10 ways to increase your cafe’s profits
Running a cafe is truly a labour of love.
With rising costs of rent, wages and utilities, combined with a virus that continues to cast its shadow on our industry, it’s hard for cafe owners to stay profitable. In fact, a good cafe operator these days is lucky to be making a net profit of above 10%.
But there are a few things cafe owners can do to stay ahead of the game.
From leveraging technology to improving service levels, we spoke with two industry experts – Christian Bianco from Coffee Alliance and Matt Jefferis from Savour Cafe in New Farm – to find out what steps cafe owners can take to minimise their costs and maximise their profitability.
1. Know your numbers
Christian has been in the cafe and hospitality industry for more than 15 years. He says it’s really important that cafe owners understand where their costs are from the get-go.
“Be aware of your costs and make sure they are accurate – from rent, COGS (cost of goods sold), wages, utilities etc – you need to have a breakdown in place so you can make any changes as needed,” he says.
As a general rule of thumb, when running a cafe you want to be sitting at around 35% wage cost, 25% food cost, 5% utilities, 10% rent and 5% contingency.
The remaining 20% should ideally be your net profit – but the reality is a good operator these days is lucky to be making a net profit of 7%–10%. The most recent industry benchmarks from the ATO shows the average net profits for Australian cafes are sitting at around 10%.
The trick to generating sales, Christian says, is to ensure that you stay fluid enough and able to make informed changes as you go.
2. Know your customers
It might sound simple, but engaging with your customers is crucial and is something that Christian says goes a long way towards creating a great experience from start to finish.
“Ensure that your team are actively working on at least knowing your customers’ names and their coffee orders, then build up from there. A little banter along the way is always nice.”
3. Use different kinds of loyalty programs
When The Coffee Commune opened its doors in March 2021, it offered the first coffee for free as a way of attracting customers. These sorts of promotions are common and can come in the form of basic cafe loyalty cards, where the first or 10th coffee is free.
Savour Cafe at New Farm offers two kinds of loyalty cards, a paper version and a digital version when customers place orders online.
“Our online ordering platform is fairly new, but it gives us a lot of flexibility when designing different loyalty programs, which we’re currently working on,” Matt says.
“These programs will go beyond discounts for coffees and will focus on all items ordered. We’re also considering a membership program, where customers are able to pay an annual fee for discounted products anytime they dine with us.”
4. Build on your retail offering
Cafes and coffee shops have a great opportunity to generate sales and increase profits by building on the retail offering within their business.
“You could start by selling take-home bags of coffee, coffee capsules or instant coffee,” says Christian. “In addition, you could also sell products that you actually use within the cafe – alternative milks, chocolate powder, teas etc.”
These items could also be bundled together into gift packs and promoted during holidays and special occasions like Mother’s Day, Father’s Day or Christmas.
5. Make your products accessible and visible
Savour Cafe recently underwent a renovation, which included introducing a take-away coffee window and changing the location of their patisserie display.
“Our new take-away window is accessible from a busy walkway on Merthyr Road. This has been a great way to attract new customers that may not have entered our cafe previously,” says Matt.
They also changed the location of their savoury and patisserie display cabinets so that they are more visible to potential customers walking by without having to enter the cafe.
The same goes for your retail products. Rather than storing bags of coffee behind the counter, have them within reach of your customers so they can touch and feel the bags.
6. Leverage technology
Since the pandemic there has been an increase in innovative tools and platforms such as contactless ordering systems. These online platforms can streamline service processes, cut waste and reduce any other unnecessary costs. Cafes like Savour and The Coffee Commune have jumped on board.
“Our online ordering platform allows customers to order from the table at a pace that is convenient for them. They are also able to see what meals and drinks look like before ordering, and have the flexibility to alter or change menu items,” says Matt.
“Having the customer place their order has also reduced the number of mistakes or misunderstandings, which in turn has decreased wastage.”
7. Use data from POS systems
Christian says cafe owners can also look to the data from their POS (point of sale) systems to work out what is and isn’t working. This can include stats on inventory levels, time of sale and how customers pay.
“That way, you can ensure you are maximising all opportunities across the day,” Christian says.
8. Systemise the business for efficiency
Matt says having systems in place across all parts of the business is crucial for speedy service and consistency, and ensures customers receive the same experience each time.
“Food and drinks are able to be delivered faster when you are following systems. We’re able to have a higher number of tables turn over by providing them with quicker service,” he says.
Over the years, Savour has systemised its business and created its “best way” of doing things. But, Matt says this doesn’t mean that it can’t be improved upon.
“We are always open to changing systems when a better way is discovered.”
Savour has also recently transferred their operations manual and staff training programs to be completely online through an app.
“Staff are able to use this as a tool throughout their employment at Savour. It covers everything they need to know and can be used as a guide in any time of need while at work. We think of it as our own version of Google – keywords can be entered into the app and the relevant training or answers will be provided.”
9. Provide sales incentives
Employee incentive programs for management teams are another way to reach sales targets and build a positive work culture. At Savour, they reward their staff based on measurable outcomes.
“We believe that if the right outcomes are rewarded, our business and our staff will both benefit,” says Matt.
10. Explore take-away and delivery options
Take-aways and deliveries are a great space for cafes to explore opportunities. Christian’s advice is to design a menu that travels well, apply the appropriate margins and trial different platforms to see what works best for your business.
Savour is currently looking at a delivery service through its online ordering app, which will link with third-party companies to provide the service.
Keep your business profitable, efficient and sustainable with a Cafe Owners membership at The Coffee Commune. Want to learn more about running a successful cafe? Sign up for Personal Development – Cafe Owners with Phillip Di Bella breakfast presentation on 26 July 2021.