Cafe Business - The Good vs The Bad

It is rightly said that for every dollar spent in failure, one should learn a dollar’s worth of lesson.

Trading of goods and servic...

  • Cafe Business - The Good vs The Bad
    Manish Khanna Image Manish Khanna

    Cafe Business - The Good vs The Bad

    • Tuesday 16th of June 2015
    • Startup

    It is rightly said that for every dollar spent in failure, one should learn a dollar’s worth of lesson.

    Trading of goods and services is not an easy task and involves various types of risks. An enterprise providing goods and services to the consumers is called a business. Businesses may take many forms i.e. they may be privately owned or they can be controlled by state authorities. Some businesses are taken up by a large number of individuals whereas there are many non-profit businesses which are conducted for the benefit of the society.

    Café business is one of the most popular businesses one should opt for. It is similar to starting a restaurant, but the only difference is that café businesses are taken up on a small scale. The owners of café shops are usually those individuals who have some previous experience in a related area of hospitality or have a strong interest in food and cooking. The startup challenges for a café Entrepreneur are:

    • Training, hiring and supervision of staff members – hiring is the first and foremost task for a business owner. The staff should be given a proper training for ensuring that they know everything about the business and the product along with ensuring quality service to the customers.
    • Budget planning – a business is usually taken over keeping in mind some budget plans. The budget plan involves the cost associated with starting as well as running a business.
    • Supply schedules and stock management – entrepreneur should ensure that the supply of raw material is regular and there is enough stock to meet the regular demand and no shortage occurs at any point of time.
    • Promotional and advertising events – an entrepreneur should engage into enough promotional activities to create a brand recall in the minds of the prospective customers.

    Sometimes the owners of these small enterprises are also the managers themselves but if the business model and capital allows, the business owners can hire a manger to supervise and look after the daily operational requirements of the café and give regular reports. Otherwise, one can easily undertake the management role himself/herself but should keep in mind that the daily operational needs of running a café can be quite hands on and include overseeing, ordering and tracking all of all the food, supplies, equipment and other inventories needed. Keeping a track of various food outlets and other cafes is a must. Apart from this, a successful cafe owner needs to have good business management skills, including budgeting, accounting, sales and marketing skills. Also, the owner has to be fully aware of health, safety and food hygiene regulations that apply to the business.

    Every business takes time to achieve its goals and café business is no different. Every owner tries to look at and investigate the bigger coffee picture, looking for ways to make the business better for everyone. In addition to business’s goals, every industry faces some challenges and it becomes vital to look at them in the eye and deal with them. Finding the best solutions is the ultimate goal of every owner that will benefit all parts of the business and the industry as a whole.

    Challenges and solutions to café business

    1. Business’s survival

    The focus of café business is to ensure that coffee farmers and producers are looked after. Here, looking after typically means ensuring that small farmers have enough food to feed their families and enough money to pay their bills. If the coffee farming will not serve them well, they would resort to different industries for their survival. Hence, the coffee business would go down.

    Education comes up with a solution. It is a key factor which ensures that producers and farmers are aware how to run a successful business. Managing finances, prices of goods, the investment should be their first and foremost outlook. This is the correct time when roasters and coffee organizations come into the picture. Such organizations are particularly setup for coffee farmers and producers by setting up a kind of ‘insurance’ scheme so that when prices drop, they can still support producers/ farmers helping them to grow their businesses.

    2. Challenge to aging farmers.

    As seen in many countries of the world, coffee farming is usually taken over by old farmers. The average age of coffee farmers is nearly 60 years. Young people are usually kept away from the coffee plantation. It is only the grandparents and parents who struggle to make a living on their farms along with some major issues such as leaf rust epidemic, volatile market prices, changing climate and low productivity. These poor old farmers are forced to turn off the family business and have to look for more lucrative industries elsewhere.

    Among many solutions, financing is the most desirable one. The only solution to this problem is to make the farmers financially healthy. The young ones should come up as helping hands. They should be encouraged to work with their parents and grandparents. Also, they should be taught how to run a successful business, not just how to grow coffee plants. Seeing the poor condition of coffee farmers, various organizations and schools have started to alter their education programs to alleviate this problem. The agenda of the plan is to integrate mathematics and science with hands-on farming exercises on the school’s campus. In this way, coffee farming will become profitable.

