*This article is updated with figures as of Nov 2021.
For everyone who enjoys the cafe culture, we're sure this is one question that has flashed across your mind as you're sitting there enjoying the vibes -- "Hey, how much does it cost to open a cafe ah?"
With more than 10 years of experience in the specialty coffee industry, and having helped nearly 100 clients set up their cafe operations, Smitten is here to offer a glimpse into that "blackbox".
Rental, equipment and renovation are the three main setup costs you will need to consider.
Rental: A quick search on Commercial Guru for a 1000 sqft unit suitable for F&B businesses turns up a range of monthly rentals starting from S$5,000 all the way up to over S$20,000 for more central locations. Do also keep in mind that tenants are also required to put down a security deposit usually equivalent to 3 months' rent.
Location and rental is one of the most crucial factors deciding the fate of your business so be sure to consider it thoroughly before committing to a location. It is not necessarily a case of cheaper is better. The following questions might be a useful start:
- Who are the main customers at this location? Is there a consistent crowd who can sustain your business on an everyday basis?
- Are there many similar businesses in the area? How would you differentiate yourself from your competitors?
- How visible is your business? A unit on the upper floor of a shophouse might be significantly cheaper, but is it easy for customers to discover you? Remember, if they can't see you, you don't exist.
- Other practical considerations such as accessibility by public transport, and whether there is sufficient parking space for your customers.
Equipment: To ensure the quality of the coffee you'd serve, you will need to invest in a good espresso machine and grinder. (Check out our other article to read more about how to choose a grinder.) If you intend to serve both espresso and filter coffee, chances are you'll need 2 grinders, one for each purpose. Top-range espresso machines easily cost over S$20,000, and grinders can go up to S$5,000 for one. (Click here to learn why espresso machines can be so expensive and how to choose them.)
For those who are worried about the hefty investment, there is an alternative you can consider. If you are getting coffee from a one-stop coffee service provider like Smitten, your supplier can likely customise a coffee plan for you which includes equipment and coffee. Don't be afraid to ask if your supplier can provide machines, and to work out an arrangement that suits your coffee needs.
Apart from the espresso machine and grinder, don't forget to budget for other appliances such as a kettle, refrigerator, ice maker and so on. If you're serving food, you should budget for kitchen appliances as well.
Renovation: Now this one's an open question -- you can go as simple and as fancy as you like. We would say it could cost anything from S$20,000 onwards. We have a few tips for those who are hoping to save costs:
- Try not to modify the existing configuration of the space (e.g. hacking walls)
- Try to see how you can come up with smart solutions to minimise expensive works such as carpentry. For example, you could opt for open shelves over full cabinets, which cost more to make.
- Try to work with standard dimensions. For example, counter tops are usually 60cm in width and tables can commonly be found in lengths of 1.5m or 1.8m and so on. Working with standard dimensions means you can buy ready made furniture items off the market, which would be significantly cheaper than having to custom make.
Operating costs include salaries, utilities, cost of goods sold and training.
Salaries: While the number of staff you need would depend on the size of your cafe, we'll say that each cafe would need at least 2 full-time baristas (even for modest shops). If you're serving food, you will need another 2-4 kitchen staff. Full-time staff draw salaries from S$1,600 - S$2,500 per month, while part-timers earn anything from S$7-10 per hour.
Utilities: Again, this will depend on the scale of your operations, but we would say budget for S$,1000 per month as a ballpark figure.
Cost of goods sold (COGS): COGS refers to the expenses you incur that are directly relevant to the goods you sell. In the context of a cafe, that would be your coffee beans, food ingredients and so on. As a general rule, it is recommended that your COGS does not exceed 20-35% of your overall operating costs.
Training: If you have no prior experience or knowledge in specialty coffee, it is recommended that you attend a foundation course in barista skills to acquire some basic knowledge and skills that you will need to run a cafe. A course like this costs around S$500, and some service providers (like Smitten) allow you to pay via Skillsfuture credits.
So there you have it! This is a rough summary of some of the costs you will need to budget for when starting up your own cafe. Do you have any thoughts or experiences to share? Connect with us via our Facebook page or IG @smittencoffeeroasters!