Are you looking to quit corporate life and be your own boss? Choosing to start an F&B business is one of the ways to go, cafes in particular. Coffee is a profitable business, and coffee shops will always be in demand no matter where you are in the world. Singapore has a healthy and growing coffee culture; a cafe is a go-to place for most to get their daily fix.
Like every other business, opening a cafe is a delicate decision as a lot of factors need to be taken into consideration. Being an entrepreneur requires time, dedication, and the right finance. However, cafes are springing up all around Singapore, and having a solid business plan is one great way to set your cafe apart from the rest.
Factors to Consider When Opening a Cafe
There are a lot of factors to consider and steps you’ll need to take when starting a coffee business:
Regardless of whatever type of business you’re choosing to start, Singapore law requires the registration of your business with Singapore’s Accounting and Corporate Regulatory Authority (ACRA). This is a way for you to legitimise your business.
The cost of registering a business is about $5, while the registration fee is around $300 – $1,200 for foreigners and $50 – $600 for locals.
Renting a space will be your business’s biggest recurring expenditure. With the constant increases in rental rates in Singapore, a high sales volume is needed. Rental rates as of today are estimated to be as follows:
- Central Business District (CBD): $30,000 for 2,500 sq ft
- Bugis: $8,000 for 900 sq ft
- Tanjong Pagar: $12,000 for 1,200 sq ft
- Duxton: $13,000 for 1,600 sq ft
Aside from setting aside some amount for the rental deposit, you should also save up enough to cover about 3 to 6 months’ worth of operational costs, just in case you do not generate enough revenue in the early stages of the business.
Businesses in Singapore do not usually require a permit or license to operate. But depending on the type of business you choose to engage in; you might need a license as they are usually industry-specific. For example, the cafe business is listed under the Food and Beverage industry, with a few licensing requirements and a fee of around $200.
A list of the required licenses needed to run a cafe is as follows:
- Food Shop Licence: This license is required for all food and beverage businesses in Singapore. An already available space is required before applying for this license, as a physical inspection needs to be done before it can be issued.
- Government Service Tax (GST) Registration: You will only need to apply for this license when your annual revenue reaches at least $1 million.
- Basic Food Hygiene Course: This course is mandatory for all food businesses in Singapore.
- Central Provident Fund (CPF) Registration: As an employer, you are required by law to register for this social security savings plan.
- Liquor license: This license is only needed if you plan to sell liquor in your cafe.
- License for food ingredients importation: This license is required if you import the ingredients you use in your cafe by yourself.
- Halal Certification: (Optional, but advisable if you intend to serve the Muslim community).
Renovation and Aesthetics
Owning a cafe in this day and age involves more than just serving good coffee and great food. Due to the growth in social media usage, having a cafe with excellent interior design, which is Instagram-worthy and a place young people would want to hang out at, is crucial to attracting customers. The lighting, decorations, furniture, and flooring can incur high costs when renovating your new cafe. Renovation costs are estimated to be around $40,000 for a 1,000 sq ft cafe.
This is the second biggest recurring expenditure. The workforce required largely depends on whether your cafe will be serving cooked food or only beverages.
For a start, you’ll need at most six workers for your cafe. A full-time Singapore citizen or PR is paid between $2,000 to $2,500. You will also need to find part-time workers for the job, as finding full-time workers for food and beverage jobs is difficult. Part-timers are paid between $7 to $8 per hour.
Sticking to a 6-man team with two part-timers will bring your staffing cost to about $20,000 monthly.
Unless you are a trained barista, you’ll need to train yourself or a member of your staff to prepare various types of coffee by paying for a basic barista course. Such courses start from around $400 per trainee and teach the basics of latte art, espresso extraction, milk frothing and more.
If you’re looking to differentiate your cafe from the rest by serving top-notch coffee, you can choose to up your game by taking professional-level courses. These advanced courses are estimated to be around $1,000.
Coffee-making equipment costs can vary depending on the brand and make. Renowned espresso machine brands like La Marzocco and Synesso cost about $25,000. However, for a startup cafe, it is best to go for mid-range espresso machines, which costs around $3,500.
A coffee grinder is just as important as a coffee machine. Most cafes have two grinders just to be on the safe side. However, it is best to go for burr grinders rather than blade grinders. Burr grinders are said to make better coffees as they produce better grinds. A good quality grinder costs around $3,000.
If your cafe is going to serve cooked food and baked goods, you’ll need to set aside another $20,000 for refrigerated display units and other kitchen equipment.
An excellent way to keep your old customers coming back and new ones coming in is by investing in high-quality beans. A 1kg bag of pre-roasted beans will produce about 120 expressos. This 1kg bag costs around $15 to $20. Therefore, the monthly cost of beans will be at least $500.
Running a cafe that operates around 8-10 hours daily will cost you about $1,000 in water and electricity bills.
Due to the high cost of starting a cafe, having good insurance is important, as there are certain risks and accidents that can occur while you are running your cafe. For example, your coffee machine could develop faults. Your barista might incur burns while making a latte, or a little fire incident might occur. Paying up to about $200 for an all-in-one insurance policy can help you cover the extra costs due to these business disruptions.
Putting the cost of all the above-listed factors together, starting up a new cafe in Singapore will cost a minimum of $120,000. So, if you’re set on opening a cafe in Singapore, a good business plan and a minimum of $120,000 is needed for the capital.
Cafes are common in Singapore and if your path to becoming an entrepreneur is owning a cafe, carefully selecting a standout business name, finding the right location, and having a solid business plan is a great way to start placing your cafe at the top of the list.
You can ensure your costs are in control and everything goes as per your plan by engaging a corporate service provider to help you incorporate your business as well as guide you through the entire set-up process and beyond.