Coffee Profits Economics for CafesCoffee represents the highest turnover profits for most cafes. Some very simple changes to the way you approach your coffee market and the way you make your coffee can have a dramatic impact on your future profitability.
Coffee Shop and Espresso Coffee Mistakes A cup of coffee not including labour can cost around 55cents or 69cents for a takeaway. Most places will sell their coffee between $2.50 and $3.50 per cup so this means the profit margins are much higher than food items. Getting the coffee right is important. Your customers will appreciate it and so will your bank manager. Unfortunately there is no fixed formula for pricing a beverage 100%, as the variables such as inputs,competition,overheads and the economics of your area make any difinitive calculation difficult. Assuming you sell your coffee for $2.50 per cup an extra 5 cups of coffee sold per day will generate and extra $3,300 per annum in profit. If you sold an extra 100 cups per day you would generate a $66,000 of profit per year There should be about $250 profit per kilo and average 130 cups per kilo If you were to sell 10kg per week this would equal $125,000 per year. Well run cafes should operate on around 25% profit margin and restaraunts 7% per year. When choosing a coffee supplier choose a company that can best service you with training, supply and technical advice and maintenance on machinery rather than gimmicks.
Read what Tony Di Corpo has to say What should you do to achieve this?? Work closely with your roaster and milk supplier so you start with optimum ingredients Spend time training your staff to make great coffee- great coffee involves 70% human input. Do some promotions Find out what the competition is doing Smile smile smile Try to learn you regular customers orders Upsell other products Once you have increased your sales renegotiate your coffee price. Higher volume sales should be rewarded. coffee books 
The menu is another form of marketing in your business and should have adequate planning time put into its presentation. Looking at areas of it presentation, the seasonal aspects of the menu, pricing and timing.
The menu could run under a menu card system with photo’s of all meals taken and placed in view of all kitchen staff including floor staff. Look at applying stock systems to save dollars with check procedures for stock control and wastage. A café menu needs to have a signature to the presentation to maintain a good price structure. I like running a specials menu on busy weekend days, copying examples of other city based Cafes with, adapting your local product. They often have pictures in the local Sunday lift outs, they can help with Garnish techniques and descriptions. Remember the description is worth $3 on top of the meal. Also special does not mean a cheap price it means specially prepared.
Pricing needs to be worked out by portion costs added then times by 3.5 inclusive of GST.
Always look at including popular café regulars on a new menu, like banana breads, almond short bread, Friands, Turkish Pide, it will really appeal to travelers. People are creatures of habit so they tend to go for things they recognize.
10 Things To Consider In A Difficult Economy by Tony EldredI have noted that recent world events and a difficult economy have created quite a bit of fear and uncertainty in our industry. It would probably be useful if I give you some important general issues to consider early in the coming year to ensure the survival of your business, rather than getting down to the detail of day to day management as I usually do. I’ve put them in the form of a ten point check list, in order of priority, as I see it: 1. Review all your staffs’ performance. Now is not the time for misplaced loyalty or sentimental tolerance — especially where expensive staff are concerned. In times of reduced sales, efficient (some would say ruthless) wage cost control becomes an imperative. You can’t afford to carry people who are not highly productive — and when I talk about productivity I don’t only mean ‘working hard’ but also being flexible, amenable to change and fully committed to your business. Now more than ever you need their minds as well as their bodies. Get rid of your ‘dead wood’. 2. Review your current menus, wine lists and function packages. See if you can reduce your prices without sacrificing margin. In difficult economic times the public move down market — accept this fact and react accordingly. Sitting on your hands waiting for the world to return to normal is a recipe for bankruptcy. You’re going to need every little bit of margin you can get in a very competitive market over the next year. It’s time to get very clever; make sure you are delivering a strong perception of value for money while making a decent profit from everything that you sell. 3. Strengthen the selling and merchandising skills of your front of house staff. You can go a long way to negating the financial effects of a decrease in trade by increasing the customer average spend from your remaining customer base. Easy said, but sometimes difficult to achieve. Now is not the time to tolerate staff who think selling is a form of prostitution, nor is it the time for you to cling to a passive ‘We’re here to serve, not to sell’ attitude. Recognise that the creation of a sales culture requires time and concerted effort on the part of management. Get cracking now. 4. Review your concept and your systems. Do you really need full table service? Do you really need to bake your own desserts? Why are you doing your own payroll? There are probably hundreds of things you can do to reduce costs and increase efficiency. Think outside the square, there is always a better or more efficient way to do things. Get the people around you challenging all your sacred cows. See if you can lose the ‘it’s always been done this way’ mind set. Try to be open-minded, it’s hard to accept fundamental changes when you’ve been successful for a number of years with your existing system. The fear of ‘destroying the magic’ is quite powerful, but it’s worth noting that there’s not much magic around at present. 5. Critically examine all your supply relationships. Hard times bring opportunity. Your existing suppliers may have served you well, but are you getting the best deal right now? I’m not suggesting you abandon a long standing relationship for the sake of a couple of bucks, but I am of the opinion that it is a good time to do a bit of shopping around, especially if you can stick to negotiated terms of trade — at present you’ll be a rare and valuable customer among all those accounts that have blown out to 120 days. It’s also worth considering that a number of suppliers will disappear suddenly over the next year or so. Do you have a contingency plan for the continuity of supply of your critical supplies? 6. Ask for a rent reduction. You may well have an iron clad lease with a number of years to go, but do you really think your landlord wants a vacant premise right now? Don’t be afraid to ask for a renegotiation of existing contracts and leases. As long as both parties agree you can put aside any written legal agreement. I would, however, recommend you gather all the facts and evidence to support your argument before you try this. Don’t rely on hearsay and opinions or you are likely to run into a cynical, hard-nosed attitude instead of a cooperative ‘how can we move forward’ response. 7. Get rid of unprofitable customers. Now is the time to ditch all those regular but financially marginal functions and events you do. The people from the local bowling club may be nice people, but are they worth the trouble? Could you use the resources they tie-up in a more effective manner, or can you cut your costs and increase the costs of a competitor by easing them elsewhere? Think about getting rid of the customers who regularly camp on a table for long periods of time over a cup of coffee. 8. Concentrate on winning customers who can bring you bulk business. You are probably not going to have much money available to spend on marketing over the next year or so. Give some thought as to how you can identify and reach those people who have the decision making power to bring you bulk business. This will probably yield a much more cost effective result than blindly placing expensive display advertising in newspapers, etc. 9. Investigate sources of financial support before you get desperate. If things are not going well now, there is a likelihood that they won’t get much better in the near future. See if you can line-up financial support from your bank before the situation becomes critical, while you still have some time up your sleeve. You might as well face reality now rather than assuming that you are a good customer and that they have all the security they need over the borrowing of further funds — they may not agree with you. 10. Know when to get out. I see people lose their homes and everything they have worked for with depressing regularity. Don’t wait till the bitter end. If your business is spiralling down, get out before your debt becomes a family disaster. Remember: If you don’t change your direction, you’ll end up where you’re headed . . . — Tony Eldred is the Managing Director of hospitality management consultants Eldred Hospitality Pty Ltd. Contact: http://www.eldtrain.com.au Read this report on purchasing a cafe Business Plan for your coffee shop |