How Much Does It Cost to Open a Cafe?

Ever dreamed of creating a cozy spot in your city where people grab their daily pick-me-up? If you answered yes, opening a cafe may be the right path for you.

But before you start shopping for the trendiest mugs and brainstorming your signature latte, let’s talk numbers. From leasing the right space to buying equipment, hiring a team, and handling those pesky permits, there’s a whole lot to consider. 

Let’s dive deep into all the costs involved in opening a cafe so you can create a realistic budget for your investment.

What is the average cost to open a cafe?

The average cost to open a cafe with seating typically ranges from $175,000 to $700,000. This estimate includes costs for leasing or purchasing space, equipment, interior design, and initial inventory.

It’s a bit higher than the average cost of opening a coffee shop, which is around $80,000 to $300,000 since a cafe usually offers hot meals and a more extensive menu. Starting this type of business incurs higher costs due to the need for a full kitchen and additional staff.

In contrast, a coffee shop focuses on beverages and light snacks, which means mainly investing in high-quality coffee equipment and limited food preparation areas.

All startup costs for opening a cafe (checklist)

As with any other food business, your cafe startup costs will largely depend on your establishment’s location, renovation, equipment, and labor costs. As you set a budget, be sure to factor in all expenses involved to kick off your cafe and keep it running as smoothly as possible.

Location and real estate

Choosing the right location for your cafe is one of the most important business decisions you’ll make. It directly impacts costs, foot traffic, and your long-term profitability.

Most new cafe owners lease rather than buy a property, as it requires less upfront capital. On average, leasing a cafe space in a high-traffic area ranges from $3,000 to $10,000 per month.

Aside from lower costs, leasing also gives you enough flexibility if your business ever needs to relocate. However, you’ll be subject to rent increases with limited control over renovations and long-term design.

If you’re leasing, negotiate favorable lease terms, like a five to 10-year lease with renewal options. This way, you can protect your business investment and have stability.

Most commercial leases require an upfront deposit of one to three months’ rent. For example, if your monthly lease is $4,500, expect to pay at least $9,000 to $13,500 before opening your cafe.

Meanwhile, buying will cost you anywhere from $100 to $800 per square foot. If you’re eyeing a 1,500-square-foot property in a prime urban location, you could be looking at a substantial investment of $150,000 to $1.2 million.

If you have the funds to buy property, you have more freedom to build out your cafe vision. On the other hand, you do have to take maintenance and repairs into account.

Interior design and renovations

If your cafe requires only minor updates, such as painting, new lighting, or simple décor changes, costs typically range from $5,000 to $10,000. These updates can refresh the space without extensive structural changes.

For comprehensive overhauls, expenses can escalate significantly. Factors influencing the cost include the cafe’s size, the quality of materials, and how complex your cafe’s design is. That’s why major restaurant interior design upgrades can cost anywhere between $85 to $500 per square foot.

Manage startup expenses by focusing on essential upgrades that directly impact customer comfort and operational efficiency. You can always improve and upgrade your space gradually as your business grows and generates more revenue.

You can also look for durable yet cost-effective materials. For example, using quality laminates instead of solid wood can reduce costs without compromising aesthetics. Look for experts in your area who can help you maximize your budget while creating an inviting space.

Equipment

After the cost of rent and renovations, equipment expenses are the next significant investment you should consider.

First, you need a high-quality espresso machine, which is the centerpiece of any coffee shop. A semi-automatic commercial machine costs around $2,000, while high-capacity automatic models can go as high as $10,000 or more.

Next, you’ll want coffee grinders. Burr grinders help you achieve finer grounds for better-tasting coffee. If you plan to offer drip coffee, you should get a blade grinder, which gives you coarser grounds, perfect for longer brewing times.

Commercial-grade burr and blade grinders cost between $500 to $4,000. Blenders are also essential for smoothies and frappes, which typically cost around $600 each.

Since you’ll be serving food, you need reliable refrigerators and freezers, which range from $1,500 to $26,500. Food-heating equipment, like toasters, ovens, and microwaves, are a must as well, costing between $500 and $2,500.

POS system and other tools

Your cafe needs a POS system to track sales and inventory. Modern POS systems typically have software and hardware, like touchscreen monitors, card readers, cash drawers, and receipt printers.

Cloud-based POS systems like Toast have a one-time fixed cost for hardware that starts at $700. Software subscription typically falls between $60 to $250 per month.

Aside from a POS system, you’ll also need restaurant scheduling software to make assigning shifts and tracking time easier. With POS integration, modern solutions can be helpful for managing labor costs and employee performance. 

Licenses, permits, and insurance

Licenses, permits, and insurance can add to your cafe startup costs. First, you need a business license to operate legally in your city or town. The cost varies widely, typically ranging from $25 to $300, depending on the size of your cafe, its exact location, and its projected revenue.

Next, you’ll need a food service license, which tells customers that your establishment passed food safety and public health inspections. This license usually costs around $100 to $1,000, based on your cafe’s size and location.

