Do you know that 75 percent of Australia’s entire population (that’s more than 19 million by the way!) drinks at least one cup of coffee every day! This fact alone shows how much we Australians love our Cup O’ Joes. Therefore, it’s easy to conclude that opening a coffee shop business is a great idea. Well, it is great, but only if you succeed in turning it into a lucrative venture because let’s face another fact – more than 80 percent coffee shops shut down within the first five years of operations.
The purpose of this blog isn’t to discourage you from pursuing your dream of opening a coffee shop but to inform and educate you about things that could go wrong so you could be better prepared. Below, we’ve enlisted the 10 most common reasons why coffee shops fail in Australia. Go through each point and make sure you aren’t making any of these mistakes before you decide to open a cafe of your own.
Why Coffee Shops Fail Reason #1
One of the main reasons why coffee shops fail is because of their poor locations. Deciding the location of your cafe is one of the key decisions that ultimately determine whether your business is heading towards success or a disaster is about to unfold. There could be a number of reasons why a location might be unsuitable for a coffee shop business such as – no parking space, no easy accessibility, not sufficient foot traffic, unreasonably high rents, or poor visibility.
In fact, the location of your cafe plays a major role in establishing what kind of menu, interiors, and themes would or would not work for your business. Do your research properly, spend time exploring the area, meeting people, and gathering information about what they like or dislike in general. This will help you decide what kind of theme – urban, professional, relaxed & casual, or traditional would work for your cafe. Once you are clear on that, you can go ahead and decide on an appropriate menu and everything else, as well.
Why Coffee Shops Fail Reason #2
Not Developing a Strong Business Plan
Most people just assume that running a coffee shop is a piece of cake! Well, make sure you don’t have this kind of attitude because doing thorough market research and developing a solid business plan are the two most essential steps for starting any business successfully, be it a coffee shop or anything else! For this, the first thing you need is to acquire as much information regarding the business as possible. You can attend workshops or seminars, attend trade shows, read coffee-related books or magazines, or watch videos online and learn.
Learn about every aspect of cafe businesses and develop a strong business plan. Clearly define your goals and sales strategies and research about your competitors. Identify who’s your audience and figure out ways to attract them. Your business plan also needs to define strategies regarding finance and labour management.
Why Coffee Shops Fail Reason #3
Hiring the Wrong People
Not picking the right staff, be it your managers, baristas, cooks, or waiters, often becomes one of the biggest reasons why coffee shops fail. It’s your staff members who’ll directly interact with your customers and in many ways are the face of your cafe. Therefore, it’s always advisable to look for personality, integrity, enthusiasm, and trainability in people you hire, instead of just relying on their experience levels.
So many coffee shop managers end up alienating the staff or they start stealing the profits, or in worst cases – both! So keep an eye on what’s happening on the ground and try to hire competent people right from the beginning. It is also your job to ensure that your staff is working at their full potential. The key is to learn when to be patient & understanding and when to be a taskmaster.
Why Coffee Shops Fail Reason #4
Creating the Wrong Menu
Both, an overly complicated menu as well as a menu with nothing exciting in it, are bad for your cafe. If you put too many items on the menu, you’ll just end up confusing your customers. At the same time, it’ll be hard and time-consuming to prepare all the dishes and maintain a high standard of quality for each of those items. Undue wastage will be high, which inevitably means high food costs and lesser profits.
On the other hand, if your menu is too simplistic, you won’t be able to retain your customers’ interest after some time. Go for a midway approach and create a menu that’s easy to manage and deliver on an everyday basis. What kind of menu will work for you also depends on what kind of customers you have and what’s the core theme of your cafe. Make sure to keep updating your menu from time to time. For this, serving a seasonal menu (or maybe a section of it) is a great idea.
Poor Customer Service
Why Coffee Shops Fail Reason #5
Again, one of the most prominent reasons why coffee shops fail in Australia! Needless to say, if your customer service isn’t on the mark, you’ll rapidly lose customers. Not just that, unhappy customers are quick to leave bad reviews on all kinds of social media platforms and if something like that starts to happen, it’s going to be extremely difficult to build your reputation back.