    3. Price level

    One of the reasons for coffee farmers to move to other industries is the stagnant price level of coffee. The product is sold at the same level as in 1970s. In addition, the extreme volatile price of green bean has made the situation worse. This has affected the business badly. The farmers are landing into situations where they are not able to purchase two meals per day. The dire situation of farmers has forced them to move to other lucrative industries in search for work. It has become nearly impossible for them to survive with rising price level of everyday essentials such as food, petrol, education and health.

    The coffee business is making considerable efforts to strengthen the farmers by raising the price level. Although the high price of coffee would reduce its demand yet it is a fair thing to do. It is also to be ensured that the extra money raised goes to the farmers at the origin and not elsewhere in the coffee chain. Along with raising the price level, the need for charities and certifications has become necessary in today’s current climate. It is not necessary that the system put into action will work out well, but the industry has to work out the price so that coffee is worth in modern times.

    4. Short supplies

    It is the most expected shock for the coffee consumers. If the coffee business will not serve its farmers and producers well they would leave the industry in droves, looking for crops or businesses that will at least pay the bills for their families. Other significant contributors are changes in climate and coffee leaf rusk epidemic which are forcing the farmers to leave the industry. This has resulted in a reduction in supply as well as the quality of the coffee.

    It is a known fact that the solution for almost 90 percent of the world’s problem is education. Education here becomes a must to upskill the farmers in order to be better equipped to deal with the hostile origin coffee growing conditions. Many organizations are working hard to achieve this goal. They assist farmers with acquiring the needed funds to progress their farms. Only the farmers can tackle the climatic situations and bring the supply back to normal.

    There are two ways a person can own and operate a café business; either hook up with one of the big national chains or open up a small local shop. There are many advantages and disadvantages associated in making such kind of decisions. Various factors must be accounted for before one land up to a particular decision. Thus, these decisions can be boiled down into two components: the advantages and disadvantages of working for each.

    The biggest advantage of hooking up with a national café business is that the chain can set their own prices with not only customers but also with the farmers from whom they purchase coffee beans. Many national brands such as Starbuck’s use of business clout add a dynamic feature to their bargaining strategy. The willingness of farmers rises when they sell their beans to the national or even international brands and get a dollar for their product. Seeing the continuous supply, some national brands are able to fix up a baseline price for all of their stores wherever they may be; regardless of things like location, average income or even the market for that area. Availability is the biggest advantage of working with a national café. This particular ease of access to products makes it more enticing to those who are in need or want of whatever that chain has to offer.

    There is always another side to the story. National café chains have their own disadvantages. It is very difficult to setup a coffee chain. Corporate offices try to set standards and practices as high as possible and there is a kind of “chain-o-command” in which the decisions set forth by the top executives trickle down to various installations. Since these chains set prices on their own, there is an inability to adjust prices or conduct business in relation to the market. A national café is like a pond which cannot move freely and it becomes stagnant.

    Just like any other business, the coffee business has its own pros and cons. It is the ability of the business owners on how to tackle difficult conditions. Coffee has always been a preferred consumer product and its demand rises irrespective of the prices. Many café chains are trying to supply the best coffee by raising the quality levels. Institutions are engaged in improving the conditions of coffee farmers and also ensuring that supply meets the regular demands because one cannot buy happiness but can buy coffee which is pretty close.

  • Author Info Manish Khanna

    Manish Khanna is a serial entrepreneur, philanthropist and genuine Australian success story. In a decade he has built an online empire unlike any other. He is currently the Managing Director of more than 10 individual companies. These include the flagship Business2Sell which operates internationally in 6 countries. The others include CommercialProperty2Sell, Million Dollar Mansions, Netvision, BCIC Pty Ltd and Better Franchise Group, to name a few.

    With more than 21 years’ experience developing web applications plus very successfully creating, managing and growing start-ups, he is forging ahead to turn more of his innovative ideas into future success stories.