight away.

There may already be an established customer base of regular customers.

Consider researching whether the business has a positive reputation – if not, this could impact its future success.

Also, conduct a thorough analysis of the business, ensuring no hidden issues exist.

These could include underlying debts (depending on the terms of sale), infrastructure issues such as problems with the building or equipment, or issues with the supply chain for key products.

Starting a coffee shop business from scratch

Starting a coffee shop from scratch means you can have creative freedom over the type of business – including the concept, menu, design, brand, and ethos.

However, start-up costs can be high, including purchasing or renting a space, as well as buying equipment and initial stock.

It may also take longer to get the business up and running and to attract regular customers.

Opening a café or coffee shop franchise

If setting up your own independent coffee shop sounds daunting, consider a franchise instead.

Many big brand coffee chains, including Costa and Starbucks, operate as franchises.

For a franchise fee and ongoing royalties, you can buy the rights to use the established company name, trademarks, business model, and products.

With the support of a known brand and training on how to set up your coffee shop, deal with suppliers and hire and manage staff, a franchise offers a less risky entry into the coffee shop business.

Buying a franchise can be a significant investment, so it’s advisable to thoroughly research the specific costs, expectations, and support provided by the franchiser.

Learn more about the costs involved in buying a franchise.

Researching your business idea

Market research is a key factor to consider when opening a café.

This process can help you understand the market landscape, identify your customers’ needs, and tailor your business to meet their requirements.

Here are some key things to consider when researching your business idea:

your customer and their preferences – consider your consumer demographic – are you targeting students, professionals, or local residents? What is their lifestyle, and how can you appeal to them?
competitor coffee shops – visit other cafes to observe what they offer and assess how you could do it differently or better
coffee shop pricing strategies – looking at how similar businesses price their products could help you decide on the best price points for your own cafe
competitor marketing strategies – checking how other coffee shops are marketed could help you decide how to stand out from the crowd.

Decide on the type of coffee shop you want to open

Are you planning to open a cosy den with squashy sofas or somewhere with a high-tech, stylish urban feel?

Before you decide on the type of coffee shop you’d like to open, consider your target market, your planned location, and the nearby competition.

Think about keeping your concept flexible until you have worked out costs and profit margins, as you may need to adapt your plans to suit your premises.

Remember, the size and layout of your coffee shop can make a difference to its potential success.

For example, a coffee shop with lots of comfy sofas and free refills may end up filled with customers nursing one cup of coffee for hours, which may not help you meet your operational costs.

If you’d rather focus on serving as many customers as possible, you may wish to look into creating a business predominantly for takeaways, with only a small number of tables and bar stools.

This way, you could serve more customers who pay the same as sit-in customers, but with lower overheads.

Watch this: Need some inspiration when it comes to opening an independent coffee shop? Watch these start-up owners give the lowdown on running an independent coffee shop.

How much does opening a café or coffee shop cost?

Start-up costs for a coffee shop can vary greatly depending on your business’s size, style, and location.

It could be easy to overspend on fitting out your coffee shop, so consider focusing on return on investment and only spending on the things you need.

Like any other business owner, you will need to manage the administrative aspects of your business effectively.

This includes ensuring you meet all tax obligations such as income tax, VAT (if your turnover exceeds the current threshold), and National Insurance contributions.

In addition to these, you may also have other expenses, which can include:

rent
business rates – a tax that is charged on most non-domestic properties
furniture and fixtures
utilities – expenses like electricity, water, and gas
supplies – ongoing costs of coffee beans, food ingredients, cleaning supplies and so on
employee salaries – the cost of hiring baristas and other staff
equipment and maintenance.

Being well-organised can help your coffee shop run smoothly and avoid unexpected issues or penalties.

When it comes to making the coffee itself, you may want to buy some or all of the following:

coffee grinder
commercial espresso coffee machine – these can cost anywhere from around £1,500 to £10,000 or more, whereas you can often lease them for as little as £5 per day
barista kit
knock-out drawer
water softener
commercial-grade dishwasher
point of sale software (to manage orders and payments) and a credit card terminal.

Consider buying second-hand items or leasing them – this allows you to manage the cost by spreading out the payments over time.

Staff could be your biggest cost after rent, equipment, and stock.

Consider how you can pay staff an equitable wage while remaining competitive.

