Discover the average prices involved in opening your own coffee shop
This is a common question but unfortunately, it’s not a straightforward one to answer. The following breakdown below represents the start-up costs for a 10m x 10m ‘high end’ specialist coffee shop in London, but these can vary dramatically depending on the level of finish and condition of the retail unit to begin with. For example, many new units will require only small amounts of electrical and plumbing work, with the landlord taking care of the strip-out in advance of letting the property.
On top of this, you’ve also got to consider that rent and expenditure is always going to be more expensive in the capital city!
What do you need to open a coffee shop?
Things you will need to set up
The following are set-up costs for high-end specialist coffee shop in London 2018.
-Demolition and strip-out £1,000
-Electrical installation £7,000
-Joinery & counters £3,000
-Catering Equipment (espresso machine, ovens etc) £25,000
-General works (decorations, air conditioning etc) £30,000
£920 per sqm may seem excessive, but can easily be reduced depending on the amount of work needed and level of finish required.
Is a coffee shop profitable?
How to decide whether it’s worth the investment
When considering the profitability of a coffee shop, it’s not a straightforward question to answer, but there are some figures which can certainly help with basic estimates. Frequently used gross profit margins hover around 75%. That is to say, if you sell £100, £75 would be what’s left after the food and drink used to make it has been deducted. From the £75 you would have to pay overheads such as wages and rent etc.
Coffee Shop Running Costs
Here are some typical overheads
When starting a new coffee business, it’s important that you have an overview of the top level figures that you will be working towards both monthly and annually.
- Sales: £4,000
- Cost of Goods Sold (25%): £1,000
- Gross Profit (75%): £3,000
- Wages: £1,250
- Rent: £800
- Electricity & Gas: £70
- Water: £35
- Office Supplies: £20
- Catering Equipment £95
- Consumables (napkins etc): £20
Total Overhead: £2,290
What does this look like in terms of profit?
This would leave you with a Net Profit of £710.
A net profit of £710 on a sales figure of £4,000 would give a net profit margin of 17.75% (£710 / £4000). Although this is a very general example, and in reality actual net margins may differ drastically from this, it does give a somewhat realistic account of what profits a well ran cafe might hope to achieve.
Using a net margin figure of 17.75%, we can determine what sales we would need to make to expect a certain return. For example, if a cafe owner needs to make a profit of £40,000 per annum, a yearly sales figure of £225,352 would be a realistic target (£225,352 x 0.1775), or £4,334 a week.