How to Start a Cafe in 9 Steps

If you’re wondering how to start a cafe, but need a guide to kick you off, we have you covered. From drawing up a business plan to serving your first cup of joe, there are many steps to opening a cafe you need to follow in order to create a successful business. 

So how hard is it to open a cafe? We’ll walk you through all the important points, so that starting a cafe feels within reach. 

Benefits of starting a cafe

Before learning how to open a cafe, you should be certain that this is something you want to do. It can be a rewarding and profitable business venture if done correctly. Here are some key benefits of starting a cafe:

• High demand and steady revenue: People visit cafes daily for coffee, snacks, and socializing, which means repeat customers and consistent income.
• Creative freedom and personalization: When you think about how to run a cafe, part of the fun is the concept. You can design the cafe’s theme, menu, and ambiance to reflect your style, and experiment with unique coffee blends, baked goods, or healthy food options.
• Foster a sense of community: Cafes often become local hubs where people gather, work, or socialize. Loyal customers can turn into long-term patrons.
• Strong profit margins: Coffee and specialty drinks have high markup potential. Food items like pastries and sandwiches also yield good profits.

How to start a cafe in 9 steps

So now you may be wondering, “what do I need to open a cafe?” Before you can launch your grand opening, there’s lots to do. Here’s how to start a cafe business broken down into clear steps. 

1. Conduct market research

Before you create a cafe business plan, you want to get the lay of the land. Learning how to open your own cafe means understanding the industry and environment you’ll be working in. In your research, answer the questions: 

• Who is your target audience and what are their preferences?
• What are the local competitors or similar businesses? What do they offer, and can you fill any gaps?
• What’s trendy in the cafe space? What’s out of fashion
• What should you offer in your cafe? How should you price your products? Use online research, surveys, and focus groups to gather consumer data and make informed decisions. 

2. Write up a business plan.

Business plans are a key part of starting a new business, and knowing how to open a cafe business will require learning how to create an effective business plan. Make sure to include:

• What your business is, and who it serves
• Your unique selling proposition (USP) that sets you apart from similar businesses
• Who your target market is (and where) with an analysis of the market potential
• Your primary competitors
• Financial plans like how you intend to make money and your sales and revenue projections
• Your marketing strategy
• Key milestones, goals, and timelines for growth
• Strengths, weaknesses, strengths, and opportunities for your business (SWOT)

The purpose of your business plan is not only to provide a clear direction for starting a cafe business, but also because securing funding can often be dependent on providing a business plan. 

3. Find funding

Speaking of funding, without money, you won’t have what you need to start a cafe. There are a few ways you can fund a small business, and a savvy new business owner will try to access as many of these avenues as possible. Try the following options:

• Business loans (term loans, SBA loans, equipment financing, short-term loans, or a line of credit)
• Grant funding through a non-profit or local government 
• Personal savings and the support of family/friends
• Crowdfunding through GoFundMe or Kickstarter
• Partnering with a private investor for a share of profits

4. Choose a location

The success of starting a cafe depends significantly on the location of your cafe. Since your customers will come from the local neighbourhood, you’ll want an area with:

• High foot traffic
• Busy shopping centres
• Near colleges or office districts

And you’ll want to make sure the location is visible, accessible, and there aren’t too many other cafes in the area. 

Finally, consider whether the passersby in your neighbourhood will be interested in the type of cafe you’re planning to open. You’ll also want to ensure the space fits your needs—if you want to have a sit-down dining space, for example, or accommodate the growth of your business, then you’ll also need to consider that when you start your cafe. 

5. Sort out your licenses and permits

Nobody wants a compliance issue to be the reason their business doesn’t take off. Make sure you’ve researched and followed all necessary regulations. This might mean obtaining:

• Business license 
• “Doing Business As” license (DBA)
• Retail food service license
• Resale license for sales tax
• Sign permit
• Insurance
• Food handler’s permit
• Building health permit
• EIN (Employee Identification Number)

Each state and municipality has its own licensing requirements, so make sure you’ve consulted all necessary governing bodies at each level. If you need support, the U.S. Small Business Administration can be a good resource. 

