Cafe shops are one of the essential businesses of our world today as everyone in society finds themselves in these shops at least once.
Cafe shops generally get a lot of customers on any given day if you are located in a nice area and you can manage the business well.
However, the cafe industry is currently very saturated, with many different brands operating.
It’s not particularly easy to succeed in an industry with so many big and small brands. However, despite this challenge, it could still be lucrative.
That is mostly because the industry doesn’t have complex recipes and challenges to match like in the food industry.
You might be thinking of opening a cafe shop and wonder how much a cafe owner makes.
It isn’t easy to say an exact number of how much an average cafe owner makes because there are a lot of things that affect income.
The location, popularity, how well you manage the business and size are all differentiators.
This article will do a deep dive into how much a cafe owner makes, what are the factors affecting the income, and other details surrounding this topic.
Average Money A Cafe Owner Makes
When we talk about the money an average cafe owner makes, there are many different levels to it.
The money a small cafe shop makes will be very different than a medium-sized or a big cafe shop, but according to the statistics, we have some average numbers that a cafe owner makes.
The industry’s standards are pretty much the same everywhere, and finding the average is not hard.
On average, small and medium-sized cafe shop owners can make between $50,000 to $160,000 annually.
This number is the profit and the net income a cafe owner receives on average once you remove all the costs.
Chron tells us that the average profit percentage in the cafe industry is 2.5%. It means that only 2.5% is the profit of the products you sell.
However, these numbers largely depend on several key factors affecting the sales of your cafe shop.
For example, if you are selling double of the cafe shop next door that earns the average numbers, you will be making much higher than the average numbers as you get more traffic.
With bigger cafe shops such as Starbucks, this goes on to be millions and even billions of dollars annually.
Factors That Affect A Cafe Owner’s Income
As we mentioned above, the money a cafe owner makes depends on several key factors.
These factors affect the number of sales you are doing and the profit percentage you can put on your products. Here are some of the key factors.
Location And Foot Traffic
Just like any other business, your location is one of the most important factors in getting customers and increasing your foot traffic.
Try to have your store somewhere in the center and on people’s way to their work or home. This will allow you to take people in on their morning commute or coming back to their homes.
Size And Type Of Cafe
If your cafe shop is small and doesn’t take a lot of people at the same time, the number of products you can sell on any given day will be low. This, in turn, will affect the total income you can make.
Menu Prices
The higher the food and drinks cost, the higher the prices will be on your menu. If your prices are higher than the average prices in your neighborhood, people will try to stay away from visiting you.
Try to keep your prices either average or lower than the average to attract more people.
Staffing And Labor Costs
As a cafe shop, if you have employees, this will be one of the major cost drivers because the labor costs are one of the most expensive ones in the industry.
That is why if you have a lot of staff, your costs will go high and lower your profit percentage.
Operating Expenses And Overhead
Things such as your rent, electricity, gas, and other similar operational costs are also major cost drivers.
That’s why you have to try to be optimal with these as much as you can to lower your costs and have higher profits.
Average Income Of Cafe Owners
The national average income for cafe owners is very diverse, and there is a major gap between the average income.
According to the statistics, both independent, single-location, small, and medium-sized cafe shop owners make between $40,000 to $60,000 a year.
Depending on the number of locations, the size of the store, and the foot traffic, this could easily be over $100,000 annually.
This number corresponds very closely with other small businesses across the United States. On average, a small business owner makes about $70,000 a year.
If the business has no employees and works in one location, this number is about $45,000. Compared to the cafe shop owners, the numbers are well between $40,000 to $80,000, which is extremely close to each other.
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Forecasting The Revenue Of A Cafe Shop
There are certain profit drivers of a cafe shop that allows you to forecast the revenue.
These things help you to get a clear picture of the average income of the cafe shop you are taking as an example.
Here are the factors that you can calculate to forecast revenue:
- Daily sales numbers,
- Average amount per receipt,
- Amount of recurring customers,
- Potential to increase the average amount per receipt,
- Potential to increase daily sales,
- Total costs
These are the base pillars to use to forecast revenue. For example, if you make 50 sales a day with an average of 10$ of receipts, that equals $500 a day.
This equals about $180,000 in gross revenue if you are open every day of the year. Removing the total costs of the shop, you get the profit of a cafe shop.
Costs Of A Cafe Shop
There are three types of costs associated with opening and running a cafe shop.
Some of these costs are ongoing costs, and some of these are one-time fees that you pay only once. These costs are:
- Startup Costs: These are the initial costs that you have to pay when opening up the store. They generally are one-time costs and not continuous fees that affect the overall income of your cafe shop. Includes business permits, equipment, and other necessary things.
- Fixed Costs: Fixed costs do not change from month to month. They are also generally the ones that take up the most on your ongoing fees and affect your income the biggest. These include rent, salaries, taxes, and benefits for the employees.
- Variable Costs: This is the cost that takes the amount you produce into account. It mostly depends on the number of sales you make and how much product you use per product.
Factors That Affect The Costs Of A Cafe Shop
Each type of cost has different factors affecting the amount of money you spend on it. For startup costs, this is mostly the type of permits you need to get and how much they cost.
Also, how much equipment you need and how quality you need them to be. The more quality you go for, the more you will pay for it.
Looking at the fixed costs, the number of employees you have, how high your rent is, your state’s tax codes, and what kind of benefits you choose to give all affect it.
If you have a bigger space, your rent will be higher and will require more employees than an average coffee shop. This will affect the cost and will probably be higher than the average fixed costs.
Variable costs mostly depend on your product choices and how the quality materials you use on your drinks and foods affect these costs.
If you use more and higher quality products, your variable costs will be higher than most cafe shops.
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Conclusion
To conclude, figuring out how much a cafe owner makes is not easy. There are many variables and differentiating costs associated with how much a cafe owner makes.
If the startup, fixed, and variable costs are too high, then the profit will be lower than the average.
The national average income of a cafe owner is between $40,000 to $60,000 for single-location, independent shops.
The number could exceed $100,000 if you have multiple locations. For international and bigger cafe shops, it could be millions or even billions of dollars, so there is no limit.
FAQ
Does every cafe owner make a profit?
No, just like any other business, you are not guaranteed to make a profit in your cafe shop. Depending on the factors, you might lose money.
How hard is it to make money with a cafe shop?
The cafe industry is relatively easy in terms of producing the products. However, you are essentially managing a business with a lot of competitors. That’s why getting foot traffic and generating money could be hard.
What is the possibility of failure with a cafe shop?
According to the statistics done in 2019, about 60% of independent cafe stores fail within five years of opening.
This means that over half of the cafes and shops don’t last longer than five years.
Sources
https://www.fundera.com/resources/small-business-revenue-statistics
https://www.investopedia.com/articles/personal-finance/010816/economics-owning-coffee-shop.asp#
Amit Gupta is the founder of DrFranchises – a digital marketing agency that helps brands rank better on Google Maps through local SEO strategies. Amit has over 11 years of experience in digital marketing, SEO, email marketing, and social media marketing. He’s also the owner of multiple franchises and has helped countless brands achieve success online. When he’s not working, Amit can be found playing with his dog.