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How to Write a Cafe Business Plan (+ a Free Plan Outline)

July 12, 2024

Jul 12, 2024, 17 min read.

If you’re thinking of starting a cafe or coffee shop, your first step is drafting a business plan. This may sound intimidating, but it doesn’t have to be. When you’re armed with the know-how you need, writing a business plan is actually pretty straightforward.

This article and detailed examples will show you how to create a cafe business plan step by step. We’ll also show you how Lark can help as you draft your business plan and optimize your cafe’s operations .

Explore how Lark has helped Journey Kaffe grow

What is a cafe business plan?

There are more than 38,400 coffee shops in the US, with a total market value of over $48 billion. But there’s room for even more — and each new one will need a business plan.

A cafe business plan is a strategic document that outlines your vision, goals, and roadmap for establishing and running a successful cafe. Its main purpose is to give you a structured approach to planning and decision-making.

Additionally, it serves as a guide for the business’s day-to-day operations and a reference point for measuring progress and making adjustments once you’re up and running.

Typically, a cafe business plan includes an executive summary, a market analysis, and detailed financial projections.

The executive summary offers a concise overview of your cafe concept, target market, and unique selling points (USPs).

The market analysis delves into industry trends, your competition, and customer demographics.

The financial projections include startup costs, revenue forecasts, and a break-even analysis.

If you’re seeking financing from investors or lenders, your business plan maps out the viability and potential profitability of your cafe business.

Discover how ZUS Coffee propelled growth with Lark

What should you include in your cafe business plan?

In this section, we’ll discuss the framework of a solid business plan.

Lark Docs is useful for creating your plan as well as any other important documents your restaurant will need to function. It gives you a central location to store everything securely. You can also easily share docs with stakeholders and collaborators.

Executive summary

Your plan document should start with an executive summary. Consider writing this last, when you’ve put all the other pieces in place.

In the executive summary, you’ll present a concise overview of your cafe business plan. It should provide key highlights and a snapshot of the business. Also, include the cafe's name, location, and mission statement.

Next, summarize your business concept, including its USPs and target market. Highlight important financial projections, such as expected revenue and profitability.

Briefly mention the cafe’s management team and their expertise, and outline the competition and your strategic advantages.

Conclude this section with a summary of your funding requirements and the purpose of the plan. This section should be informative and inspiring so that it encourages readers to delve deeper into the plan’s details.

Business description

Your business description should give readers a detailed overview of your business concept, mission, and USPs. This information is summarized in the executive summary, but it's laid out in detail in the business description.

To create an effective business description, start with a clear and concise mission statement that captures the essence of your cafe. Describe the type of cafe it’ll be, including the food and beverages you want to serve, the atmosphere you’re aiming for, and the target market.

Highlight what sets your cafe apart from its competitors, such as a unique menu, specialty coffees, exceptional customer service, or sustainable practices.

Here’s a helpful sequence for laying out your business description:

1. Mission statement: A brief and impactful statement that defines your cafe's purpose and values.

Example: “Our mission is to create a warm and inviting cafe space where customers can enjoy high-quality, ethically sourced coffee and freshly baked pastries while experiencing a sense of community and connection.”

2. Business concept: Describe the overall concept, including the cafe’s theme, design, and ambiance.

Example: “Urban Elegance Café offers a sophisticated yet cozy environment with a modern design, perfect for both business meetings and casual get-togethers.”

3. USPs: Highlight what makes your cafe unique, such as a focus on organic ingredients, locally sourced products, or innovative menu items.

Example: “We pride ourselves on using only organic, fair-trade coffee beans and locally sourced ingredients.”

4. Target market: Identify your primary customer base and explain why your cafe will appeal to them.

Example: “Our primary customers are young professionals and students who appreciate premium coffee and a comfortable space for working or socializing.”

5. Location: Mention the planned location and why you’ve chosen it to attract your target market.

Example: “Located in the heart of downtown, our cafe benefits from high foot traffic and accessibility. We’ll attract both office workers and local residents.”

6. Business objectives: Outline your short- and long-term business goals.

Example: “Our short-term goal is to establish a loyal customer base within the first six months, and our long-term goal is to expand to multiple locations within five years.”

A detailed business description like this provides a snapshot of your cafe's identity and strategic direction. It helps stakeholders quickly grasp what your business is about and why it’s worth investing in or supporting. Plus, it sets the stage for a logical and compelling narrative in the remainder of your business plan.

Demographics

The demographics section of a business plan includes an in-depth analysis of the target market or customer base.

In this section, include detailed information on the ages, genders, income levels, occupations, education, and lifestyle preferences of your potential customers.

Keeping these demographic factors in mind is important for tailoring your offerings, marketing strategies, and overall business approach to the needs and preferences of your target market.

To gather the right demographic information, start with market research. Use data from local government databases, industry reports, and market research firms. Websites like the US Census Bureau, Pew Research Center, and your local chamber of commerce can provide valuable insights.

Another way to collect demographic information is to conduct surveys, focus groups, and interviews with local residents. This will give you firsthand information about the location you’re looking at.

Here are some examples of how to use the information you collected:

1. Age and gender: If your target market is young professionals aged 25–35, you might find that this group frequents coffee shops for both work and socializing.

Fine-tune your menu to include trendy coffee drinks and offer amenities like free Wi-Fi and comfortable seating.

2. Income levels: Analyze the income levels of professionals at your planned location to set appropriate pricing. In a higher-income area, you might offer premium coffee blends and gourmet pastries. In a middle-income area, focus on affordability and value for money.

3. Occupation and lifestyle: If your cafe is near a business district, cater to office workers with quick-service options, lunch specials, and grab-and-go items.

If located near a university, offer student discounts, extended hours, and a study-friendly environment.

If your research shows a high percentage of health-conscious individuals in the area, incorporate healthier menu options, like vegan pastries and sugar-free creams and syrups.

4. Education: Higher education levels often correlate with a preference for specialty coffee and artisanal products. Use this information to create a menu that includes organic, fair-trade coffee and unique, high-quality baked goods.

If you thoroughly understand the demographics of your target market, you can make informed decisions that help you achieve customer satisfaction and drive business success.

