A Guide to Opening A Coffee Shop

South Africa has seen a rise in the coffee culture, with big international brands like Starbucks competing locally with independent South African coffee franchises like The Daily Coffee Café, Vida e Caffee, Mugg & Bean and Bootleggers, to name a few.

Other local coffee shop brands that have made a name for themselves, according to lifestyle magazine EatOut’s coffee snob list, are The Bean Green Coffee Company, 4th Avenue Coffee Roasters and Department of Coffee in Khayelitsha, Cape Town. The list also includes Grind Coffee Company, which is credited with creating the most ‘Instagrammable’ coffee concept in the world – the Coffee In a Cone, which is cappuccino and espresso served in a chocolate-coated ice-cream cone.

Coffee production globally is estimated to have reached a record 174,5 million units of 60 kg bags in the 2018/2019 season, which represents an increase of 15,6 million units of 60 kg bags after the 2017/2018 season, according to Bizcommunity.com.

The South African coffee market achieved a compound annual growth rate of 2,0% from 571 000 60 kg bags in 2014/15 to 606 000 60 kg bags in 2017/18.

Beyond coffee, the majority of coffee shop entrepreneurs offer a variety of products such as teas and smoothies, as well as foodstuffs like muffins and sandwiches. Other trends are the hosting of events such as coffee tastings, book clubs and weekly game nights, according to the 2019 South African Coffee Industry Landscape Report by Insight Survey, another key trend within the market, especially among premium coffee industry players, is the use of coffee culture to drive socio-economic change and positively influence local communities. Vintage Coffee based in Centurion, for example, offers customers the opportunity to vote for the non-profit organisation (NPO) programme they would like to see receive the proceeds when they purchase an item at the shop.

SME South Africa speaks to Tumi Khobane, general manager of Monate Coffee, which was co-founded by Moss Mashishi and mother, Tidi Khobane in 2017, and Siki’s Koffee Kafe founder, Sikelela Dibela, launched in 2016. Both businesses were bootstrapped.

Setup Costs

The startup costs for a coffee business are largely dependent on one’s positioning strategy – where you want to lie in the value chain. From roasting to distributing to owning a cafe – each space speaks to a different costing structure.

Understand your input costs and work from there. Although a starting point, it is not the only thing that needs to be considered. It is fundamental to determine the feasibility/financial viability and sustainability of the business.

To estimate your startup costs, Santam suggests the following:

Arrange your business expenses into once-off costs and continuous monthly expenses. Prioritise what is necessary – like electricity and rent – versus nice-to-have-like business cards.

Your initial costs can include the following:

• Phone(s)
• Security (gates, burglar bars, cameras)Equipment
• Furniture
• Start-up inventory (stock)
• Shop fittings/signage
• Rent
• Loan repayments
• Electricity and water
• Phone connection and monthly bill
• Cellphone(s)
• Internet connection
• Salaries and wages
• Website hosting

WebstaurantStore offers a comprehensive list of equipment you will need for your coffee shop:

Consumables include coffee, espresso, tea, hot chocolate, water, milk, sugar (packets), sweetener, napkins, paper cups and lids (for takeaways), straws and stirrers, plastic cups and lids (for smoothies), ice for smoothies or ice coffees or sodas.

Tools (for sit-down customers) that can include tea cups, cappuccino cups and americano cups, saucers for cups, sugar pourers, creamers, cutlery, serving trays, a coffee machine, a coffee grinder, Espresso machine, Espresso grinder, Espresso tampers, frothing pitchers, coffee brewer, frappe and smoothie blenders, hot water urn, Point-of-Sale software and/or Snapscan, cooking equipment like an oven or microwave if you serve light breakfast or lunch, measuring cups and spoons, coffee and beverage labelling, menus, aprons, waste bins and/0r recycle bins, coffee filters, coffee equipment cleaners and coffee pot cleaners, Espresso equipment cleaners, milk frother/steam wand cleaners, cutting boards and knives for sandwiches and salads, display case for baked goods, and a sink.

Furniture such as two-seater tables or big tables for customers (depending on your decor design) to have their coffee at, work stations, countertops, shelves, refrigerator, décor and signage for the store.

In terms of the Businesses Act (1991), any business that sells or supplies any foodstuff in the form of meals for consumption on or off business premises, or any perishable foodstuff, is required to hold a business license. Therefore, any person who wishes to start a new restaurant, even if it is a take-away restaurant, will need to apply for a business license under the Businesses Act.

More on licensing and permits for the food and beverage service industry.

Regulations also require a food business to possess a certificate of acceptability. For a certificate of acceptability, you will generally be required to provide information regarding the nature and type of food being handled on the premises, the nature of the handling (e.g. preparation, packing, processing etc), and certain other information.

Coffee Shop Locations

Sikelela “Siki” Dibela, local entrepreneur and coffee shop owner explains their approach to starting a coffee shop:

I transformed a garage into a coffee shop, we have a courtyard where customers can be seated at tables and chairs. At first, it was strange for the customers to see a coffee shop that is not inside a mall. We also have WiFi now to attract customers. My business is on a (commercial) property in an area zoned for business.

Tumi Khobane from Monate Coffee shares important insight:

Location is important. People enjoy convenience, comfort and safety. Unfortunately, even when you may think you have covered [all the] bases, the location may still not work. This is where you will have to challenge yourself to find ways to either give people no choice but to find and follow you or become more innovative and dynamic in the way you choose to use your space.

“First look at the geographic area and look at how many coffee shops are there in that area,” advises Sihle Magubane, founder of  Sihle’s Brew Roasting Coffee, a range of coffee beans sourced from Ethiopia, Kenya and Tanzania. The brand was so successful that he went on to open his coffee shop, Sihle’s Brew Barista Love, located in Johannesburg. The coffee brand is also available in selected Food Lover’s Market retailers.

He continues, “If there are no coffee shops, don’t put your coffee shop there. You’re not going to make it. You must have competition, it’s healthy. Look at the people around, how many people are likely to buy your product and the age average. That will give you an idea of whether it’s viable to start the business”.

Dibela uses his coffee shop to promote various products. The shop has a variety of products on the menu because a lot of the customers don’t only want coffee. They sell muffins, brownies, sandwiches and smoothies. Additionally, the shop sells its speciality blends of packaged coffee.

Events are another opportunity. “I work in collaboration with other entrepreneurs. For example, I hosted a ghetto session with a friend for a community-based poetry event to connect people to one another.”

Beyond the above, the coffee shop also has merchandise items such as tote bags, carrier bags and t-shirts.

Khobane sells a variety of coffee products. “Our product range includes seven different options, two of which are flavoured (Amarula Cream and Macadamia Nut), as well as a choice of decaf that provides a perfect substitute for those who prefer not to or can’t, indulge in caffeine.”

Regarding events, they provide coffee for private and public occasions, as well as intimate and large gatherings.

Monate Coffee has a tasting room too. This is an experiential space that looks to take the consumers on an educational and sensory journey. As part of the experience, Eighteen13 Boutique Wine Shop offers an array of South African wines while Monate Coffee serves blends for every preference, proudly sourced from the African continent.

Lastly, coffee is a great gift idea for corporate or personal use.

Coffee Shop Industry Challenges

The coffee industry is highly competitive and it’s not enough to only exist – to compete you must bring something different to the table and find innovative ways to stand out.

Access to finance or funding is also difficult to obtain. Furthermore,  access to markets (having sufficient customers) can be a challenge for some.

Dibela notes the following:

“On the first day (of starting my business) I gave away 80 free cups of coffee just to give customers a taste. Only three people come back after that first day. I had to do a lot of word-of-mouth marketing. I also had to learn how to narrate my story and to share my vision.”

Khobane’s marketing approach is a bit different.

“Our brand is experiential and we strive to communicate not just through words, but through actual lived experience. Thus, we spend a great amount of our time directly marketing – engaging and interacting with prospective clients/customers.”

Social media is a great way to market a coffee brand, says Dayne Levinrad, owner of The Grind Coffee Company and the brains behind the Coffee In a Cone, available at their coffee shop located in Melrose Arch and various coffee shops in Gauteng, Western Cape and Kwa-Zulu Natal. ​

“We were very fortunate with social media and analytical reporting, we can see who our demographic is. Our product is very sexy, people want to pose and take selfies with it, so we were clear where our target and demographic needed to be. In this day and age with social media, you don’t have to guess anymore. It’s very targeted”.

You don’t necessarily have to have specific training to start a coffee business. An understanding of business would help though. Although there are coffee-related courses, business can be learned without necessarily engaging in formal certified training. As long as you keep an open mind and make understanding and consistent learning a part of your every day, you can achieve a great deal.

Learned from experience in the industry. Dibela, for instance, didn’t go to business school. He did a lot of research and asked mentors for help. “I also read up on the history of coffee and everything coffee-related. We have conversations about coffee with our customers, educating them on the history of coffee for example,” he adds.

More Organisations

The Speciality Coffee Association (SCA) offers coffee professionals and enthusiasts the opportunity to share their wealth of coffee knowledge and experience. SCA also offers a Coffee Diploma System, of which there are four different modules in different disciplines on offer at Ciro Coffee Academy.

Coffee Importers and Roasters Organisation (Ciro)  offers expert services in sourcing, roasting, blending, packaging, training, equipment, technical support, national and international distribution and market trend analysis. They are also behind Ciro Coffee Academy which offers courses and certifications in barista skills, brewing and roasting.

Speciality Coffee Association of Southern Africa (SCASA) is the licensed body of the World Barista Championship in SA, and hosts events like South African Barista competitions, the Cup Tasters Competition and Latte Art Competition.

African Fine Coffees Association is a regional non-profit, non-political, member-driven association representing coffee sectors in 12 member countries, including South Africa.