Marsh & Partners work with many successful businesses operating in the food services industry. We’ve learnt that, while there are some factors which are common to all small businesses, running a café or restaurant presents specific challenges. This article explores some of the operational and business issues we’ve found to be most relevant to running a successful café.
Industry outlook
(Source: IBISWorld H4511B Cafes and Coffee Shops in Australia, January 2017)
- Australia’s love affair with high-quality coffee and food shows no sign of slowing and this demand will underpin industry growth over the next five years.
- Rising discretionary incomes will also encourage industry growth as households continue to spend on products such as coffee, snacks and meals from cafes for lifestyle and convenience reasons.
- Niche markets will provide opportunities for industry operators over the next five years with a growing trend towards ethical consumerism being particularly prominent.
- Despite predicted industry and revenue growth, profit performance is expected to fall slightly over the next five years due to a strong competitive environment. Business owners will need to operate with greater efficiency to maintain their profit margins.
Key success factors
This industry is highly competitive and dynamic and has unfortunately earned a reputation for a high rate of failure. Successful businesses are those that have the flexibility to respond to market conditions, as well as those that exercise sound business management skills. The following key factors have a strong impact on how successfully and effectively a cafe is able to operate in this highly competitive market:
- Having a clearly defined identity and target market
- Having access to a skilled workforce
- Having a high level of business expertise
- Ability to control costs
- Ability to provide high quality offerings
- Provision of excellent customer service
- Ability to effectively market the business
- Presence in a desirable location
6 critical focus areas to improve your competitiveness
- Reduce and control expenses:
- Control wastage of perishable items
- Consider making larger orders on non-perishables to reduce freight costs but be careful to avoid overstocking
- Use a smaller number of suppliers to gain quantity discounts
- Regularly review actual costs against your budgeted costs
- Keep an eye on your profit margins
- Ensure your pricing is accurate
- Avoid excessive discounting
- Ensure your sales mix includes higher margin items
- Maintain quality:
- Customers are searching for quality so focus on offering diverse menus that emphasise fresh and premium ingredients
- The prevalence of review websites, such as Zomato, ensures that consumers will continue to rate cafes for their quality and service
- Quality coffee blends, highly skilled baristas and premium ingredients in meals will increasingly make a difference to discerning customers
- Increase average revenue per customer:
- Create inviting displays
- Creating ‘packages’ eg. coffee and a muffin etc.
- Train staff to encourage customers into an additional purchase
- Increase customers and repeat trade:
- Advertise and offer specials on your off-peak times and slow days
- Utilise social media to engage with current and target customers
- Ensure your online presence has the basic information correct with quick access to information on operating hours, prices, menus and reviews
- Enlist the help of a good accountant
- As a business owner in this industry, you need more than an accountant who simply keeps score. A good accountant provides strategic advice and practical business solutions to give your business a significant competitive advantage.
Marsh & Partners combine industry knowledge with business expertise to help food industry businesses operate and thrive. In fact, cafes and restaurants are one of our niche client groups and we have expert advisors on hand to help you with:
- Equipment and asset finance
- Cash flow and budgeting
- Asset protection
- Processes and procedures
- Bookkeeping
- Management accounting
Further resources:
- Food and beverage industry regulations and compliance in Queensland – https://www.business.qld.gov.au/industries/hospitality-tourism-sport/food/food-beverage/regulations
- Food standards Australia New Zealand – https://www.foodstandards.gov.au/code/pages/default.aspx
- Taking on an employee checklist – https://www.business.gov.au/Info/Run/Employ-people/Recruitment-hiring-employees/Taking-on-an-employee-checklist
- Customer service and consumer laws – https://www.business.qld.gov.au/running-business/consumer-laws
If you’d like to discuss managing your business finances with one our business advisers, please contact us on 07 3023 4800 or at mail@marshpartners.com.au
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