SWOT analysis

A key element of any business plan is a SWOT analysis . This is a strategic planning tool for identifying and evaluating the strengths, weaknesses, opportunities, and threats related to a business. It’s used to assess the current situation of the business and develop strategies for growth and improvement.

More specifically, a SWOT analysis gives a comprehensive overview of the internal and external factors that can impact the business, which helps owners and managers make informed decisions.

A strength could be a particularly unique menu, and a weakness could be limited seating capacity.

Opportunities and threats are external factors, like market trends that favor a particular specialty coffee (an opportunity) or new competitors entering the market (a threat).

For example, a cafe might identify its prime downtown location as a strength but its limited parking as a weakness.

An opportunity could be changes in the coffee business, such as an increasing demand for organic coffee, while a threat might be the opening of a new coffee chain nearby.

By analyzing these factors, you’ll be prepared to play to the strengths of your cafe enterprise, address weaknesses, capitalize on opportunities, and find ways to lessen the impact of potential threats.

To visualize what a SWOT analysis looks like, here's a simple diagram of one for a cafe that caters to health-conscious customers:

Competition analysis

One of the most important considerations in opening a new business is whether it can hold its own against its competition and potentially outperform it. To figure this out, you need to do a competition analysis.

A competition analysis involves identifying and evaluating your potential competitors to understand their strengths, weaknesses, strategies, and market positioning. It’s critical if you plan to open a cafe since it provides insights into the competitive landscape and helps you develop strategies to differentiate your business and capture the market share you’re hoping for.

Specifically, conducting a competition analysis helps you:

Identify market gaps: Discover unmet needs or underserved niches that your cafe can target.

Benchmark performance : Understand industry standards and set realistic benchmarks for your business.

Refine your USPs: Clearly define what makes your cafe stand out from the competition.

Develop effective strategies: Craft marketing, pricing, and operational strategies that capitalize on your competitors' weaknesses and leverage your strengths.

How to conduct a competition analysis

Follow these steps for a solid competition analysis:

Identify your competitors: Start by pinpointing both direct competitors (other cafes) and indirect competitors (bakeries, food trucks) near your intended location. Use online searches, local directories, and social media to compile a comprehensive list.

Analyze key competitors: Visit your competitors’ locations, review their menus, and observe their customer service. Take note of their pricing info, promotional strategies, and customer reviews. Analyze their online presence, including their websites and social media profiles, to understand their brand positioning and customer engagement.

Do a SWOT analysis: Perform a SWOT analysis for each key competitor. Identify their strengths (e.g., strong brand loyalty or a prime location), weaknesses (e.g., a limited menu or poor customer service), opportunities (e.g., a growing demand for specialty coffee), and threats (e.g., new entrants or changing consumer preferences).

Evaluate market positioning: Determine where your competitors stand in terms of market positioning. Are they targeting budget-conscious customers or premium coffee lovers? Knowing this information will help you position your cafe appropriately.

Suppose you plan to open a cafe in a busy downtown area. Your primary competitors include a well-established chain with a strong brand presence and a local boutique cafe known for its artisan pastries.

Upon analyzing these competitors, you find that the chain offers quick service but lacks a cozy atmosphere, while the boutique cafe has a loyal following but higher prices.

Making use of these strengths and weaknesses, you could position your cafe to offer a comfortable, inviting space with competitive pricing and a focus on high-quality, locally sourced products to fill the gap between quick service and premium offerings.

So, by conducting a thorough competition analysis, you can strategically position your cafe to attract customers and thrive in a competitive market.

Costs and revenue forecasting

One of the first questions when opening a new business is: Will it generate a profit ?

Cost and revenue forecasting involves predicting future expenses and income to determine the financial viability of your cafe. This process is essential for financial planning, securing outside financing, allocating resources wisely, and managing cash flow effectively.

This detailed analysis provides potential investors with a clear picture of your cafe’s financial potential. It also identifies potential financial challenges and helps you identify proactive countermeasures.

How to conduct cost and revenue forecasting

Build this section around the following three points:

Identify costs: List all startup costs (e.g., equipment, renovations, and licenses) and ongoing operational expenses (e.g., rent, utilities, salaries, ingredients, and supplies). Group them into fixed and variable costs.

Estimate revenue: Project your monthly sales based on expected customer volume, average transaction value, and menu pricing. Consider peak and off-peak periods, as well.

Create projections: Use the identified costs and estimated revenue to create monthly and annual financial projections. Include best-case, worst-case, and most likely scenarios to account for uncertainties.

Suppose your estimated monthly costs are $15,000 (fixed costs: $11,000 for rent and salaries; variable costs: $4,000 for ingredients and utilities).

If you expect to serve 3,000 customers per month with an average transaction of $7, your projected monthly revenue would be $21,000.

Subtracting your costs from your revenue, you forecast a monthly profit of $6,000. This basic forecast helps you understand your break-even point and profitability.

By conducting cost and revenue forecasting, you ensure that your cafe is financially prepared for both challenges and growth opportunities.

To track inventory and sales details in your bookkeeping once your cafe is up and running, take a look at Lark Base . It easily connects with your POS system to give you insights into your cafe’s performance. You’ll see at a glance which drinks and foods sell and which don’t, helping you monitor the success of your menu.

If you’d like some help with staying on top of your inventory and revenue stream, also check out Lark’s helpful inventory and revenue tracking system.

If you’re selling online, too, software like Larksuite paired with a good POS like Shopify can help your ecommerce run very smoothly. Lark has a built-in Shopify integration, making it even easier to keep your data in sync.

Staff and management

Your cafe business plan should also detail the projected staffing structure and management roles in the organization.

Include a staffing plan that outlines the number of employees needed, their roles (e.g., baristas, kitchen staff, and waitstaff), and any required qualifications or experience.

Describe management structure and skills and highlight key positions such as general manager, head chef, and floor supervisor, as well as their responsibilities. Include recruitment and training plans for your future staff, too.

Finally, outline employee policies when it comes to compensation, benefits, and scheduling.