Insurance is another crucial element to consider as you start your business. Get coverage for general liability insurance, which protects your business financially against claims of injury or property damage from customers or third parties.

Premiums average around $40 to $55 per month, though actual costs depend on coverage specifics and the insurer you choose.

Music is important to maintain a welcoming ambiance in your cafe. However, you need to be mindful of licensing fees, which vary based on factors like the size of your establishment and the type of music played. Costs typically fall between $250 and $500 for background music.

Staffing, payroll, and training

Staffing is a significant component of your operational costs. Baristas earn an average of $15.27 per hour, with tips adding more to their daily wage. Meanwhile, cafe or coffee shop assistants have an average base salary of $14.76 per hour.

You should also consider hiring a chef who can prepare various food items for your cafe menu. Chefs’ salaries vary based on their specialization and experience; for instance, sous chefs earn around $62,000 annually, while pastry chefs average $47,500 per year.

On top of wages, you also have to consider taxes and benefits. With labor expenses taking up roughly 30% of restaurant costs, you want to manage your staffing efficiently through a dedicated cafe management app such as 7shifts. The platform also offers payroll software to simplify processes with automatic wage and tip calculations, ensuring employees get paid accurately and on time.

Your hiring process also plays a crucial role in startup costs. Right at the start, you want to find the best team members who provide excellent service to customers. At the same time, building a culture of care can help each employee feel connected, just like 7 Leaves did.

The California-based regional coffee and tea concept found success by focusing on hiring passionate team members who understand their brand ethos. They also make it a point to equip their staff with useful skills that they can use even after their stint with the company.

“From an employee standpoint, it’s listening to their needs. We employ a lot of Gen Z, and despite societal stigmas, this working force here demands one thing, and that’s purely knowledge,” Newton Hoang, their Director of Marketing and IT, said on The Pre-Shift Podcast.

“I think, respectively, what we bring to the table as a brand is that we know that as an employer of choice, many of them are first-time jobbers, are a transfer of knowledge, soft skills that are going to help propel them to the next echelon in their life.”

Initial inventory and food costs

Essential staples like coffee beans, milk, syrups, and bread form the backbone of your menu. Monthly food expenses typically range between $5,000 and $25,000, depending on your cafe’s scale and offerings.

One key metric to track is the food cost ratio, which represents the percentage of your revenue spent on food supplies. Industry standards suggest maintaining this ratio between 28% and 35% to maintain profitability.

For example, if your cafe generates $50,000 in monthly revenue, aim to keep food costs between $14,000 and $17,500.

Manage inventory costs by buying in bulk while having a steady supply of high-demand items. You can also save by consolidating purchases with fewer suppliers. Consider exploring local suppliers who might offer fresher ingredients and more personalized service.

Be strategic when you time your negotiations. At first, you’ll need to show your reliability as a business partner by being punctual with payments and maintaining clear communication. As you become more of an asset, you can try to negotiate better pricing and terms.

Marketing and branding

Investing in marketing and branding is crucial for cafes, especially if you’ll be an independent establishment competing with well-known chains. Your website and social media profiles are cost-effective ways to reach your target demographic.

A well-designed website provides potential customers with essential information like your menu, location, and operating hours. The cost of developing such a website varies based on complexity and features.

A simple, informative website with minimal features can cost around $500 to $3,000, while an extensive cafe website with online ordering can cost as much as $8,000 to $15,000.

Social media channels like Facebook, Instagram, and TikTok are other effective ways to promote your cafe. The average cost of social media marketing services ranges from $500 to $10,000 per month, depending on the scope and scale of the campaigns.

Costs can be more modest for smaller, localized campaigns, especially for businesses like cafes. For example, platforms like Facebook and Instagram offer cost-per-click (CPC) rates ranging from $0.44 to $2.00, which totals only about $20 to $100 monthly for targeted online advertising.

You can also invest in local marketing, such as grand opening promotions, to generate initial buzz and attract customers. Marketing expenses for cafes and coffee shops fall between $500 and $5,000, including special discounts, events, or limited-time offers.

More pre-opening expenses

Factor in more pre-opening expenses, like professional services for accountants, consultants, and legal support. These experts help ensure your business complies with regulations and operates efficiently.

Certified Public Accountants (CPAs) and Enrolled Agents (EAs) charge around $150 to $400 per hour, while restaurant consultant fees range from $250 to $1,000 a day or $40 to $120 per hour.

For legal help with business formation, contract drafting, and intellectual property protection, you can set a budget of around $2,000 to $10,000.

While these may seem like significant upfront investments, they’re essential for establishing a solid foundation for your cafe business. Proper legal and financial guidance can help prevent costly mistakes and provide strategic insights that ultimately save money and reduce potential risks in the long run.

Minimum investment needed to start a cafe

You can start a small cafe or coffee shop with seating for around $80,000 to $330,000. This can include initial equipment, lease deposits, renovations, kitchen setup, initial inventory, and marketing expenses.

