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How to Open a Coffee Shop in Melbourne?

But first, you'll need to make some preparations; there are a few things to think about before you officially open your doors.

Coffee culture in Melbourne varies widely depending on where you are. Do your homework before launching your own company. In order to learn more about opening a coffee shop in Melbourne, read the following post.

FAQs About Coffee Shop In Melbourne

Depending on your venue size, type of lease, location and operational requirements, the cost of opening a new cafe in Australia can range from $200,000 to $500,000+. It is a considerable investment, and it can be challenging to raise the capital required to kickstart your business.

The good news is you don't need any specific qualifications to run a coffee shop. However, courses on general business skills such as bookkeeping and marketing and key topics such as catering and food hygiene are a good idea.

In short, coffee shops are extremely profitable due to their high-profit margins and low stock cost. However, effective costs management will ensure your café succeeds like any business.

As a general rule, Chris believes that the acceptable profit margin for beverages should be around 70% after factoring in all the material costs. For retail items, he recommends doubling what you paid to start with and then adding a bit more to profit from the sale.

Quality: high-quality ingredients, best brewing recipes, consistency, fresh and appealing sweet & savoury selections are keys to success. Selection: have the most popular products in the market and something special that makes you unique.

How To Open A Coffee Shop

person sitting near table with teacups and plates

Do you long for a cafe in Australia because of your insatiable need for a morning jolt? Starting a new company is both an exciting and terrifying adventure. But it can also elicit a range of emotions.

Research The Coffee Business

It's a significant time and financial commitment to launch a cafe. Investing some time now in learning the ins and outs of cafe management will serve you well in the future. Connecting with other coffee shop owners for the purpose of gleaning useful information about what works and what doesn't work is a necessary first step. The best part is that doing so requires frequenting numerous cafes in order to gain inspiration for your future establishment. Think about the things that set you apart from other companies. Figure out who your target market is. Who are they going to be, exactly? What do they require? When should you expect the most customers? Knowing your clientele inside and out will help you with everything from menu creation to cost estimates.

Define Your Vision

You probably have a clear mental image of your café in full operation and lots of grand plans. Start by outlining the goals for your café and the vibe you hope to achieve. The next step is to begin gathering images, menus, and design concepts that inspire you for your future café's atmosphere, food, and service. Having your vision defined will help you be consistent when choosing a name, deciding on the decor, planning the food, choosing the coffee, picking the cups, and defining how you'll interact with customers. Never forget that you simply cannot make everyone happy with your business. Instead, your best bet is to zero in on your ideal customer.

Create A Detailed Business Plan

It's tempting to skip the business plan. "It's too much work"… "Who's going to read it"…are comments we hear all the time. However, the real benefit of putting together a business plan is less about the final document and more about the process. The process of writing a business plan helps you understand your local market and take a close look at the numbers you need to make the business successful. In addition, a business plan will guide you through each stage of developing and managing your coffee shop and serve as a road map for structure, running, and growing your new business.

Your business plan should include:

  • A summary: What this business stands for and how it will stand out.
  • A local market analysis: Who are your regular customers? Who are your competitors?
  • Your team: What are you going to do yourself? What team are you hiring to do the rest?
  • A marketing plan: What is your point of difference? How are you going to communicate this?
  • How much cash do you need to get started, and where it's coming from.
  • Financial projections: Projected Profit & Loss, Cash Flow
  • A location and lease strategy.

There's a lot to think about, but taking time to plan for each of these aspects of your business will help set you up for success.

Identify The Right Location.

The first step you need to begin is identifying the right location. Who are your customers, and where are they located? These questions will help you identify a good location. It's a good idea to scope out neighbourhoods and their business laws to see what fits in with your budget and your business concept. The place should be easy to access. Next, decide whether to rent a space or start from scratch and have your place built from the ground up. You can also consider buying an existing business and franchising.

Location is critical to the overall success of any cafe business. Before you make a decision, spend some time in the areas you're considering. Pay close attention to how many people are moving about on foot and how much parking is available. Is the location visible enough? Is there enough foot traffic around to sustain your café? What does the location mean in terms of demographics? What kind of things does the local community like to do? Are you near lots of other cafés or in your little alleyway? Remember, you're spending a lot of time here, so you want to make sure you understand what makes the locals tick. It's also vital to understand the details of the retail lease; the terms of this document will affect your business's profitability and resale value down the track. It's wise to talk to a lawyer who specialises in retail leases before you sign anything.

Choose A Business Structure.

Decide which type of business you want to run. There are four structures to choose from:

  • Sole proprietorship: A type of business where you register individually and take full control of everything, and you can hire a staff to help you.
  • Partnership: A type of business where more than one person runs a business together. It can be beneficial if you don't have all the money or education to start independently and have a friend or know someone who knows the industry better.
  • Company: A commercial business with separate legal existence to all the shareholders.
  • Trust: An entity that possesses property, income and other assets benefit the third party. 