Legal information

Your cafe business plan should include a detailed overview of any necessary legal requirements as well. This includes business licenses and permits, such as a general business license, health department permits, food handler permits, and possibly a liquor license if you plan to serve alcohol.

Also, describe compliance with local zoning laws and building codes as needed.

Include information on any required inspections and safety regulations, as well as an overview of insurance coverage, such as liability and property insurance.

Clearly identifying these legal requirements ensures that your cafe operates within the law and you avoid potential legal issues.

Marketing plan

In addition to the above sections, you could add a summary of your marketing plan, which describes the avenues you will use to reach potential customers.

This could include a website, print ads, sidewalk advertising, online ads, social media, frequent visitor discounts or rewards, special promotions , or building a mailing list.

However, a marketing strategy is typically more comprehensive than what’s included in a business plan, so it's good practice to draft a detailed marketing plan as a supplement to your business plan.

Use Lark’s restaurant sales guide for smooth cafe operations

Coffee shop business plan example: Green Elephant Cafe

Still not sure how to get started with your plan? Take a look at our cafe business plan example for a hypothetical establishment called the Green Elephant Cafe.

Green Elephant Cafe - Business Plan

The Green Elephant Cafe, located in a bustling downtown area, will provide a vibrant, eco-friendly space for locals, office workers, and tourists.

Our mission is to offer high-quality, ethically sourced coffee and organic pastries while promoting sustainability.

With a prime location and exceptional customer service, we project a monthly revenue of $20,000 with a profit margin of 10%.

Our experienced management team will guarantee operational excellence. We seek $100,000 in funding for startup costs and initial operations.

The Green Elephant Cafe is a modern, eco-conscious cafe that combines a cozy atmosphere with a focus on sustainability. We offer a diverse menu featuring organic, fair-trade coffees, teas, and freshly baked pastries.

Our cafe provides a welcoming environment with free Wi-Fi, comfortable seating, and a commitment to reducing our ecological footprint through sustainable practices.

Our target market includes young professionals, office workers, and tourists.

The downtown location is home to numerous office buildings, so we will attract a steady flow of employees looking for quality coffee and a relaxing space.

The area is also a popular tourist destination, which will give us a diversified customer base.

Our focus on sustainability appeals to environmentally-conscious individuals and health-conscious consumers.

Strengths : Prime downtown location, unique eco-friendly concept, high-quality products, and experienced management team.

Weaknesses : Higher costs for sustainable products, reliance on foot traffic, and initial significant marketing expenses.

Opportunities : Growing demand for organic and fair-trade products, the potential to expand to new locations, and potential partnerships with local businesses.

Threats : Competition from established cafes, economic downturns that affect discretionary spending, and fluctuations in ingredient costs.

The Green Elephant Cafe faces competition from both large coffee chains and local boutique cafes.

Our key competitors include a well-known national chain located nearby and a local artisan cafe famous for its pastries. The national chain offers convenience and brand recognition, while the local cafe excels in specialty baked goods.

The Green Elephant Cafe differentiates itself through its strong commitment to sustainability, organic offerings, and unique, relaxing atmosphere.

Cost and revenue forecasting

Initial startup costs, including leasehold improvements, equipment, initial inventory, and marketing, are an estimated $100,000.

Monthly operating expenses covering rent, utilities, salaries, and supplies are projected at $15,000.

With an anticipated monthly revenue of $20,000, we forecast a monthly profit of $5,000, breaking even within the first six months.

The Green Elephant Cafe will employ a dedicated team of baristas, kitchen staff, and servers.

Our management team includes a general manager with over 10 years of experience in the cafe industry and a head barista with a strong background in specialty coffee. For the first three years of operation, we’ll outsource accounting to a local firm.

Staff training will focus on exceptional customer service and sustainability practices.

We will obtain all necessary business licenses and permits, including a general business license, a signage permit, health department permits, and food handler certifications.

Compliance with local zoning laws and health regulations will be strictly maintained. We will also secure comprehensive liability and property insurance to protect our business and our customers.

In addition to our website, we will market with local print ads and engage in extensive email marketing.

Check out Lark’s detailed restaurant opening checklist

Cafe business plan outline for your use

Now that you understand the key components of a cafe or coffee shop business plan, here’s a blank template you can use to compose your own:

Explore Lark’s detailed guide on restaurant marketing

Common cafe business plan FAQs

Let’s take a look at some common questions asked about cafe business plans:

How profitable is owning a cafe?

Owning a cafe can be profitable if you manage costs effectively and attract a steady stream of customers.

Profit margins in the cafe industry typically range from 5% to 15%, depending on factors such as location, menu pricing, and operational efficiency.

To maximize profitability, focus on high-margin items like specialty drinks and pastries, manage labor costs, and build a loyal customer base through excellent service and marketing.

What should be included in a business plan for a small cafe?

Your business plan should include an executive summary, a market analysis, and detailed financial projections.

Outline your cafe's concept, target market, and USPs.

Financial projections should include startup costs, revenue forecasts, and a break-even analysis.

Also, include an operational plan that details daily operations, staffing requirements, and supplier relationships.

What are some things I should know before opening a coffee shop?

Before opening a coffee shop:

Think about the importance of location since foot traffic and accessibility are crucial for success.

Familiarize yourself with local regulations and licensing requirements.

Develop a deep understanding of your target customers and their preferences.

Identify the USP that sets you apart from the competition.

Be prepared for the demanding nature of the business, including long hours and the need for consistent quality and customer service.

How do you calculate profits for a cafe business plan?

To calculate profits for your cafe business plan, subtract your total expenses from your total revenue.

Start by estimating your monthly revenue based on your expected sales volume and average transaction value. Then, calculate fixed costs, such as rent, utilities, and salaries, as well as variable costs, like ingredients and supplies.

Include other expenses, like marketing, maintenance, and equipment depreciation.

Your profit is the remaining amount after you’ve deducted all expenses from your total revenue.

Find out how Lark and Mama Lou’s created restaurant success

Let Lark help you run a profitable cafe or coffee shop

We hope our detailed business plan descriptions and examples have given you everything you need to get going on your cafe business plan.

When you’re getting ready to launch your new cafe, Lark can help.