Make sure your staff members aren’t rude or unconcerned and try your best to keep your cafe’s service quick and efficient with minimum delays or mix-ups. Also, the music shouldn’t be too loud or distasteful and the decor should complement the cafe’s core theme in every way possible. For all this to happen smoothly, you need to be well-organised, not just on the execution level, but on the planning level itself.
Why Coffee Shops Fail Reason #6
Wrong Allocation of Resources
Overspending on non-essential components or alternatively trying to save money on aspects that are actually pretty crucial, both can turn into major reasons why coffee shops fail. Do not overspend on ambience or furniture if you cannot actually afford them at the moment. Instead, spend money to get quality ingredients and hire a genuinely talented barista.
The point is to learn how much to spend, on what, and when and where to save, according to the current scenario. The simple mantra is to make sure all your basic requirements are well taken care of and then keep on adding things slowly.
Why Coffee Shops Fail Reason #7
Unwillingness to Adapt
Yes, it’s wise to plan everything in advance but it’s even wiser to have an approach that allows you to learn, adapt, and improvise as per the situation demands. Many times it’s the owner’s unwillingness to adapt that becomes one of the reasons why coffee shops fail.
Different stages of the business require a different mindset and amount of effort and involvement from your side. Make sure you are flexible enough to fulfill each one of these roles. Try to come up with new pricing strategies, and marketing and promotional models. Try to be as proactive as you can and learn from your mistakes.
Why Coffee Shops Fail Reason #8
Failure To Invest in Marketing
The coffee shop industry is a competitive market. If your cafe belongs to a coffee chain, you probably don’t need much marketing, but if it’s an independent venture, not investing in marketing can lead to an inevitable failure. Dedicate an appropriate amount of resources and budget towards planning and executing a well-structured marketing plan.
Identify your target demographic and explore what kind of advertising and marketing platforms can be used to attract them. If all this sounds a little too confusing or overwhelming, consider hiring a professional marketing agency to handle all your promotions. It’s really important to build a solid reputation right from the beginning. After that, you can come up with a suitable number of engaging campaigns every few weeks or months to retain the interest of your customers.
Why Coffee Shops Fail Reason #9
Tax or Accounting Related Complications
The next two prominent reasons why coffee shops fail include – not following the requisite tax norms or carrying out some other kind of accounting malpractices. Because of these, many cafe owners end up paying hefty penalties and fines. Being involved in something like this ultimately leads to a complete shutdown.
If your cafe is running on a tight margin, keep a close eye on the cash flow and make sure to cover all the big expenses first, including the payrolls, taxes, loan instalments, etc. If you can afford it, consider hiring a chartered accountant for all these purposes.
Why Coffee Shops Fail Reason #10
Lack of Capital or Motivation to Keep the Cafe Going
If this is the first time you’ve opened a cafe, it’s going to take at least a year or so to understand all the nuances of the business. It takes some time to truly understand your audience, their specific set of needs, and how to fulfill them to the best of your abilities while making the maximum amount of profit, at the same time. There’s a learning curve to this process and you need to be patient, resourceful, and inspired if you want to succeed.
Don’t let your enthusiasm fade away because of the initial struggles and losses. Almost every restaurant business endures losses in the initial few months of their operations. Make sure you are prepared for such a scenario. Dedicate an amount of money towards this. So that even if you fail initially, you have some extra capital ready to keep you going.
Conclusion and Important Takeaways
With the right amount of planning and preparation, you can easily avoid all these mistakes which tend to become the main reasons why coffee shops fail within the first few years of their operations. Try to make the right decisions from the beginning, be open to learning, and do not lose heart if a few things go wrong here and there. If you feel lost at any point of this journey, take professional help from expert cafe designers and fitout specialists. Keep yourself motivated and turn your dream of becoming an owner of a spectacular coffee shop, into a glorious reality!
How ImpeaccaBuild Can Help You Avoid Making These Mistakes
Since designing and decorating a coffee shop needs a certain amount of additional planning work and creative thinking, hiring an experienced fitout professional would certainly make things easier and quicker. Call Us On: 1300 LETS BUILD or send us an email on: Info@impeccabuild.com.au to explore how we can help you avoid the biggest reasons why coffee shops fail in Australia.
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