I became an F&B entrepreneur slightly over 2 years ago, when my wife and I decided to open Double A Cafe.
As an introduction, my experience in F&B are with cafes – dealing with coffee, cakes and hot kitchen. Cafes are increasingly becoming popular here in KL, you hear a new one opening almost every month. Owning a cafe is exhilarating and it’s like street-cred, it’s the new cool. What people don’t tell you is that, if you are small business with limited cash and you plan to be hands on, owning a cafe involves being exhausted a lot (imagine being on your feet for 10 hours a day for 6 days a week). It is your passion that will drive and sustain you. What people don’t tell you is that while new cafes open every month, cafes close down every month too. If you plan to open a cafe because you want to create a hang-out spot for your guys or you want to look cool and not because you have a genuine love for coffee or cooking, my advise is: Don’t Open A Cafe.
Here it is, six things I learnt:
1. Buy things second hand. Some things you can upgrade.
For a small business where cash is limited, you need to be aware that cafe business requires somewhat large capital (a good estimate of a set up cost of a cafe in a shop-lot would be ~RM250,000). Because many cafes close down on a monthly basis, always be on the look for good bargains for equipment. Coffee and kitchen equipment have a lifespan of 5-10 years and many cafes don’t get far past their 1 year mark before closing down hence equipment should be in good condition. Often, when cafes close down, you can get bargains of up to 50%.
In Malaysia, you can find bargains in Mudah.my (search for Coffee Machine) or on the Facebook groups Barista Club Asia or Malaysian Chef Connection for notice of cafe closure.
2. Don’t rent a place thinking it will boom. It is better to rent in a mature area with proven traffic.
Rent will make up a significant portion of your monthly fixed cost. It is tempting to tell yourself to rent at a relatively new area as it has a slightly lower rent and telling yourself it will be a matter of time before this place will boom (the common lies you will tell yourself include thinking occupancy of condos above are picking up, your shop is near LRT/MRT etc). My advice is to not fall into this trap – yes perhaps the place will boom but you won’t know if it takes 6 months or 6 years and you won’t last that long. It is better to pay RM10k rent for a mature area with strong purchasing power for your products than going to A new development and paying RM7k. The absence of traffic will kill you.
3. Don’t rely on traffic as a revenue. Supply.
Relying solely on foot traffic is one major reasons why many cafes fail. Traffic is unpredictable and the cafe game is a volume game – if any given day you have no traffic, you make no revenue and you are still paying for staff with low productivity. Whatever it is you choose to be known for, may it be coffee, cakes or food, create a new revenue stream by supplying – you can get a head start marketing this by having a good social media account. Getting your staff out to deliver to nearby offices makes more money than them just sitting in the shop.
4. Work on your marketing early. Build social media influence.
Unless your cafe is situated in a heavy traffic area, it is a good idea for you to work on your social media presence early – even before you construct your shop. Malaysians are heavy users of Facebook and Instagram and these platforms play a big role in influencing customers / foodies to come to your shop. If it’s possible to get some, endorsements by instafamous folks will carry a long way.
5. Sometimes, putting yourself in your staff’ shoes is not a good idea. Someone needs to clean the grease trap.
F&B is a physically demanding job – it involves a lot of standing, discipline to come in on time and doing the kind of cleaning that you usually don’t do at home (like cleaning the coveted grease trap). One trap I see many owners fall into is letting things slide with their staff – the ‘kesian’ mindset. You may think you are practising empathy when you tell yourself, wow they work this much and get paid so little, let’s not be so hard on them – empathy has a time and place and this is not one of it. Your business is not a charity, it needs to make money and people must do what you expect of them for your business to thrive. Yes you will have rebellious staff who do not want to do what they are told – my advice is one bad apple spoils the vibe for everyone. In a small business where many legal aspects are not well understood by staff, it is a good idea to explain to your young staff the grounds for you to terminate them and do not be afraid to issue warning letters and firing them.
On that note, F&B is the kind of business where you should trust in your hiring instinct and give trust to your staff first, until they break it. Else you will be checking the cctv every 10 minutes. People have the capacity to perform and impress you given the right conditions.
6. Have multiple partners. Having 50% in a successful business is better than 100% of a failing business.
As much as you are passionate for your cafe business, you still want to have a life outside it. Putting “everything you got” for something like a cafe, where returns are not guaranteed, is not a good idea – both in regards to time and money. It is much better if you can find partners and friends to do this with you. If you have 5 partners, what this means is you spend 1/5th of the expenditure and if you negotiate right with your partners, you work 2 days a week and not 6 or 7 days a week full shift. It is better to have a small share of a successful business (and retaining your sanity) as opposed to full ownership of a failing business. If you are telling yourself on the get-go “I have a good idea for a cafe and I don’t want to share the profits of this brilliant idea”, tell yourself it’s all a big IF.
As a final word, if you are set on having a cafe, it already means you are an entrepreneur which means you are driven. The key thing is to be prudent and execute.