At Lark, we have extensive experience helping food and beverage businesses flourish . Our state-of-the-art project and workflow management solutions, intuitive form builder , attendance management software, built-in communication apps, and food and beverage templates will make managing your establishment a breeze.

To learn more, try Lark for free .

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How to Start a Cafe Business in 14 Steps (In-Depth Guide)

Updated:   January 26, 2024

BusinessGuru.co is reader-supported. When you buy through links on my site, we may earn an affiliate commission. Learn more

The cafe business market is expanding, with consistent success. With a projected compound annual growth rate (CAGR) of 3.7% from 2022 to 2032 , the market could reach $243 billion by 2032.

Success hinges on astute planning, attention to customer experience, quality products, and adaptability in our digital age. This guide will cover key steps – from crafting your business plan to designing your space and menu to budgeting smartly. While competition varies by location, the rewards of operating your café often outweigh the demands.

This guide will walk you through how to start a cafe. Topics include market research, marketing, customer focus, registering an EIN, obtaining business insurance, and forming an LLC. Here’s everything you need to know to start your own cafe business.

1. Conduct Cafe Market Research

Market research is important for newcomers to the cafe business market. It offers insight into your target audience, local coffee shop trends, and market saturation. There are two types of market research, primary research you do yourself, and secondary research compiled by a third party.

Some details you’ll learn through market research include:

• Several key drivers feed the skyrocketing demand for cafés and specialty coffee shops.
• Consumers increasingly view cafés as “third spaces” outside work and home to socialize, remote work, or simply enjoy high-quality drinks and snacks.
• The millennial cohort in particular fuels growth – young generations drive trends like specialty brews, mobile ordering, and sustainability that cafés readily incorporate.
• While chains like Starbucks, Dunkin’ Donuts, and Caribou Coffee dominate, independent cafés thrive by offering unique atmospheres and hyperlocal community connections.
• Market saturation remains relatively low, indicating room for new café entrepreneurs to carve out territory with creative differentiation and localization.
• The most lucrative café segments currently include specialty coffee, Latin coffee shops, dessert cafés, and automated mobile cafés.
• Keys to continued success and profitability include astute site selection, efficiency, customer loyalty programs, and social media integration.
• Adaptability also proves vital – café owners who rapidly implemented online ordering and contactless payment during COVID-19 mitigated revenue drops by up to 60%.

In summary, industry analytics overwhelmingly confirm the café sector’s resilience and viability for aspiring business owners. While big chains present competition, the broad market appeal, relatively low barriers to entry, and manifold opportunities for innovation symbolize a bright future.

2. Analyze the Competition

Competitive analysis is an important part of building a business. It helps you assess your pricing structure, build a thorough business plan, and develop services and products based on successful coffee shop ventures.

Some ways to learn more about other coffee shop owners include:

• Drive around town with fresh eyes – note coffee shops already operating, and jot down specifics like size, appearance, hours, and menu options visible. Also check whether or not they offer additional services such as hookahs and other leisure areas, or if they let cats stay at the cafe, essentially doubling as a cat cafe . This can increase your overall reach and business attractiveness to new customer groups.
• Covertly observe the in-store customer experience at multiple times of day – how busy do they seem, what offerings get ordered most, is the atmosphere inviting?
• Search online reviews for existing cafés on Yelp, Google, and Facebook to gather customer sentiment.
• Pay attention to what people rave and complain about to identify unmet needs a new entrant could satisfy.
• Study their social media engagement across platforms – follower counts, post reactions, and user-generated content featuring their brand.
• Assess the polish and functionality of online ordering platforms and mobile apps.
• Consider search engine visibility by plugging “cafés near me” into Google Maps – where do rivals rank?
• Incorporating both offline and online investigative work allows founders to realistically evaluate direct and adjacent competition while informing their positioning.
• A SWOT analysis can then synthesize findings to illuminate viable differentiators – maybe an avant-garde drink menu, monthly comedian nights, and reservable workspaces.
• Data and creativity together enable new cafés to stake out a distinctive niche.

Use details gleaned through competitive analysis to build up your coffee shop business. From forming a coffee shop business plan to sourcing ingredients for your coffee shop menu, competitive analysis helps your new coffee shop secure a place among independent coffee shop owners.

3. Costs to Start a Cafe Business

When launching a café, the majority of initial expenses stem from real estate, build-out, equipment, inventory, and permitting. Here, we’ll break down the coffee business expenses you may encounter as you begin your own coffee business.

Start-up Costs

• Total start-up costs often range from $80,000-$250,000+ depending on size and services offered.
• Appropriate commercial space is essential, be it leasing, buying, or even a food truck. Average small café lease rates run $15-$30 per square foot annually.
• Purchasing an existing restaurant property can require $100,000-$500,000+ depending on location and features. Food trucks have lower barriers to entry around $50,000.
• Build-out costs to furnish, renovate, and optimize the site layout add another $15,000-$38,000.
• Specialized equipment constitutes a significant fixed cost. High-volume espresso machines range from $8,000-$15,000.
• Fridges, ovens, dishwashers, and other kitchen appliances add a few thousand each. Ventilation, fire suppression systems, point-of-sale setups, and dining furniture also add up quickly. New cafés can expect to invest $20,000-$45,000 in key equipment.
• Ingredient inventory must be purchased upfront before opening day. Estimate $5,000-$10,000 to stock coffee beans, bakery items, produce, dairy, paper products, utensils, and more until cash flow stabilizes.
• Cafés with liquor licenses require extra capital for wine, beer, and spirits – at least $3,000 initially.
• Various permits and professional services facilitate a smooth launch. Filing fees for LLC formation and food service licenses cost $500-$1,500.
• Lawyers and accountants may charge $2,000-$5,000. Designers, architects, and contractors also have pricey fees but prove worthwhile for space planning and efficient build-outs.

Altogether, a 1,200 sq ft counter-service café with mostly second-hand equipment may launch for $80,000 if opting for a basic built-out space. A 2,500 sq ft full-service site with entirely new equipment and custom architecture could demand upwards of $250,000.

Also worth noting that smaller cafes are often present in movie theaters , whether in-house or external (e.g. Starbucks). Consider branching out as you’ll constantly have a steady influx of customers at such a hot spot.

Ongoing Costs

Once opened, cafés face numerous ongoing operating expenses split into fixed and variable costs:

• Rent/Mortgage – $24,000-$100,000+ annually
• Loan repayment – $8,000-$30,000
• Equipment leases – $2,000-$10,000
• Payroll including taxes and workers comp – $60,000-$250,000+
• Insurance – $4,000-$8,000
• Utilities – $6,000-$15,000+
• Point of sale fees and subscriptions – $1,000-$4,000
• WiFi and music licensing – $600-$1,500
• Accounting and legal retainers – $500-$5,000
• Advertising – $2,500-$15,000+
• Food/beverage inventory – 30-50% of monthly sales
• Janitorial supplies and shop upkeep – $1,000-$4,000

Careful financial planning and cost control will help offset slim profit margins in the competitive café sector. But for owners who curate an in-demand concept and brand identity, the earnings potential remains highly stimulating.

4. Form a Legal Business Entity

As you open a coffee shop, owners must weigh options on the legal business entity. The four primary formations each impact taxes, regulations, liability protection, and expansion capabilities differently. For coffee shops specifically, limited liability companies (LLCs) tend to offer the best balance of flexibility and owner protection.

Sole Proprietorship

Sole proprietorships represent the simplest yet riskiest entity. They involve minimal paperwork and cost nothing to initiate. Owners report profits or losses on personal tax returns. However, solo presenters bear unlimited financial liability – meaning their homes and assets get tied up if sued.

Partnership

Partnerships allow the sharing of operations and expenses across two or more founders. But similar to sole proprietors, general partners remain personally liable for debts and legal issues.

Corporation

On the incorporated side, C-corporations have the highest start-up costs – incorporation filing fees plus annual franchise taxes. They provide limited liability shielding but face double taxation on company earnings and shareholder dividends. S-corp election avoids double tax but adds accounting complexity with strict ownership rules that can prove overly restrictive for café growth.

Limited Liability Company (LLC)

By comparison, Arizona State University’s business experts hail LLCs as the best option for small hospitality firms like cafés. LLC registration protects owners’ assets if sued, avoiding sole proprietorship exposure. Taxwise, earnings, and losses pass to members’ returns without corporate double taxation. Operations governance brings flexibility akin to partnerships but with the liability limits of a corporation.

5. Register Your Business For Taxes

All new business owners must obtain an Employer Identification Number (EIN) from the IRS, which functions like a Social Security Number for your company. This unique 9-digit number identifies your LLC, corporation, or other legal business structure for federal tax purposes.

While sole proprietors can use their SSNs initially, the SBA highly recommends securing your own EIN even if you don’t plan to hire employees. Having an EIN adds legitimacy for partners, lenders, and vendors. It also enables opening business bank accounts properly titled to your company.

Thankfully obtaining an EIN takes just minutes online. Simply:

• Navigate to the IRS EIN Assistant
• Answer a few basic questions about your LLC or corporation
• Provide your personal identifying information for verification
• Get your EIN immediately upon submitting the form

The online EIN application has no fees or processing delays. You must print/save the final assignment notice from the IRS for record-keeping.

With your federal EIN secured, contact your state revenue office to register for additional tax IDs used in sales tax collection, payroll taxes, alcohol licenses if applicable, and other filings. States charge no registration fees either, though you’ll need to integrate reported sales and income on separate state returns annually.

Streamlining legal compliance from the start helps cafés focus on customers and growth in a complex regulatory environment. An EIN only takes minutes via the IRS portal but unlocks essential business functions down the road.

Let me know if you need any other details about obtaining an EIN, applying for state tax licenses, or navigating business taxes as a new café owner!

6. Setup Your Accounting

With slim profit margins prevailing in the food service industry, café owners must implement rigorous financial systems right from the start. Careful record-keeping, accounting software, fiscal diligence, and retaining a tax professional provide vital foundations for success.

Accounting Software

After securing your EIN, invest in user-friendly accounting software like QuickBooks to track all transactions in one place. The cash basis method recognizes income/expenses when money exchanges hands, which simplifies reporting for small cafés. Link your business bank and credit card accounts so payments automatically download into preset categories like supplies, payroll, utilities, etc.

Hire an Accountant

While the software does the heavy lifting, working with an accountant or bookkeeper safeguards accuracy in documenting deductible expenses, estimating quarterly taxes, reconciling accounts, and producing clean financial statements to spot issues.

Expect to invest $100-$250 monthly for comprehensive outsourced accounting or around $700-$1,500 for annual filing prep. An accountant also proves invaluable if audited down the road, supplying evidence to validate deductions claimed.

Open a Business Bank Account

Separating business finances from personal avoids monstrous headaches at tax time. Open dedicated café checking/savings accounts and apply for a business credit card solely for company expenditures. Consumer cards often can’t handle high transaction volumes anyway.

7. Obtain Licenses and Permits

While exciting to finalize menus and décor, new cafés must allot time upfront to navigate licensing requirements. Find federal license information through the U.S. Small Business Administration . The SBA also offers a local search tool for state and city requirements.

At a minimum, register for a baseline food service establishment permit through local health departments before serving anything edible to customers. These prevent foodborne illness by stipulating protocols for ingredient sourcing, prep, storage, cleaning, and employee health policies.

If planning to sell alcoholic beverages, apply for separate liquor licensing through alcohol control boards in your state. Eligibility for beer/wine versus full liquor depends on the cuisine type, seating capacity, and hours. Liquor permits run $500-$2,000 with annual renewals and staff training mandates. Bartenders must obtain additional certification.

Cafés hosting live entertainment or background music require analog music licensing like an ASCAP or BMI Permit. These royalties compensate artists when songs commercially play and cost around $275-$590 yearly. Venues above certain occupancies need concert/event permits for talent shows, trivia nights, or open mic events too.

While not universally mandated, café owners concerned with public health may additionally pursue recognized food safety training and display-related signage. Programs like ServSafe offer evidence you uphold best practices for contamination avoidance, thereby attracting discerning patrons. Some cities even incentivize such voluntary credentialing.

Confirm precise requirements with business licensing departments and schedule adequate lead time. The permitting process held Emilie’s Bakery from a disastrous incomplete inspection at their grand opening ribbon cutting! Confirming regulatory obligations early keeps new cafés compliant and audit-proof.

8. Get Business Insurance

While an unbudgeted expense, business insurance gives café owners peace of mind against scenarios threatening their livelihoods. Policies cover losses from theft, property damage, customer injury lawsuits, and other risks – no small problem given hot liquids, slippery floors, and heavy equipment.

Imagine a winter pipe burst flooding your newly renovated space, destroying walls, wiring, and custom tile work. Without coverage, the café must pay six-figure repair costs out of pocket. Now imagine a patron spills tea and slips on your vinyl floors.

Thankfully getting insured does not break the bank and prevents catastrophic loss. Start by researching café-specific risks using Hartford’s industry risk profiler. Next, connect with independent insurance brokers familiar with local food-service clients. Standard policies include:

• General liability – covers 3rd party injury/property claims
• Equipment coverage – replaces stolen/damaged appliances
• Workers comp – pays staff medical bills
• Loss of income – continues some profits after a disaster

Ensure adequate limits given major assets like machinery or real estate improvements. For optimal protection, secure policies 30-60 days before opening doors to customers and require certain coverages from vendors. Defending your livelihood deserves priority!

9. Create an Office Space

Although counterintuitive given their physical retail sites, securing office space proves essential for café owners to operate administrative functions outside chaotic kitchens. An external headquarters, be it home-based, shared, or private, offers a space for administrative duties.

Home Office

Home offices allow bootstrapping cafés to avoid paying rent elsewhere initially. Dedicating space for filing, equipment storage, and food science experiments also enables tax write-offs on a portion of residential bills. However, separating work and personal life often proves beneficial for concentration.

Coworking Office

Coworking spaces like WeWork supply turnkey office infrastructure for around $300-$500 monthly. Many provide meeting rooms to interview chefs, kitchen incubators to test recipes after hours, and networking events to connect with fellow entrepreneurs. While budgets tighten, the flexibility and amenities keep startup costs manageable until cash flow stabilizes.

Commercial Office

As managers build out management teams over time, leasing a private commercial office better accommodates more employees permanently stationed behind the scenes versus just running the register. Expect monthly rates from $1,000-$1,500 but with no restrictions on hours or storage for extra equipment/records.

10. Source Your Equipment

Outfitting a café requires significant upfront investment in durable commercial-grade inventory spanning furniture, cooking gear, point-of-sale systems, and small wares. Thankfully multiple acquisition options balance quality and affordability.

When buying brand new, beverage-focused sites like Espresso Parts offer barista tools like high-end Italian espresso machines, grinders, tampers, and steaming pitchers often sold in discounted bundles. Commercial kitchen retailers like Webstaurant Store supply heavy-duty ovens, refrigeration, ventilation, prep tables, utensils, and display cases configurable to space.

To conserve startup capital, browse used listings on eBay , Facebook Marketplace , and Craigslist for quality floor models or refurbished wares at 40-60% discounts off retail. Peer networks connect buyers and sellers of specialty baking gear through their online exchange. Try searching locally first to inspect the condition before committing.

Renting essential equipment also limits large outlays while opening helps cash flow early on. National companies deliver commercial dishware, tables, linens, and servers for off-site catering gigs with flexible terms. Rental fees apply to eventually owning certain items too.

Leasing agreements for expensive machinery like high-performance coffee roasters allow spreading payments over 3-5 years until the balance is satisfied. This pay-as-you-go approach prevents major asset purchases from paralyzing young businesses. Credit checks often factor in leases, however.

11. Establish Your Brand Assets

Crafting a distinctive brand platform fuels recognition, trust, and customer loyalty over commodity competitors. While initially daunting, methodically curating visual identity, communications channels, and an online hub need not break tiny startup budgets.

Get a Business Phone Number

Secure an official business line via cloud-based providers like RingCentral for around $30 monthly. Toll-free numbers project credibility while call routing, voicemail transcriptions, and custom greetings operate professionally.

Design a Logo

Design aesthetics likewise convey persona. Have a designer create a timeless wordmark logo evoking your café’s vibe through font, color, and icons from Looka . Expect to invest $200-$500. Vector files adapt easily to signs, cups, ads, and swag. Steer clear of overused visual clichés.

Print Business Cards

Print 500-1000 business cards for under $20 from Vistaprint to share during guest interactions, vendor meetings, hiring fairs, and community networking. Cards enable quick captive messaging after pleasant café encounters.

Prominent exterior signage also drives lucrative foot traffic – illuminate hours, menus, and brand insignia outside. While pricier than print materials, quality metal and neon signage lasts for years with proper installation.

Get a Domain Name

Digital real estate equally enables discovery by neighborhood patrons and tourists alike. Register an intuitive .com domain with your name via Namecheap for about $12 annually. Use this consistently across platforms like GMB, social media, and email.

Design a Website

Building out an owned website on Wix or WordPress enables showcasing menus, events, catering details, e-commerce, and contact options without third-party interference. Expect to invest $100-$500 launching with custom branding. If funding is extraordinarily tight, you can also commission affordable site development on Fiverr .

12. Join Associations and Groups

While competitive, the food and beverage industry encourages remarkable collegiality. Connecting with community resources, complementary businesses, and hospitality pros pays dividends for novice café owners through traded secrets and elevated visibility.

Local Associations

Joining the local chapter of the Specialty Coffee Association offers workshops on brewing techniques and customer retention alongside peer networking. Membership fees of around $100-150 prove worthwhile for insider tricks. Restaurant alliances additionally lobby for legislative changes benefitting eateries.

Local Meetups

Attending regular startup meetups via Meetup enables you to meet fellow entrepreneurs plus sponsor Booths featuring your scones or pour-overs and get your brand directly in front of potential customers and vendors like commercial linen services. Expect to invest $50+ monthly to maximize exposure at multiple events.

Facebook Groups

For free perpetual advice, join hyper-targeted Facebook Groups like RESTAURANT BUSINESS OWNERS and Coffee Shop Owners Only alongside local conversations. Learn from peers globally in managing staff, marketing on Instagram, saving money, and preventing common pitfalls.

13. How to Market a Cafe Business

While tempting to focus solely on perfecting recipes and interiors, dedicating time to strategic marketing proves indispensable for attracting initial customers and sustaining patronage long-term. By tapping personal connections alongside targeted digital and print channels, new ventures can amplify visibility and sampling.

Personal Networking

Start close to home, most small businesses earn new clients from word-of-mouth sources like friends, family, neighbors, and colleagues. Savvy owners incentivize referrals by offering free drink cards to existing patrons who check in on social media and tag new guests.

Digital Marketing

• Run hyperlocal Facebook and Instagram ads highlighting signature breakfast sandwiches or oat lattes
• Claim and optimize free business profiles like Google My Business, Yelp and TripAdvisor
• Produce snackable behind-the-scenes café culture videos for TikTok and YouTube
• Send limited-time reopening offers via SMS and email collection
• Partner with workplace offices, fitness studios, and apartment buildings nearby to fuel referral rewards
• List catering menus on gig marketplaces like UberEats for expanded visibility

Traditional Marketing

• Distributing menus and flyers at the public library, rec center, and local colleges
• Placing radio ads spotlighting trivia nights on community stations
• Sponsoring Little League teams and putting up banners at games
• Staking signs at busy neighborhood intersections

The most effective strategies entice trial from a fusion of existing networks and targeted local outreach. Space limitations prevent covering everything here but let’s brainstorm other ideas that could uniquely work for your café!

14. Focus on the Customer

In an increasingly commoditized food service sector, stellar customer service stands out as a competitive differentiator for cafés striving to build loyalty and earn referrals.

Some ways to improve customer focus as a coffee shop owner include:

• Tactics like greeting every patron by name, customizing orders for regulars, and gift card bonuses after frequent visits make customers feel individually appreciated, not just processed.
• Baristas might also deliver samples of new whole bean arrivals to spark conversation and showcase expertise.
• Little service touches spotlight the care and pride owners place in their neighborhood oasis.
• A memorable send-off like “Your lunch is on us today, we so appreciate your continued support!” demonstrates genuine recognition of patronage that earns huge dividends offline and on platforms like Yelp.
• Putting people first with thoughtful hospitality and attention powers expansion more than any single marketing tactic alone ever could.

Let’s discuss additional ways we can wow your café guests! Delivering consistently excellent service remains every entrepreneur’s secret weapon.

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Cafe Business Plan Template

Written by Dave Lavinsky

Cafe Business Plan

Over the past 20+ years, we have helped over 10,000 entrepreneurs and business owners create business plans to start and grow their cafes. On this page, we will first give you some background information with regards to the importance of business planning. We will then go through a cafe business plan template step-by-step so you can create your plan today.

Download our Ultimate Business Plan Template here >

What is a Cafe Business Plan?

A business plan provides a snapshot of your cafe as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategy for reaching them. It also includes market research to support your plans.

Why You Need a Business Plan for a Cafe

If you’re looking to start a cafe or grow your existing cafe you need a business plan. A business plan will help you raise funding, if needed, and plan out the growth of your cafe in order to improve your chances of success. Your cafe business plan is a living document that should be updated annually as your cafe grows and changes.

Sources of Funding for Cafes

With regards to funding, the main sources of funding for a cafe are bank loans and angel investors. With regards to bank loans, banks will want to review your business plan and gain confidence that you will be able to repay your loan and interest. To acquire this confidence, the loan officer will not only want to confirm that your financials are reasonable. But they will want to see a professional plan. Such a plan will give them the confidence that you can successfully and professionally operate a business.

The second most common form of funding for a cafe is angel investors. Angel investors are wealthy individuals who will write you a check. They will either take equity in return for their funding, or, like a bank, they will give you a loan.

Finish Your Business Plan Today!

Your cafe business plan should include 10 sections as follows:

Executive Summary

Your executive summary provides an introduction to your business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.

The goal of your Executive Summary is to quickly engage the reader. Explain to them the type of cafe business you are operating and the status; for example, are you a startup, do you have a cafe that you would like to grow, or are you operating a chain of cafes.

Next, provide an overview of each of the subsequent sections of your plan. For example, give a brief overview of the cafe industry. Discuss the type of cafe you are operating. Detail your direct competitors. Give an overview of your target market. Provide a snapshot of your marketing plan. Identify the key members of your team. And offer an overview of your financial plan.  

Company Analysis

In your company analysis, you will detail the type of cafe you are operating.

For example, you might operate one of the following types:

• Take-Out Cafe: this type of cafe doesn’t have seating (or has limited seating) and is mostly visited by customers looking to grab a coffee and/or bakery item on their way to work or elsewhere.
• Restaurant Cafe: this type of cafe is most similar to a restaurant and offers a full, sit-down menu in a nice atmosphere with a full wait staff.
• Casual cafe: also known as a corporate, student or co-working cafe, this type of cafe typically offers food and drinks from a counter with no waiters or waitresses. Patrons purchase items and consume them in the cafe, often while performing work on their laptops or conversing with friends or colleagues.
• Coffee Shop: This is a popular type of cafe. Coffee shops usually offer a selection of tea, coffee, pastries and other drinks

  In addition to explaining the type of cafe you operate, the Company Analysis section of your business plan needs to provide background on the business.

Include answers to question such as:

• When and why did you start the business? What is your business concept? What is your unique selling proposition?
• What milestones have you achieved to date? Milestones could include sales goals you’ve reached, new store openings, etc.
• Your business structure. Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.

Industry Analysis

In your industry analysis, you need to provide an overview of the cafe business.

While this may seem unnecessary, it serves multiple purposes.

First, researching the cafe industry educates you. It helps you understand the market in which you are operating.

Secondly, market research can improve your strategy particularly if your research identifies market trends. For example, if there was a trend towards cafes with ultra high speed internet connections, it would be helpful to ensure your location could offer such a service.

The third reason for market research is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.

The following questions should be answered in the industry analysis section of your cafe business plan:

• How big is the cafe business (in dollars)?
• Is the market declining or increasing?
• Who are the key competitors in the market?
• Who are the key local suppliers in your market?
• What trends are affecting the industry?
• What is the industry’s growth forecast over the next 5 – 10 years?
• What is the relevant market size? That is, how big is the potential market for your cafe. You can extrapolate such as figure by assessing the size of the market in the entire country and then applying that figure to your local population.

Customer Analysis

The market analysis section of your cafe business plan must detail the customers you serve and/or expect to serve.

The following are examples of customer segments: local office workers, college students, sports enthusiasts, soccer moms, techies, teens, baby boomers, etc.

As you can imagine, the target audience you choose will have a great impact on the type of cafe you operate. Clearly baby boomers would want a different atmosphere, pricing and product options, and would respond to different marketing promotions than teens.

Try to break out your target customers in terms of their demographic and psychographic profiles. With regards to demographics, include a discussion of the ages, genders, locations and income levels of the customers you seek to serve. Because most cafes primarily serve customers living in their same city or town, such demographic information is easy to find on government websites.

Psychographic profiles explain the wants and needs of your target customers. The more you can understand and define these needs, the better you will do in attracting and retaining your customers.

With Growthink’s Ultimate Business Plan Template you can finish your plan in just 8 hours or less!

Competitive Analysis

Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.

Direct competitors are other cafes (and restaurants and/or bakeries depending on the type of cafe you operate).

Indirect competitors are other options that customers have to purchase from you that aren’t direct competitors. This includes restaurants, supermarkets and customers making coffee and bakery items themselves at home. You need to mention such competition to show you understand that not everyone in your target market will visit a cafe each day.

With regards to direct competition, you want to detail the other cafes or coffee shops with which you compete. Most likely, your direct competitors will be cafes located very close to your location.

For each such competitor, provide an overview of their businesses and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as:

• What types of customers do they serve?
• What products do they offer?
• What is their pricing (premium, low, etc.)?
• What are they good at?
• What are their weaknesses?

  With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to stand outside your competitors’ locations and ask customers as they leave what they like most and least about them.

The final part of your competitive analysis section is to document your areas of competitive advantage. For example:

• Will you provide superior cafe products?
• Will you provide cafe products that your competitors don’t offer?
• Will you make it easier or faster for customers to acquire your products?
• Will you provide better customer service?
• Will you offer better pricing?

Think about ways you will outperform your competition and document them in this section of your plan.  

Marketing Plan

Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For a cafe business plan, your marketing plan should include the following:

Product : in the product section you should reiterate the type of cafe that you documented in your Company Analysis. Then, detail the specific products you will be offering. For example, will you offer pastries, soups, items such as café latte, cappuccino, espresso or macchiato?

Price : Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your marketing plan, you are presenting the menu items you offer and their prices.

Place : Place refers to the location of your cafe. Document your location and mention how the location will impact your success. For example, is your cafe located next to a heavily populated office building, or gym, etc. Discuss how your location might provide a steady stream of customers.

Promotions : the final part of your cafe marketing plan is the promotions section. Here you will document how you will drive customers to your location(s). The following are some promotional methods you might consider:

• Making your cafe’s front store extra appealing to attract passing customers
• Distributing samples outside the cafe
• Advertising in local papers and magazines
• Reaching out to local bloggers and websites
• Partnerships with local organizations (e.g., gym members get a free cup of cafe with each pastry they purchase)
• Local radio advertising
• Banner ads at local venues

Operations Plan

While the earlier sections of your business plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.

Everyday short-term processes include all of the tasks involved in running your cafe such as serving customers, procuring supplies, keeping the cafe clean, etc.

Long-term goals are the milestones you hope to achieve. These could include the dates when you expect to serve your 10,000th customer, or when you hope to reach $X in sales. It could also be when you expect to hire your Xth employee or launch a new location.  

Management Team

To demonstrate your cafe’s ability to succeed as a business, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company.

Ideally you and/or your team members have direct experience in the cafe, coffee shop and/or restaurant business. If so, highlight this experience and expertise. But also highlight any experience that you think will help your business succeed.

If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act like mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in cafes and/or successfully running retail and small businesses.  

Financial Plan

Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet and cash flow statements.

Income Statement : an income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenues and then subtracts your costs to show whether you turned a profit or not.

In developing your income statement, you need to devise assumptions. For example, will you serve 100 customers per day or 200? And will sales grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.

Balance Sheets : While balance sheets include much information, to simplify them to the key items you need to know about, balance sheets show your assets and liabilities. For instance, if you spend $100,000 on building out your cafe, that will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a bank writes you a check for $100.000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.

Cash Flow Statement : Your cash flow statement will help determine how much money you need to start or grow your business, and make sure you never run out of money. What most entrepreneurs and business owners don’t realize is that you can turn a profit but run out of money and go bankrupt. For example, let’s say a company approached you with a massive $100,000 catering contract, that would cost you $50,000 to fulfill. Well, in most cases, you would have to pay that $50,000 now for supplies, equipment rentals, employee salaries, etc. But let’s say the company didn’t pay you for 180 days. During that 180-day period, you could run out of money.

In developing your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing a cafe:

• Location build-out including design fees, construction, etc.
• Cost of fixtures like chairs, tables, signage and cafe decor
• Cost of equipment like grinders, espresso machines, blenders, refrigerators
• Cost of ingredients and maintaining an adequate amount of supplies
• Payroll or salaries paid to staff
• Business insurance
• Taxes and permits
• Legal expenses

Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your store design blueprint or location lease.

Putting together a business plan for your cafe is a worthwhile endeavor. If you follow the template above, you will be able to prepare a winning cafe business plan or a coffee shop business plan. You will really understand cafe business planning, business operations, your competition and your customers. You will have developed a marketing plan and will really understand what it takes to launch and grow a successful cafe.

OR, Let Us Develop Your Plan For You

Since 1999, Growthink has developed business plans for thousands of companies who have gone on to achieve tremendous success.

Click here to see how our professional business plan writers can create your business plan for you.

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