Remember, you must pay employees at least the National Minimum Wage or National Living Wage, depending on the age of your employees.

Allow for expenses including business and contents insurance, supplies, licenses and permits, utilities such as electricity and gas, marketing, repairs, and maintenance.

Organise your finances and legal and tax responsibilities

Think about ways to get the administrative side of your business in order – you may need to pay income tax, VAT, and national insurance, in addition to other expenses.

Read our guide to business tax for more information.

Ensure you’re registered with HMRC and Companies House and consider registering as a limited company.

Many people invest their own savings in their new coffee shop venture but there are alternative sources of funding available.

How to fund your coffee shop or cafe business

There are many options for funding a coffee shop business.

A Start Up Loan is a government-backed personal loan available to people looking to start or grow a business in the UK.

You can apply for up to £25,000 and repay the loan over 1 to 5 years.

A business loan can be an accessible option for someone starting a small business.

A loan could be used for buying new equipment, moving to new premises, marketing, market expansion, or day-to-day running costs.

Find out the difference between a secured loan vs an unsecured business loan.

Personal loans work by borrowing a fixed amount, which is paid back in monthly instalments over an agreed period.

You could also pay back your loan before the end of your term if this is stated in your credit agreement.

There are a number of grants available for small businesses in the UK - look into what could be available in your area.

Crowdfunding is another way to raise money from the public and small investors.

Look into platforms such as Crowdfunder and Crowd Cube.

Create a coffee shop business plan

For many business owners, a business plan is essential – having one in place could help you secure funding for your coffee shop.

A business plan is a written document that describes your business, covering its objectives, strategies, sales, marketing, and financial forecast.

It can forecast how you’ll grow your business over a three-year period and could include the following:

your coffee shop’s concept – a summary explaining what your coffee shop offers and why it is different compared to nearby competitors.
target customers – a snapshot of your customers and what they are looking for
menu – details of the products you’ll be offering
start-up funding – how much funding your coffee shop needs, including interest repayments
competitor analysis – details of local competitors, including the number of customers they serve at different times of the day
marketing plan – a marketing strategy showing how you’ll advertise and the expected ROI for your marketing spend.
overheads – details of all costs, including staff, premises, utilities, and both fixed and variable costs.
financial forecasts – forecast revenue projections and costs.

Create the perfect business plan with our free guide and template.

How to choose the perfect coffee shop location

Your coffee shop’s location could be fundamental to its success, so it can pay to research different locations when opening a cafe.

Most people pick a coffee shop for convenience while they’re out and about, so premises near offices, shopping areas and train stations could provide the footfall you need.

Consider whether buying or leasing is the best option for you regarding financial commitment, flexibility, and responsibility for maintenance and repairs.

If you want to buy, decide on a budget that includes all extra costs, such as renovations.

Ensure you consult relevant professionals to ensure it complies with UK laws and health and safety standards.

If you’re renting, it is best to start looking for a space at least six months in advance, so you have time to research and negotiate the terms of your chosen space.

It’s wise to thoroughly research rents for similar properties and be prepared to negotiate to get the best deal.

Keep an open mind regarding possible premises – for example, a small kiosk in a train station concourse could be more profitable than a large shop in a shopping parade.

Property sites such as Rightmove have commercial property sections allowing you to view potential sites to buy or rent.

Food safety regulations when opening a coffee shop

Running a coffee shop requires a thorough understanding of food safety regulations.

Before you open your coffee shop, you should make sure you understand what will be required of you as a business owner from a food safety standpoint.

The Food Standards Agency (FSA) is the government body that regulates food safety in England, Wales, and Northern Ireland.

In Scotland, these duties are handled by Food Standards Scotland (FSS).

When you start or take over a food business, you must register with your local authority at least 28 days before you start trading at your coffee shop.

Environmental health officers make regular inspections of coffee shops and have the power to fine or close down your business if you fail to adhere to food safety laws.

Check government guidelines to ensure you meet the requirements for safely opening a coffee shop – the FSA’s Safer Food, Better Business leaflets detail the key requirements for serving and preparing food and drink.

Insuring your coffee shop

When opening a cafe, you will need the appropriate commercial insurance covering everything from the property to the customers.

It’s a good idea to seek legal advice to make sure your business is fully compliant.

Employers’ liability insurance

When you hire a staff member, you must purchase employers’ liability insurance.

