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Thread: Help setting up a cafe

  1. #1
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    Help setting up a cafe

    Gene Cafe Coffee Roaster $850 - Free Beans Free Freight
    Hi all,
    Is there anyone out there who can provide some advice, based on their experience, in financing the start up of a cafe?

    I have looked a bit online and done some very cursory research and I think my three options would be 1) raise my own money to buy the equipment 2) loan the money from a bank or 3) use a rental service such as silver chef

    If anyone has a view on which of these options are the best? I would like to minimise the upfront investment of my own money so option 2 and 3 would be ideal but I just wanted to understand the pros and cons of both as well as the feasibility of both?

    Thanks!

  2. #2
    TOK
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    Welcome to CS.

    In the event you don't have the ready capital to buy outright, talk to your coffee supplier about he thinks your options are, and consider Silver Chef/ing the equipment that he thinks will be best for you to work with while using his product. Silver Chef/ing is much more flexible (for you) than a straight out loan from the bank.

    Don't know what the rates are (in comparison) however the flexibility of a rent/buy through Silver Chef would be worth a premium over a perhaps lower bank loan rate, and in the end it will come down to what you can budget to pay oin a weekly basis over a certain term, and how you justify it.

    EG, lets say it costs you $50.00 a week to do a Silver Chef Agreement. In the scheme of the expected revenue from total weekly coffee sales (you have done some figures/ budgets haven't you?), is that doable? You could justify it as part of the cost of weekly raw materials that go into producing the coffee for sale, alongside cost of beans, milk, sugar and chocolate. I expect it will be (doable) with a *reasonable* turnover of kilos.

  3. #3
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    Get into coffee roasting first build up clientelle(less risk) then if it works after few years, just do that or expand into cafe and realize higher margins with two revenue streams more street Cred.

  4. #4
    TOK
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    I love the way how in here people are always advised to start roasting coffee, as if you just wave a magic wand, go "poof", and you're a coffee roaster who is magically building up a clientelle....in this lovely declining internal economy (Australia) !

    The margins are in selling coff in the cup, not in roasting and selling coffee beans, unless you have a very large client base, which is not something that happens quickly. On the other hand cafes can happen much more quickly if they are sited well in a good location and are doing the right thing by their clients.
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    TC
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    Hmm... When I read of people hoping to start businesses without any capital, I see red flags. FWIW, my advice is that if you can't finance it yourself and afford to work for 12 months without a salary, you're likely to be pushing "it" uphill so to speak. Tread very carefully. It's a whole lot harder to earn it than lose it.
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  6. #6
    Senior Member Dragunov21's Avatar
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    Quote Originally Posted by Delish007 View Post
    Get into coffee roasting first
    Quote Originally Posted by TOK View Post
    I love the way how in here people are always advised to start roasting coffee, as if you just wave a magic wand, go "poof", and you're a coffee roaster who is magically building up a clientelle....in this lovely declining internal economy (Australia) !
    It also bears mentioning that there is a difference between roasting coffee and being good at roasting coffee. I just had a coffee at a lovely little place with a nice atmosphere, great people, they ground per-dose, the barista appeared to be doing all the right things and they had a Sonofresco out the front.

    Unfortunately the shot tasted reminiscent of what I pulled when I started roasting with my Behmor; I can't say for certain but I think that their technique is good but their beans may not be.

    If they got their beans sent up from Zimmah (for example) I'd probably be in there every day. Specialty roasting isn't as simple as just making beans brown and I suspect that unless you already have experience you may be handicapping your business by starting roasting at the same time as starting a cafe. Personally I'd be making it as easy as possible to turn out exceptional product by using the best local spec. roasters I could find.

    Just my uneducated 2 cents though.

  7. #7
    Senior Member Barry O'Speedwagon's Avatar
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    Quote Originally Posted by FarnamSt View Post
    Hi all,
    Is there anyone out there who can provide some advice, based on their experience, in financing the start up of a cafe?

    I have looked a bit online and done some very cursory research and I think my three options would be 1) raise my own money to buy the equipment 2) loan the money from a bank or 3) use a rental service such as silver chef

    If anyone has a view on which of these options are the best? I would like to minimise the upfront investment of my own money so option 2 and 3 would be ideal but I just wanted to understand the pros and cons of both as well as the feasibility of both?

    Thanks!
    Welcome FarnamST.

    The people who would have to finance your options 2) and 3) are aware of the borrower's incentives. Ignoring the expertise issue for a nanosecond, you need to have a significant amount of 'skin in the game' (and security) before a bank will lend you the $$ required for such a venture. They won't lend to a new guy on high debt to assets ratio unless you are able to pledge a ridiculous amount of security (and even then there are costs of enforcing that interest). So......this is only going to work if you can self-finance a considerable proportion of the initial and on-going investment.
    Cheers
    BOSW.

  8. #8
    Senior Member GrahamK's Avatar
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    Quote Originally Posted by FarnamSt View Post
    Is there anyone out there who can provide some advice, based on their experience, in financing the start up of a cafe?
    I suggest you have a chat to a/your accountant first. Starting a Café does not rate high in the success list for small business and especially for getting finance, and while you have not mentioned what your expertise/experience is, based on your question I have assumed you do not have much. Many (20) years ago I went down the Café path ignoring my accountants warnings, much to my detriment. And I did have some level of experience/exposure to the trade and small business. While I can blame all sorts of things such as "the recession we had to have" - Quote Paul Keating - bottom line is I also know people that did really well during the same time from similar ventures. So reckon the buck stopped with me.

    If you are the right person and have aptitude, then I would never say "never", but its a high risk venture, get the right professional advice, and preferably not forum websites as your main source.

    GrahamK
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    Thanks everyone for your responses. I actually have a background in accounting so I am quite comfortable that I understand exactly what it is I am getting myself into. Being quite number-conscious before I make this decision I wanted to understand the financial implications of the different options available to me to fund the business.

    I am quite familiar with the loan process and the Silver Chef Rent-Try-Buy product from my own research but I was hoping to get some insight from people here who may have actually used these financing sources and could provide the kind of advice that can only be gleamed through experience!

    Thanks again!

  10. #10
    TOK
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    My organisation is using the silver chef "product" for various pieces of equipment. It works for us, under the particular circumstances, and is preferable to pulling trading capital straight out of the overdraft, losing the use of it and paying interest on it anyway after losing the use of it So may as well pay interest, and NOT lose the use of it.

    Talk to your coffee / equipment supplier.

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    Thanks TOK. I would also be interested if anyone out there has had issues with using Silver Chef as it does seem quite attractive?

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    Senior Member chokkidog's Avatar
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    Where are you located?
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  13. #13
    TOK
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    Behmor Brazen - $249 - Free Freight
    Quote Originally Posted by FarnamSt View Post
    Thanks TOK. I would also be interested if anyone out there has had issues with using Silver Chef as it does seem quite attractive?
    My organisation hasn't, but we don't miss payments and always pay on time.

    ...please keep in mind that many people that "have trouble" with suppliers (that is what Silver Chef is...), "have trouble" paying on time or try not to pay if the going is tough, or try to get out of a contract part of the way through...

    You just have to "supply" a viable business/income/ payment system for the term, and there invariably wont be "any trouble" with the supplier.

    That said, I am also interested to hear what others say about Silver Chef.


    and with regard to chokkidog's excellent post "where are you located", yup I would also like to know.
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