1.

Decide the concept of your Restaurant

The first thing to consider while starting a café business is deciding the concept. You need to keep a
number of things in mind before deciding a concept, the major one being the amount of capital you have
for investment. The Average Price per Customer (APC) gives you a fair idea about the average amount of
money a customer would spend in your Café .

 It can be a book café

 It can be a stand up comedy
 It can be clubbing
 Normall coffe shop
 Add a hokka parlour

2. Get Investment to fund your Café Business

 Self-funding – If you have enough money in the bank, then congrats, you have crossed the first
hurdle of opening a café . It is also a good idea to open a café in partnerships, as it reduces the
risks of investment.
 Loan- You can take a loan to fulfil your café dream. However, securing a loan from a bank may
include hassles as they look for collateral or someone who can underwrite the loan.
 VC/Angel funding- Getting investors on board can be difficult, especially if yours is a first-time
venture. Investors usually look for your café venturer’s growth potential, quality, and the
scalability of your model. The performance of your first few outlets is considered before
investing.
3. Evaluate all Café Costs involved

Café costs are a major part of running a Café and need to be evaluated and planned carefully.

 Food Costs- Food cost is the cost of all the raw materials used in preparing a stuff. Ideally, the
food cost should be around 30-40% of your menu price.
 Overhead Costs– Overhead costs are the other expenses that are not related to food or labour.
4. Decide the Location for your Café (main problem)

The location is an important factor to consider while discussing how to start a café business, as it can
determine the success of your cafe. While choosing your café location, it is a good idea to identify your
competitor in that area and gauge their success. This would help establish that a target customer base
already exists in the area.

5. Get all Licenses required to start a Restaurant Business

You need to acquire licenses from the government to run a café business in India. The cost of obtaining
these licenses varies, depending on the size of your venture. It is advisable to apply for the licenses early,
as they may take a lot of time to be approved.

6. Get Manpower for your Restaurant Business

Hiring the right talent and retaining them is one of the biggest challenges while running a café business.
Hiring through referral is the most common form of hiring, with existing employees referring their friends
and family. You can hire through the traditional way: set up an advertisement in the newspaper, put up
‘We’re hiring’ posters, or hire through agencies.

7. Design a Stellar Menu

A smartly designed menu can make a huge impact on your café food costs. The menu should comprise of
items that can be prepared easily and use local or easily available food material .

8. Arrange Suppliers & Vendors for your Café

A healthy relationship with your supplier and vendor is important for the smooth functioning of your cafe.
You must have at least two-three vendors in each category. This would help compare prices, and also
serve as a backup in case some problem comes up with one.

9. Install Right Technology at your Restaurant

Café technology is often the most ignored part of running and managing a café, though perhaps the most
important. With new age modern technology, there are a number of integrated features in the POS that
have smoothed café operations to a great extent like BrewBakes provide different types of service and
franchises .
Why do most café startups fails?
If only people understood the truth that most cafe startups fail - then they may not be so tempted to
indulge their fantasy in the first place. Failure, not so much in terms of 'closing the doors', but failure
as a business concept to reward owner/managers to the same level as what their capital and time
would secure from a combination of bank interest and 'working for the man'.

For me, the #1 reason why startup cafes fail to achieve economic sustainability, is the endless supply
of amateurs that fall victim to the siren's enticing call 'to own our own cafe/restaurant'. These people
have no idea about how to price products that are capable of giving the owner/manager a
competitive return for their long hours worked and a competitive return on their substantial
investment. But their less-than-sustainable prices keeps even the good cafe operators from getting
reasonable returns in the industry. So, as the rotating door of new entrants replace the outgoing
haggared failures, prices remain for all participants below what is required for the industry to be a
sustainable and worthwhile investment. Sure, you can extract a wage from your cafe investment but
'buying a job' is hardly the stuff of sustainable business models.

So apart from that general industry issue with price sustainability, the pitfalls that you can make all by
yourself are listed below. Having founded and managed over 20 cafe/restaurant outlets myself, I know
they are pitfalls because I have fallen into them all.

 Compliance fear - Being so overawed by the myriad of compliance issues surrounding food
service that you rush into the waiting arms of fear-mitigating advisers who can single-
handedly wipe out your budget and ability to spend money where it matters most. (i.e.
customer experience and marketing). The cost of compliance at the outset can cripple a cafe
in such a way that they never really recover.
 Kitchen rules too much - Same goes for over investing in a state-of-the-art kitchen rather
than the customer experience in the 'front of house'. Beware the chef who thinks that 'food
art' is more important than consistently reliable, quick and friendly service.
 Poor ergonomics in design - With a low average unit sale, cafes need to process thousands
of transactions per day to be sustainable. If the coffee making area is not ergonomically
designed, the order taking and payment system is not efficient and effective and the food
production requires lots of human movement then your cafe's physical service limit may curb
your ability to reach sustainability, not to mention the huge wages bill poor ergonomics can
create.
 Coffee only - Coffee has great gross profit margins however you don't pay the rent in
percentages - you pay it in dollars. Cafes with a coffee only/mostly strategy can be very busy
all day, but still not generate enough gross profit dollars to pay for all the costs. A cafe must
have a 'coffee plus' strategy at the outset if it is going to secure sufficient turnover to be
sustainable. i.e. coffee plus bakery item or food item that is conveniently located to the
coffee service area.
 Too wastage focus - Many newbies to the food game are horrified by the wastage that is
inherent in a well run cafe. So, they begin to reduce the amount of product on display or
they hold on to food items longer than they should. Trouble is, you will never build your
 business to sustainable levels if the shelves are scant and customers experience even the hint
of stale food. In fact, you begin the slow spiral slide into failure.
 Too profit focused - Similar to wastage focus, a profit focus too early tries to screw
suppliers on price rather than concentrate on building the more important partnership
relationship and reliable delivery and being overtly stingy with portion sizes and worrying
too much about the profit in the sale and not worrying enough on 'winning the customer'
(acquisition style). 'Make the customer not the sale' is an important startup catch phrase as is
the truth that 'you can go broke being obsessed with profit'.
 Poor staffing - Cafes don't just sell food/drink ... they sell stress relief, belonging,
recognition, feel good, connection and many other intangible value-add benefits that only
come from how you and your staff engage with the customers. The cafe with the staff that
make a feature out of remembering customer names, their standard orders and yesterday's
discussion succeeds, while those that don't fail. Customers in cafes may soon forget what
you sold them but they will never forget how you made them feel.
 Too wide an offer - Many startup cafes offer too much choice when the customer is
basically just hungry and thirsty. Wide assortment offers are difficult to manage and can
increase costs and lead to poor quality outcomes that lead to lost sales and lost customers.
Better to be 'inch wide - mile deep' when determining assortment offers in cafes.
 Unsuitable location - I agree with Jason Nuss that an unsuitable location can be the single
biggest reason why cafes fail. I have had one fail with too much unfocused traffic (train
station) and too little attention traffic (down a lane). My best 'A' location cafes served a
static, high density clientele during week days which was also on a busy tourist route during
weekends.
 Poor pricing strategy - Cafes are already struggling with industry prices that make the
establishment of a sustainable business difficult. Add to this some poor pricing strategies
and you set up a guaranteed failure. For example, discounting your espresso coffee price to
'get business' when it is the one product that is least price sensitive if the quality is high.
Also, charging an average price for products or basing the selling price on costs rather than
on market expectation. Sustainable cafe pricing needs to be built on clever 'subjective
margins' see here What are some examples of products or services that are priced by value
rather than by cost?
That's not all the reasons why most cafe startups fail but it's a good start. I will come back and add to
this list as the failures of my past come back to haunt me. I have now updated my answer here with
the sequel, What's the secret to a successful coffee shop? and added my thoughts to the related
question What is it like to own/run a coffee shop
What are key components of a successful startup?
1. Have a great idea, and vet it. Vet it with potential customers, vet it with family and friends,
vet it by calling up competitors and asking them if they offer the service. If you’re a believer
in lean start-up principles, vet it by putting up adwords for it.
2. Pay more attention to the people who don’t like your idea than the people who