If an employee becomes injured or unwell due to the workplace, this policy will help you pay compensation.

Public Liability insurance

Public Liability insurance is one of the most popular policies for a small business.

If a member of the public is injured or property damage occurs, Public Liability insurance will support your business with the claims made.

How to find and hire coffee shop staff

Hiring and managing staff can be one of the biggest challenges in running a business.

For a coffee shop, you’ll need reliable and friendly staff to give a warm welcome to customers.

Consider recruiting before you open for business and try social media and the local press to advertise for staff.

You could hire staff to cover peak periods only, such as lunchtimes.

Think about a candidate’s interpersonal skills as much as their food or coffee preparation experience—good customer service is vital to encouraging return customers.

To train staff without breaking your budget, you could act as a mentor, use free e-learning or local training courses, or even have a buddy system where new staff shadow an experienced employee for a week or two when they start.

As an employer, you’ll need to pay employer’s tax, National Insurance contributions, and holiday pay.

In addition, you may also need to contribute to a workplace pension scheme for qualifying staff.

Contact HM Revenue and Customs for more information, and read our first-time employers guide to hiring staff for more guidance.

Branding your coffee shop

The branding for your coffee shop can help create a unique experience for your customers and make your business easily recognisable.

Consider the following steps to help create a successful brand for your coffee shop business:

decide your brand identity – what do you represent, and what makes your coffee shop unique?
think about your target customers – what are their preferences, and what kind of coffee shop would attract them?
create a brand name and logo – consider choosing a name and logo that reflects your coffee shop’s identity and is easy to remember
choose brand colours – use the same colours and fonts across all platforms, including your shop decor, menus, and social media.

Market and promote your business

The more people know about your coffee shop, the better – and that’s where a marketing strategy comes in.

Once you have created your coffee shop brand, marketing can help you create a solid following of loyal customers.

Clever marketing can also save you time – by promoting the opening of your cafe, your target audience could find out about your business considerably faster than they might have otherwise.

As well as having a clear website explaining what your coffee shop offers and where you are, try these ideas for marketing a coffee shop:

Social media can be an invaluable, free way to market your products and services to target your audience, increase brand loyalty, and develop customer relationships.

You could share high-quality photos of your drinks, food, interiors, and happy customers to attract more people to your coffee shop.

You can use platforms like Instagram, Facebook, X (formerly Twitter), TikTok, LinkedIn, and YouTube.

Try email marketing

Email marketing can deliver targeted messages straight to customers.

You could collect email addresses and send people details of special offers and events (make sure you comply with data protection laws).

Try free or paid platforms like Dotdigital, Campaigner, and Mailchimp.

Learn more about email marketing.

Get onto Google

Make sure your coffee shop can be found easily on Google when people search for coffee shops in your town.

Having a free Google Business Profile will show your shop location on Google Maps, including your opening hours, and allows customers to leave reviews.

Discover how to use Google My Business to get more customers.

Try a loyalty programme

Reward frequent customers to encourage repeat business.

This could be done with a traditional stamp card, offering a free coffee after a certain number of purchases.

Offer deals and promotions

Everyone loves a special deal or discount – why not have a coffee happy hour or offer discounts at certain times to encourage more people to visit?

Download our marketing tool kit.

Learn with Start Up Loans and help get your business off the ground

Thinking of starting a business? Check out our free online courses in partnership with the Open University on being an entrepreneur.

Our free Learn with Start Up Loans courses include:

Plus free courses on climate and sustainability, teamwork, entrepreneurship, mental health and wellbeing.

Disclaimer: The Start -Up Loans Company makes reasonable efforts to keep the content of this article up to date, but we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. This article is intended for general information purposes only and does not constitute advice of any kind, including legal, financial, tax or other professional advice. You should always seek professional or specialist advice or support before doing anything on the basis of the content of this article.

The Start-Up Loans Company is not liable for any loss or damage (foreseeable or not) that may come from relying on this article, whether as result of our negligence, breach of contract or otherwise. “Loss” includes (but is not limited to) any direct, indirect or consequential loss, loss of income, revenue, benefits, profits, opportunity, anticipated savings, data. We do not exclude liability for any liability which cannot be excluded or limited under English law. Reference to any person, organisation, business or event does not constitute an endorsement or recommendation from The Start-Up Loans Company, its parent company British Business Bank plc, or the UK Government.

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