Are you looking for ways to increase profits in your cafe? Profit margins in a café are high, usually 65-70% gross profit is common. Gross profit is whats left after taking out the cost of ingredients and GST. However, net profit, the amount left after paying staff, rent and everything else can be quite modest. For a café turning around $500K a year, that would leave the owners with approx. $50K to pay off loans, taxes and take something home for themselves. So, to make all of the effort of running a café worthwhile, let’s take a look at some ways to help improve profits in your café.
The Numbers!
If you are not overly familiar with a Profit and Loss statement, it is time to learn. And it is key to increasing profits within your cafe. A statement shows your totals in a breakdown and makes it easier to see where your money is going overall. A simplified Profit and Loss statement may show sales, costs of goods, rent, wages and misc expenses. The totals are calculated to form percentages for the business overall, making it to see everything in a simplified bottom line, along with overall gross profit and net profit. Accounting Systems like Xero or MYOB can generate these statements for you.
The three biggest expenses for cafes are usually the cost of goods, wages and rent. A typical range for cost of goods would be 35-40%, while best practice would be 30-35%. A typical range for labour/wages is 30-40% and best practice is 25-30%. A typical range for rent is around 10-15% and best practice would be less than 10%.
Growing Sales
A common mistake many make is cutting costs; by hiring younger and cheaper staff with less experience or buying cheaper ingredients with less quality. Although with slower service and poor-quality items on offer, you’re less likely to get return customers.
Some will even implement marketing campaigns on social media and offer loyalty programs for discounts etc. Those will help a little, but to make a big difference and keep your profits growing, you simply need to offer consistently great coffee, food and service in an amazing atmosphere. Feedback can be key in ensuring that you meet all of these expectations.
Keep a close eye on all of these areas and ensure your customers have a great experience that makes them want to come back. Hire staff with a passion for coffee and customer service. Experience goes along way, so if your staff don’t have much, provide them with training in everything from how to greet a customer to making consistent coffee. Keep high quality ingredients and food offerings on your menu. Encourage feedback and reviews from your customers when you can. Pay close attention to anything that isn’t a five star, as that is usually how a customer tells you about a pain point.
Efficiency
Create efficiency where ever you can to ensure quick service. If you know some items always sell well at a set time of day, is it possible to prepare ahead of time. Is there a more efficient way to stock coffee cups so they are reached easily during business times. Can the menu be simplified to help with time management, avoiding waste and even saving some money by not including unpopular items.
Update your equipment to automatic options and install a point of sale system that allows staff to keep their focus on customers.
Mix it up!
Some of your menu items with have higher margins and higher sales than others. If you have an up to date point of sale system you maybe able to generate reports such as a “products sales analysis” which shows you a breakdown of all menu items. If an item is costing more than it is making or could be removed all together, you will be able to see it on the report.
Capacity
If you offer top quality service and high-quality coffee and menu items, customers are going to come back. When your customer bases starts to grow, you need to be able to maintain catering to them at the same standard otherwise you run the risk of them going elsewhere because they are waiting too long. So, what can you do to cater to a larger capacity? Look for ways to speed up service times, can you pre-make or pre-pack some popular items or re-arrange food prep areas so things are in reach when needed. Maybe it is time to for a re-design with smaller tables to free up some floor space for extra seats or install a bench along a window space. Encourage takeaway orders for customers that want to plan ahead of time, so they are ready to grab and go. You could even use a mobile ordering service.
Is it worth adding to your opening hours for earlier service. Is there a park nearby or an open space for sitting, you could create mini picnics and encourage customers to takeaway to eat outside in the warmer seasons.
It will always come back to a friendly atmosphere and great menu, so do everything you can to ensure those standards are always consistent and you should find you increase profits within your cafe.