do. The people who don’t like your idea are making a valid point. Pay attention to it. Address
it.
3. Keep vetting. Vetting never stops. As you play with the idea, you have to keep vetting it. As
your company grows and starts getting customers, you should vet tweaks to your ideas with
them, too.
4. Practice Active Hope. Recognize that, while hope is not a strategy, you need to have hope,
and you need to take active steps to make that hope happen. Most people call this ‘hard
work.’ It is, but it’s more than hard work - it’s directed hard work.
5. Understand that your process is more important than goals. I’m paraphrasing Scott
Adams’ post here on this, because he uses the word systems rather than process. Reasonable
people can differ on semantics. Reasonable people can’t really differ on the idea that you
need some way to get from A to B. Whether it’s checklists, ticketing systems, journals, or
whatever else you use (I like sticky notes, still), you need a process. Without that, you’re just
shooting in the dark.
6. Practice great customer service. There’s a front door and a back door in almost every
business. The front door is selling, and bringing people in. The back door is the customers
who stop using your service. You never, ever want people to walk out that back door for a
number of reasons: a) it’s cheaper to keep an existing customer than to get a new one; and
b) happy customers are your best way of selling in the future. If you don’t believe me, think
about the last time you bought something on Amazon that had a lot of 1-star reviews.
7. Only promise what you can do. Never sell based on something you can’t do today,
because customers expect that you can do the things you say you can do. One lie will
destroy months or years or sales effort. So, don’t do it. This extends to your marketing
messages, too — don’t ‘spin.’ Just tell the truth about what you do in plain language. For
example, don’t write that something is your ‘most popular’ if you’ve sold two of them rather
than the one you’ve sold of everything else. Just write that it’s ‘recommended.’ No spin.
8. Learn to write clearly. If you can’t write well, hire someone who can. Writing - and, to a
lesser extent, video (which still involves a lot of writing) - are the ways that people are
introduced to you, both as a customer and as an employee. So write clearly and
unambiguously, or find someone who can.
9. Have meetings. Start-ups seem allergic to meetings because ‘everything moves too fast.’ Or
because ‘I just had another meeting that could have been an email.’ Or ‘we have Slack.’ Well,
meetings exist for a reason - emotions and nuances don’t get translated over email, and
speed isn’t a substitute for thought. Have meetings with your employees and meetings with
your partners at least once every other day (daily stand-ups / scrums for tech teams, too).
People need a forum to discuss things out loud and make sure that they understand what
they’re supposed to do, why they’re supposed to do it, and for you as a founder / CEO to
help them get it done.
10. Keep reading. You had an idea. You’ve worked on your idea. And, with luck, you’re
successful enough to make money. Now, keep learning. You need to learn as much as
possible from as many different disciplines, and the best way to do that is to read. I read
from about 25 regular sources per week, plus podcasts, plus books.
11. Work with the right people. I can’t stress this enough - you’re only as good as the people
you surround yourself with. I wrote a long post about how I didn’t do this here.
12. Be more afraid of failure than death. The mantra in start-up land is to embrace failure and
to love failure. While I agree that you can learn from failure and that failure is something that
happens to the vast majority of start-ups (including several of mine), I don’t look to fail.
I hate failing. Failing means so many things, and they’re mostly bad - often, seeing the silver
lining in a cloud ignores that there’s a cloud. I’d rather win. You can call this grit, or you can
call this fear, you can call it creating optionality, or you can call it anything else you want to,
but failure shouldn’t be an option until it’s the only option. I remember when I was writing
my first novel (a massive failure in itself, both creatively and economically), and I was having
dinner with my mom. She asked me, “What are you going to do when the book doesn’t sell?”
My answer was, “That’s not an option.” And it wasn’t, until it was the only option.
13. Don’t be afraid of anything else. There’s a quote I love from the original Point Break that I
write all over Quora. It’s this: “Fear causes hesitation, and hesitation causes your worst fears
to come true.” The older I get, the more I believe that.
14. Find someone to share it with. This last one isn’t really just business advice. You don’t want
your company to be your only love. Take care of your personal life while before, during, and
after you launch your start-up. Those people are incredibly important to your life, and you
should make sacrifices for them. Because, at the end of the day, a company is just an entity -
it’s not a person.