I was asked today by one of my clients about coffee as we used to have a strong association with a large coffee machine distributor. Plus this is also a subject that I do claim much expertise. I am a certified barista. I worked as one during my university days and am an avid coffee addict. 

Coffee is a huge market in Australia and its not a hard market to enter. Years ago, when I was a kid, if people wanted to talk about business, they went to the pub. Now they go to a coffee shop.

Here are some basic economics on what if you are thinking of going into the coffee. