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Cafe net profit margins

teatea
edited January 1970 in Coffee Industry related subjects
Hi guys,

I am currently in uni and doing feasibility study on a variety of business and just curious to know what the net profit margin would be for an average cafe selling coffee, sandwiches, cakes etc.

I was reading on the net that a good cafe should be taking min 30% net profit. Just wondering if this is true?

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Comments

  • psaighpsaigh
    I'd put it closer to 20%, but 30% is not unbeleivable. Rent: 10% (older established leases can enjoy anything from 6% with fresh new leases creeping up to 15%) Wages :30%(franchises typically run lower employing 15yo staff, this figure can get as low as 14%) COGS: 30%(35% these days) Other costs: 6%(water, electricity etc) Total exp: 76% therefor NET profit = 24%
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  • takeaimtakeaim
    plus 9% super if you're paying it and 10% gst, again, if you're paying it  ;D
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  • fattylatepleasefattylateplease
    Volume is the key too good cafe sales. Also, one needs to factor in lose of product - wastage which can be taken off the tax. So many cafes just toss stuff without thinking about recording it as waste.
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  • psaighpsaigh
    plus 9% super if you're paying it and 10% gst, again, if you're paying it
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  • sketchysketchy
    Hi As a cafe owner if i hit 5-8% net profit then i'm pretty happy. any higher and tax man gets too much. LE
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  • teatea
    Thanks for the reply guys... psaigh - I am assuming the 24% profit margins might even decrease year after year, as suppliers increase their prices yet the price of a cup of coffee is still pretty low due to oversupply of cafes. sketchy - 5-8% sounds more realistic with most cafe owners and other small business owners  ;)
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  • askthecoffeeguyaskthecoffeeguy
    the other thing to take into account is on season and off season - during peak trading a margin 0f 20 per cent profit is not out of the question, but during quieter times you are sometimes lucky to just break even. and I agree with the comments about the tax man - they always take their share and the more you make the more they take! thin thing is to do your costings for all possible scenarios and then to adjust your payrol accordingly hope this helps, cheers, pat
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  • teatea
    Yes thanks Pat, I've drawed up the worse, medium and best case scenarios. The tax man can only take what you tell him... :0 When's peak / off peak seasons though?
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  • askthecoffeeguyaskthecoffeeguy
    that will vary according to location but for many businesses the winter period represents a marked downturn in trade due to significanly reduced foot-traffic, also, unless you are centrally located, the post christmas period: jan / feb - can be very quiet for many places, especially if you are dependant upon tourism or students for your patronage, as a lot of folks holiday at this time there is no real definitive peak period, you will probably have to trade over a 12 month period to determine that for yourself good luck with your new venture cheers, pat
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  • sketchysketchy
    Hi Again I thought when you said net profit you meant end of year after everthing including drawings and salaries. thats how i worked on the percentage that i did. of course during winter, profit margins increase due to a higher number of coffees being sold. LE
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  • Unknown
    We are quite busy in Winter because the locals like to warm themselves up with coffee. I think it's a very location-dependent thing, the whole weather-business relationship. Also, I think that in Summer we would really get just as many people coming in (albeit for iced coffees/milkshakes and not so much caps and lattes), if not for the fact that people choose to travel/go to the beach in the hotter months. The answer is clearly a cafe near the beach C:
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  • teatea
    your right sketchy, I did mean end of year net profit but still good to know the peak and off peak seasons as it will effect cashflow. Do you think your net profit margins will decrease? Due to the increase in competition, prices have stayed low but I'm sure suppliers prices would have increase, as well as rents, wages. Do you increase your prices accordingly?
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  • sketchysketchy
    Hi tea Unfortunately you do have to increase prices. in the last 12 months i have seen some things such as milk and fresh fruit and veg increase greatly. Milk went up by about 26cents a litre. add to that the fact that i have to travel 150 km each way to perth to get fresh and dry goods. so margins have goten tighter, but you can cut costs by doing more hours yourself, triming off less profitable items and shoping around for better prices. LE
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  • teatea
    And on top of that, GST is chargable on milk, bread, fruit & veg to cafe owners but cannot be claimed. Must be a pain to travel 300km.. You must really stock up each time.. Will interest rate rises affect your sales? I'm assuming people who are on a budget will cut that cup of coffee out to save money but then again if they really love (or addicted to)their coffee they might not.
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  • Unknown
    What sort of margins would you expect on biscuits/cakes bought in?
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