Deciding on a business structure greatly impacts your level of control, personal liability, regulatory obligations, tax to be paid, and health and safety required in the place. So take your time to sit down and compare the pros and cons and, most importantly, the numbers and decide what fits best with your vision and your budget.

Apply For An Australian Business Number.

In order to legally operate a business in Australia, you will need to obtain a valid Australian business number. One of the first things you should do when starting a business is to apply for a federal employer identification number (FEIN). When you have an Australian business name, you can register it with the government, advertise it to potential customers, and use it when making purchases, filing tax returns, and claiming goods and services tax rebates and other credits.

Create a memorable brand name that accurately reflects the nature of your company. With a good name in place, you can move on to creating a logo, website address, or other visual elements. All of these will need to be updated if you decide to legally change your name, so it's best to give careful consideration to the new moniker. It is also highly recommended that you register a patent on your coffee shop's name and logo. Legally securing a patent for your company's moniker and emblem can shield you from claims of theft of intellectual property.

Get a domain name registered.

This can be done once an Australian business number and name have been obtained. Your domain name needs to be both original and descriptive of your company. It's a terrific method of making a name for yourself and spreading the word about what you offer. Once you've settled on a good domain name, you should double-check that it isn't already in use.

In addition to registering a domain name, it's a good idea to create a presence for your store on every major social media website. By encouraging customers to geotag and tag photos taken in your store, you can reap the benefits of free advertising. This is another task that needs to be started before the store opens. Pay attention to the most talked-about cafes and vendors in your area. A successful opening can also be facilitated by announcing a countdown to the opening to generate anticipation and excitement among potential customers.

Consider holding a soft opening for your store. People in the coffee industry, your friends and family, your staff, and any social media influencers you think will help bring in customers are the only ones invited to a soft open.

Planning And Licensing

To successfully run a legal coffee business in Australia, you need to get all the relevant licences. However, if you're planning to buy an existing coffee business, you can skip this step because you provide the licences.

You may need specific health and food safety certificates for you personally, no matter what kind of shop you open or take over. In this context, the different licences include:

  • A business licence.
  • Employer identification number.
  • Foodservice licence.
  • Certificate of occupancy.
  • Sign permit.
  • Resale permit.
  • Building health permit.
  • Seller's permit.
  • Employee health permit.

There could be more depending on your specific location. Once you have the exact location, research what you'll need for that specific address.

Find The Best Suppliers

Finding a good, reliable supplier is a key component of any business success. Depending on the type of café you're opening, the major suppliers are usually coffee, milk, bread, fresh produce and groceries. You'll also need cups (paper and porcelain), napkins, coffee stirrers, teapots, syrup, the list goes on. Start by making a list of all the supplies you need, being as detailed as you can. The list may seem overwhelming, but getting down to the nitty-gritty (from pastries to napkin holders) will ensure you're prepared for anything. From there, you can begin researching suppliers until you find ones you love and who fit with your business philosophy.

Register The Right Taxes.

As a business owner in Australia, you must register for the relevant taxes to avoid legal implications. To register for the relevant taxes before starting your coffee shop to be on the safer side. Some of the taxes to register may include goods and services tax (GST), pay as you go (PAYG), and fringe benefits tax (FBT). As a sole proprietor, you'll have to use individual tax file numbers to process your business taxes.

Install Equipment And Hire Employees.

After following all the legal procedures, you're free to purchase and install all the necessary equipment. However, it's suggested not to go with the cheapest equipment since in this industry, if something like your espresso machine breaks down, not only will you lose money from replacing it or buying parts, but you'll lose income from losing customers during the time it takes to get a replacement.

Hire competent employees with etiquette to help you run your coffee shop. Finally, develop a good marketing strategy and execute it to get more clients.

Design Your Café And Give It Character

Your café's aesthetic is critical to luring new customers and keeping your regulars coming back. Your intended audience will have a significant impact on the direction of the idea. Is it up-to-date? Retro? Sophisticated? Family-friendly? Health-focused? Make sure your café caters to the tastes of your target demographic. Don't waste your time trying to appeal to everyone; focus on developing a strong identity through a singular approach. Think about the decor, signs, furniture, and lighting of your storefront. Think like an employee and a customer for a moment and assess the layout's effectiveness. Is there enough room for the barista to work efficiently? Can you get your workers across the room in a timely fashion? Will people who walk into your coffee shop know how to place an order? Although it may be costly, I highly recommend speaking with a professional interior designer. An accomplished designer can make all the difference in creating an enjoyable environment and a smooth workflow.

