Hospitality? Where to from here??
By Simon O’Brien
In the years leading up to COVID 19 (BC) I'd been constantly telling my Clients the market is actually really competitive and if you're going to do well in the Coffee Industry you need a really good opportunity to make this worthwhile.
Today..
Entry Barriers have been pretty much obliterated, due to cost of living, inflation and poor government policy. Vacant shops are pretty much everywhere and while this provides potential opportunity in a resurgent industry, it can't be business as usual.
To couple the ‘high costs’ impediment with unpredictable customer spending is a recipe for disaster. I propose we all adopt 3 key changes before reopening our doors. This works for new startups and cafe veterans alike.
Key Change#1. Rent!
Do you know how much the average cafe makes?
10% of gross earnings.. This means they have to earn a whopping 500k pa gross to take home, (after paying all bills, tax and repayments) a paltry 50k pa.
Not a lot of incentive for those 16 hour days is there?
Instead a new benchmark has to be set. No longer should greedy landlords be able to dictate terms. In order for this to work for everyone, can I ask we all stand in unity and demand a fair go!
I drew a line in the sand years ago that Rent needs to be Less than / < $1000.00 per week. In some cases I’ve seen less than $500. If you purchasing a business, then make sure the rent is under 10% or walk away.
Also... No Personal Guarantees!
In worst case scenario and you can't make rent, the landlord has 3 months back up and then they can boot you out. That seems fair enough to me?! Why have people in this continual state of loss where they're bleeding money every week but forced to remain open?
Key Change#2. Staff Costs!
Senior Baristas are now getting $35 per hour + Super and I'm not saying a good one's not worth it but how many can your business afford?? Not too many is the answer. Instead you need to get smarter. Start automating your production line. Half and even fully Automatic equipment has really closed the gap in terms of finished product quality. I know what you're thinking, customers want Real People making their coffee - But let me tell you straight. If you want output quicker, cheaper and more consistent, then you want to start automating certain processes on the coffee production assembly line. Look at it as a partnership between You and Technology.
Here are my favourite Robot Employees which are being employed by savvy operators to enormous effect.
The PAQ Press. This thing tamps. Sorry Coffee Speak. It presses down the coffee in the group handle. You will be surprised how much repetitive effort goes into this practice every day. It makes your coffee extraction so much more consistent and can seriously save your wrists from RSI.
The Uber Milk dispenses perfect micro foam steamed milk. You can open the tap and have it pour straight into the cup, to integrate with the Coffee shot. This works really well for a Client Drive Thru doing high volume takeaway coffee. If you want more theatre of the Barista at work, then dispense from the Uber into a milk jug and pour the coffee's free hand. This automation produces better steamed milk and can slash your staff costs by at least 1/4/.
The Eversys is essentially a fully automated coffee machine which does as much or as little as you like. The technology has caught up to being as good, if not better than a skilled Barista and a whole lot more consistent. Just three buttons to fully produce a finished coffee. Remote Control servicing, maintenance and operation. Even cleans itself. You simply have to see it to believe it!
Key Change#3. Raise Your Prices.
In parts of Europe, Uk, Japan a cup of Espresso Coffee will cost you $10 AUD. America is up there too once you add the 20% Tip.. Meanwhile in Sydney and Melbourne we're still under $5 per cup.....and this is for some of the best coffee in the World. We are still way too cheap!
If... (emphasis on IF).. your coffee is flawless, then your customers are paying for an experience. NOT just a quick hit and a bad aftertaste.
What’s a pint of Ale or Lager worth these days at any bar or Restaurant? $15.. $20 bucks PLUS!
People line up for multiple drinks at the bar but whine about the cost of one perfectly made coffee? Trust me,... they will adjust their thinking when we adjust ours.
In Conclusion.
I suggest we recognise the game has changed and it’s adapt or die.
You see business will not resume as usual.
Unfortunately many have be taken out of the game, due to the whole Covid 19 fiasco. While this is unfortunate for those business owners, it has helped restore balance to what was a highly saturated market.
Right now we have the advantage and the industry needs us to re-open. Let's not waste the opportunity. Don't resume Business as usual in a new World.
Best,
Simon O'Brien
Kickstart Coffee Shop
