What it takes to own a coffee shop

Tuesday December 1 2015

By Paul Njuguna

In Uganda today, we have become so accustomed to high-end restaurants or coffee shops such as Café Javas, Cafesserie and Café Pap, among others.

Indeed, they have become lucrative businesses but what does it take to set up a coffee shop in the country?
Location and capital: Location is ultimate in any business establishment. However, beyond the location you need to be cautious of your capital injection and budgeting to be able to accommodate all costs involved. Here we shall look at minimum of $200,000 (Shs714m) for an uptown coffee shop.

Rent in a prime Kampala location today stands at about $6,000 (Shs21m) a month but most landlords will require a prepayment covering six months. In addition to this is a security deposit and service fees, which could drive initial rental charges to $50,000 (Shs178m).

Operational equipment: You will require high-tech equipment to facilitate the level of speed and service required of an efficient, modern coffee shop. Roughly, this will need about $100,000 (Shs357m).

Branding and advertising: This is a pertinent part of a coffee shop as you will have to cost on a menu, wall paintings, staff uniforms and light boxes. But beyond these, you need publicity through advertising, which might need another $20,000 (Shs71m).

Recruitment, administration and registration: Definitely, this is the rollout stage where you will need to acquire necessary licences such as company incorporation and trading licence.

It is paramount that you seek the counsel of an experienced legal firm to acquire all the required licences as well as a recruitment agency to source, interview and hire your staff.
You will as well need to hire consultants to engineer a suitable menu, which as a whole, might require you to sink in about $10,000 (Shs35m).


Therefore, with all the above in place, the last hurdle would be providing working capital for the coffee shop to roll.
Stocking items that are in tandem with the menu is key here but it is preferable that you set up a central store that could be utilised for other services such serving meaty assortments.

However, it is advisable that you stock items that can last through a two-week service. And for such you would need an investment of about $20,000 (Shs71m).

Thus, after putting these in place, the question now shifts to the returns factor, which, if you do your mathematics right, should put you at between Shs10m and Shs15m daily.

For any business, operations should stand at between 25 per cent and 30 per cent of cost of sales. That should leave you with a gross profit of 70 to 75 per cent to absorb your fixed operating costs and roughly 25 per cent net of net profit.

Paul Njuguna is a financial and cost accountant: Email: paul@paulnjuguna.com.