The Cafe Owner’s Guide: Navigating Challenges and Making a Profit
20 November 2023
Running a cafe is more than just crafting the perfect latte or curating a tempting menu. It’s a dynamic world where cafe owners wear many hats. Here’s a quick cafe owner’s guide to navigation challenges and making a profit.
In a recent conversation with one of our cafe customers, the discussion veered towards the multifaceted skills that cafe owners must possess. Imagine a scenario: stepping into the cold side of the kitchen to assist, covering a barista shift due to sickness, or ingeniously fixing a malfunctioning cool room motor with alfoil, gaffa tape, and a teaspoon. These are just a few instances of the diverse skill set cafe owners employ daily. Counsel a heartbroken waiter? Absolutely. And let’s not forget the fundamental task of ensuring customers are not just served but delighted.
With such an array of roles to juggle, it’s no surprise that cafe bookkeeping often finds itself on the back burner. The detailed scrutiny of the Profit and Loss statement, even if the books are up to date, becomes a rare luxury. However, the financial heartbeat of every cafe — the Profit and Loss statement — demands attention. It’s the lifeline that determines whether a cafe thrives or withers.
The Rule of Thirds: A Guiding Principle
Pete had a nugget of wisdom passed down to him when embarking on his own cafe journey in 1997 — the Rule of Thirds. This principle provides a practical framework for cafe economics, breaking down expenses into three categories, each ideally constituting around 33% of the overall budget.
- Wages (including the owner’s wages): While achieving the exact 33% might be a challenge, a range of 35% to 37% is often realistic. This figure depends on the nature of your cafe operation; a restaurant with table service might have higher wages but better food costing, while a takeaway operation might experience higher food costs and lower wages.
- Cost of Goods Sold (Food and Beverage Costs): This category encapsulates the expenses associated with the production of goods sold. Strive to maintain it around 33%.
- Operating Expenses: The remaining third covers rent, insurance, power, gas, and miscellaneous costs. After the bills are paid, you aim to keep around 10% as your net margin — a precious ten cents for every dollar earned.
In the real world, achieving these percentages with precision might be elusive, but the key is to ensure that the combined total of wages and cost of goods remains at or under 66%. This delicate balance is crucial for financial sustainability.
Navigating Cafe Economics
Cafe economics is indeed a juggle, but with strategic rostering, vigilant wastage monitoring (take a peek into your garbage bin at the day’s end!), and a keen eye on operational efficiencies, cafe owners can fine-tune these percentages without compromising on the value they offer to customers.
So, as you navigate the vibrant, fast-paced world of cafes, remember the Rule of Thirds — your compass for financial equilibrium and the sustained success of your cafe venture.
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