6. Order equipment and connect with suppliers 

When you’re selling quality coffee, you want to make sure you find reliable suppliers for both your beans, your food, and any other products you might sell. Build partnerships so that you can get fair prices and reliable deliveries. 

You’ll also need to equip your cafe with everything necessary for operation. While the details will depend on your cafe design, consider getting:

• Coffee makers, grinders, milk steamers, and other cafe equipment
• Refrigeration and food preparation equipment and tools
• Comfortable seating and tables
• Inventory management tools
• A Point of Sale (POS) system for sales

7. Design your cafe

Perhaps this was the first part you thought about when you thought about how to open your own cafe—the design and concept of your store. Beyond your own design preferences, there are a few factors you should consider: 

• Unique design: Using a theme or niche that sets your cafe apart from the rest will help your business stand out and appeal to customers. Whether you want to focus on fair trade beans, health-conscious drinks and foods, or themeing your cafe after a particular aesthetic or hobby, make sure your space and branding reflect your idea. 
• Comfort and navigation: Even with the most interesting theme, if your customers don’t feel comfortable moving around and staying in your space, your business won’t do well. Make sure there’s ample space to move around, comfortable furniture, and amenities like outlets and coat hooks. 
• Accessibility: To create a welcoming space, you should ensure customers using canes or mobility devices are able to enter and move around your cafe, including accessing the counter and seating. 
• Develop a complementary, cost-effective menu: Designing your cafe goes beyond thinking about the space—you’ll also want a menu that matches your theme and reflects the price point your target audience expects, alongside the cost of supplies. 

8. Hire and train your team

In order to provide your customers with the best experience, you’ll need to hire staff to keep your business running. Now that you know how to start a cafe business, you’ll want to hire the best coffee shop employees to support you. That means hiring baristas, cashiers, managers, and employees to help with inventory and administration. 

To hire the best employees for the job, you need to budget for the roles you need and craft a job description for each. To make your life easier, try using online templates like this barista job description or reference competitors’ postings to ensure your offers are competitive. 

Using employee hiring and onboarding tools like Homebase, you can make the hiring process easier. Our app lets you post automatically to job boards, track applicants as they go through the interview process, and create employee onboarding programs for your new hires so they can hit the ground running. 

9. Market and launch your cafe

It’s time for the big moment! Though you might be eager to open your doors, you’ll want to follow a marketing plan for your launch so that you can generate lots of buzz before your store officially opens. That way, you’ll have customers lining up by opening day. Try including these strategies in your plan:

• Make engaging signage that catches the eye and aligns with your brand
• Advertise in local newspapers, flyers, and through the BIA
• Collaborate with other businesses in town to spread the word 
• Host an opening day event with discounts, prizes, and other exclusive offers
• Create a social media presence to build hype and a digital community 
• Partner with local community groups or authors to be a host for their events

{{banner-cta}}

How do I start a small cafe?

If you’re working with limited space or a limited budget when considering how to open a cafe, you may be wondering how to start a small cafe. While costs can differ depending on your location, this may help illustrate what kind of budget you need to get started. 

Starting with a small 500 sq ft cafe, you'll need to consider several key expenses. Depending on your locations, rent for a space this size typically runs around $2500 per month. Equipment costs for a small cafe will be around $15,000. This includes essential items like espresso machines, grinders, refrigerators, and other necessary appliances. 

Supplies are another important factor. Budget approximately $5000 for initial stock, including coffee beans, milk, syrups, cups, plates, and utensils. These supplies will need regular replenishment, but this initial amount will get you started. 

Labor costs are significant, so you can expect to spend around $10,000 per month on wages. This figure includes salaries and any benefits you might offer to attract and retain good employees. Overall, the total startup costs for a small 500 sq ft cafe can come to about $50,000, but make sure you do your own budgeting to be sure.

Kick off your cafe with Homebase

Now you know the basics of how to start a cafe business! As you continue in the journey to build up your dream, you’ll notice that you need both good people and reliable tools to help get all the work done. 

Luckily, Homebase was made for small business owners like you. Our all-in-one team management app is designed to support your hourly team, so that administration is a breeze. From scheduling to time tracking, payroll, and more, we can simplify your cafe's employee management? Let's make work easier—get started today.