How Much Money Is Needed To Open A Small Cafe In Australia?

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Starting your own business is a great way to take control of your finances and your future. But, unfortunately, it's also often a case of needing money to make money. 

Coffee culture is growing significantly, with $5bn spent in coffee shops across the country last year. As a result, many Aussies see opening their cafe as a profitable venture, but it can also be expensive.

According to the Australian government, when you're setting up any new business, it's a good idea to be able to cover six months' worth of running costs. Applying for a business loan can make up the shortfall if you don't have the capital to get going. 

Buying An Existing Cafe

Buying an established cafe is faster than starting one from scratch, even though there will still be ongoing costs.

By doing so, you can benefit from the established reputation of the brand, possibly avoid starting from scratch in terms of inventory and machinery, and make use of existing human resources, lease agreements, and supply chains. You'll have some leeway to make adjustments, but the groundwork is already laid.

Restaurant prices can range widely. Existing businesses were listed on Commercial Real Estate in March 2020 for prices ranging from $200,000 (Lane Cove, Sydney) to $4,500,000. (Melbourne or Sydney CBD).

Rent

One of the biggest expenses you'll have in your new business is rent. There's no fixed number for this, and it largely depends on location – rent in Sydney will be a lot more than rent in Newcastle, for example. Even in Sydney, there will be big differences between cafe rental prices in Circular Quay, Newtown and Chatsfield. 

For example, in Melbourne, a 100sq m cafe space in St Kilda is currently available for $19,000 per year, while a 65sq m space in Northcote is listed at $57,500 per year. 

If you were to pick either of these options, the government's suggestion of having six months' rent set aside would be $8,500 or $28,750. However, it's also recommended that rent should be no more than 15% of your income, so with these properties, you would be hoping to make at least $125,000 or $380,000 per year. 

Machinery And Equipment

Commercial coffee machines are a lot more expensive than home-use ones. For example, the current range on the Segafredo website goes from $2,500 to $12,595 per machine. 

Commercial machines may also require specialist electrical work to get them going at their full capacity. You'll also need to ensure you have enough grinders, fridges and other appliances to serve your customers. 

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One of your biggest expenses for a coffee shop will be coffee beans, which you'll need in large numbers. How much depends on how many coffees you'll be making, of course, which varies from cafe to cafe.

You'll also need to consider the cost of milk (dairy and alternatives), sugar, coffee cups (takeaway and sit in) and other incidentals like napkins. 

Wages

According to the job site Indeed, the average hourly rate for a barista in Australia is $25.14. 

Using this figure, you can determine how much you're likely to spend on staff expenses. You'll also need to consider how much of the work you'll be doing yourself, how many people you'll need to hire and how many hours they'll be working a day. 

Total Costs

As you can see, total costs will vary dramatically. But with rent starting at $19k a year in a major city and the purchase of an existing business likely to be $200,000 or more, opening a cafe isn't a cheap venture. 

Once you have a figure worked out, you can start to plan. For example, how much will you need to save? Would a business loan help meet some of the costs? Should you get a partner? And how much profit will your cafe need to make to survive?

Benefits Of Starting Your Coffee Shop

Chance To Express Your Creativity

When you start something new or unique that you have not done before, you'll have to be creative and create your unique environment. It will help you have an inner reflection as you try new things like decorating your shop in your style.

Expansion

When you start your coffee shop in Australia, you'll have great opportunities to spread across the country as your success increases.

You Become Your Boss

As a manager of your own business, you'll have freedom from the stress and pressures of being managed by someone or being limited in a way. When you open your coffee shop, you manage your time and set your schedule. No one dictates your salary, and the harder you work, the more profit you'll glean.

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Opening Your Café

Opening your café is an incredible achievement and will mark the beginning of an exciting new adventure. After months (or years) of planning, preparation, and hiring the best staff possible, your 'grand opening' is a chance to show off your hard work. It's also a great opportunity to start building long-lasting relationships with your customers. To hold a successful grand opening:

  1. Start planning early.
  2. Ensure you have enough staff for the event and check for other local events that might clash with yours.
  3. Consider having a 'soft opening' — allowing you to learn the basics before you open fully to the public.

It is a great way to test staff, workflow, and the atmosphere of your coffee shop, and it also allows you to iron out kinks before the big day. With your shop open, you can enjoy the opportunity to be your boss, build your profits and make new relationships throughout the community. And most importantly, you'll enjoy sharing your passion for one of life's greatest pleasures, coffee!

Conclusion

Ok, so you want to open a cafe in Melbourne. Congratulations! There are already some of the world's best cafes in this city, and there's always room for one more. We hope you've found this manual to be informative and that it's given you a solid foundation from which to launch your new business. Don't be shy about contacting us if you need clarification or further guidance.

 

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