Finding the perfect location for your cafe is like winning half the battle. But what makes a location perfect?
We did our research on the commercial property market and spoke with experts in the field to understand the top things you should be paying attention to while you're looking for the top spot for your cafe.
Here are 9 insights that can really help you in your search for the perfect place:
1. Think how much you can afford to spend on rent. Then consider the additional costs.
It all starts with knowing exactly how much you can invest in the business. The mistake many people make is that they only consider the rent for a property when they’re shortlisting locations.
But in reality, rent is often only part of the cost. There are many other operational costs that you need to account for. For instance, besides paying the recurring electricity and other utility bills, there are statutory costs attached with a property. These include municipal rates, water and sewerage rates and land tax that you may need to pay to the council. These rates are proportional to the area you occupy and will depend on the specific building you’re in.
These additional costs also depend on the kind of lease you have. There are typically two types of lease agreements:
- Net lease: This means you pay the operational costs in addition to your rent
- Gross lease: This means all costs are included in your rent. This is generally easier for a smaller property (say an area of 100m2 or less)
Plus, remember that at the beginning, you also need to shell out a security deposit, which is usually three months’ rent.
That’s why it’s always a smart idea to have enough money in reserve to be able to afford these additional costs.
2. Choose between the city or suburb
In places like Sydney, maximum cafes are located around the CBD. That’s because the CBD area in any city has most offices and universities - which are two of the major catchment areas for cafes.
You are likely to get more footfall if you’re located on a high street next to an office complex compared to a suburb, but the associated cost is also much higher. Plus, you need to think about the fact that the density of cafes in the CBD is very high - so if you open a cafe in the heart of Darling Harbour, you’ll also be competing with a lot more cafes.
Depending on the amount of money you have, you’ll need to decide whether you want to open a cafe in the CBD or somewhere near your home. The advantage of opening a cafe in a suburb is that properties are relatively cheaper and you could potentially think of buying the place instead of renting.
3. Work out your target audience.
You should remember that it’s not just about the location but how you use the location to your advantage and find a niche target audience. For example, a property valuer we spoke with, said that she once valued a cafe, which was close to an Australia Post outlet and the owner realised he had a lot of people coming their early morning to pick up their packages. So he decided to take advantage of the morning crowd by opening at around 6am instead of the usual 8am.
Broadly speaking, you can target three main types of coffee drinkers - office goers, university students and commuters. So if you’re close to an office, a university or a train station, you can expect a natural inflow of customers all through the day. In some stations like Central in Sydney, you can have a cafe on the station itself.
4. Buying an existing cafe.
Another choice that you’ll have to make while picking a location is whether you should buy an existing cafe or start something from scratch. If it’s a popular location, buying an existing food business makes sense because you’re also tapping into the goodwill the place has earned over time.
But it’s important to consider why the owner is selling the place. Before signing any document, make sure you observe the place for a few days, understand who your regular customers would be and if you think you can make this a profitable business.
5. Weekends or not.
Your location will determine whether it makes financial sense for you to remain open on weekends or not. For instance, if you’re in a fancy commercial building in Martin Place, Sydney, it would be too expensive for you to remain open for business on days when your regular crowd isn’t there. You’ll need to pay your staff plus you’ll need to pay for electricity and gas to keep the lights on.
6. Choose between takeaway or dine in.
The other thing you need to decide is whether you want to open a takeaway place or if you’d prefer to offer seating. In the beginning it could be a smarter idea to open a takeaway coffee shop to minimise costs. Let people get used to you, understand your market and then you can think of expanding.
Offering a seating space means a bigger place, which means a higher rent. And if you’re planning to have outdoor seating, it means an additional licence from the council - which is a cost in terms of both time and money.
7. Think about the menu.
The place you finally shortlist is also going to dictate the menu you can have on offer. That’s because different buildings can have different compliance regulations. For instance, say you get a premium spot on the ground floor of a busy office building - while this is a great place to tap into a regular customer base, this may also mean that you can’t have a kitchen in the cafe. You could have a fridge and a microwave, which means you can keep muffins and sandwiches but you won’t be able to fry fritters. You must remember that a kitchen requires a different kind of a licence.
This is an important thing to think about because while an average coffee costs $3.5-4 it may not be enough to just serve coffee to make profits or for that matter, break even. For many cafes that are run by single owners having an additional product along with coffee always helps.
8. Plan a way to stand out.
The cafe market is extremely competitive and that’s why, to survive here, you have to think of ways to stand out in the crowd. Some of the tactics cafes use include:
- Loyalty cards where every sixth or tenth coffee is free
- Partner with apps so people can order their coffee online
- Offer delivery deals for nearby buildings
- Brand yourself as an organic cafe
- Work on interiors that differentiate you from the cafes next door
- Serve amazing coffee - the coffee standards in Australia are very high and with so many options, if you don’t serve great coffee every time, customers will not come back to you
9. Think about the evenings.
Many cafes tap into a different customer base by turning into a bar in the evenings. This obviously entails a different kind of licence to remain open after hours and serve drinks. Whether this is a profitable exercise depends on the kind of area you’re located in, your target audience and the neighbourhood.
The right location for your cafe can make all the difference to your business model. So spend some time researching through all these points - it can easily take a few months before you find the perfect spot, but in the end, it will be worth the effort.
If you have any thought or questions about these insights, drop us a comment below!
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