The minimum investment can vary depending on your location, cafe size, and specific business model. Consider starting with a smaller, more focused concept like a specialty cafe in a smaller space to reduce upfront costs.

Aside from your savings, explore alternative funding options, such as 7(a) loans from the US Small Business Administration (SBA). The government offers favorable terms with loan guarantees, lower interest rates, and longer repayment terms.

When can I expect ROI after opening my cafe?

It’s possible for cafes to break even as quickly as six months from launch, depending on your location, market demand, and operational efficiency. Factors like prime location, unique menu offerings, effective marketing, and excellent customer service can accelerate your path to profitability.

For most restaurants, the average ROI timeframe is within three to five years. It’s typical for cafe and restaurant businesses to require patience and consistent effort to establish a stable customer base.

During this period, focus on improving your business model and maintaining high-quality products. Make sure to build strong community relationships as well by participating in local events and supporting neighborhood initiatives.

Your cafe should become more than just a place to get coffee. Make it a goal to be a community hub where people feel comfortable gathering, working, and socializing. 

Frequently asked questions on cafe costs

Is owning a cafe profitable?

Yes, owning a cafe can be profitable, but it depends on various factors, including location, menu pricing, operational efficiency, and customer volume. The average profit margin for cafes ranges from 15% to 25%, with successful ones reaching even higher.

For a profitable cafe, you should aim to keep food costs low while maintaining an efficient workforce. Implementing strong marketing strategies can also keep customers coming back.

A prime location with steady foot traffic, a well-structured menu with high-margin items, and excellent customer service also contribute to better profitability.

You can offer premium products, like specialty coffee and artisanal baked goods, since they have high markup potential. You can also develop loyalty programs or special promotions, such as seasonal discounts, that encourage repeat visits.

Consider cross-selling opportunities, like pairing coffee with pastries or offering combo deals. Plus, check your sales data regularly to know exactly what your customers like and how you can further optimize your menu.

How do I open a small cafe?

The first step to opening a small cafe is to find a concept and do your research on the market, target audience, menu, pricing, marketing strategy, and financial projections. Then, save up or apply for loans to cover cafe startup costs.

Next, you can start looking for areas with high foot traffic, like those near office buildings, universities, or shopping centers. Once you find a place, you can start with renovations and buying essential equipment.

While waiting for renovations to finish, put up job ads to hire staff. Even for a small cafe, you’ll need at least a barista, cashier, and kitchen helper to start.

Market your cafe by building an online presence with a website, social media marketing, and local advertising. Find local influencers and food bloggers who can help create buzz around your business launch.

Lastly, make sure you have your business license, food service permit, and health department approval before opening day.

What are the monthly expenses of a cafe?

A cafe’s monthly expenses can be categorized into fixed or variable costs. Fixed costs are consistent each month and include rent, utilities, payroll, marketing, loan payments, and insurance.

Rent typically ranges from $3,000 to $10,000, while utilities, including electricity, water, gas, and internet, can cost between $800 and $3,000 per month. Payroll and wages, marketing, insurance, and loan repayments are also significant fixed costs to consider.

On the other hand, variable costs fluctuate based on sales volume. These include food and beverage costs, essential supplies, and equipment maintenance.

What is the minimum size for a cafe?

A small cafe with seating typically ranges from 600 to 900 square feet, accommodating 20 to 40 customers while providing space for an espresso bar, kitchen, and storage.

For those looking to open a larger cafe or bistro, a space of more than 1,800 square feet is ideal. This allows for a full kitchen, lounge seating, and an expanded menu.

No matter the size of your cafe, you must focus on creating an efficient layout and workflow. A well-planned space should have a compact but functional kitchen to prepare drinks and food efficiently.

Your cafe should also have an optimized seating arrangement that allows customers to enjoy their experience without feeling overcrowded. Don’t forget about having adequate storage areas to keep ingredients and supplies organized.

How to run a successful small cafe?

A successful small cafe consistently serves high-quality coffee and food. This makes customers want to come back again and again.

Use fresh, premium coffee beans, and make sure your drinks always stay delicious, no matter how many times a customer orders them. Keep your menu simple, but having unique offerings, like signature drinks, seasonal specials, or different flavor combinations, can set your cafe apart.

A memorable cafe experience goes beyond coffee. Having a cozy ambiance, friendly staff, and inviting decor play a role in how customers remember your brand.

Brewing success one cup at a time

From choosing the perfect location to budgeting for equipment, staffing, and marketing, every cost plays a role in shaping your cafe’s success. While a minimum investment of $80,000 isn’t cheap, the key is to make the most of each dollar by having a solid plan and keeping expenses in check.

Avoid unnecessary overtime costs with 7shifts. The restaurant management software helps cafe owners schedule the right number of staff for each shift. This way, you won’t have to overspend on labor while serving up great experiences to your customers.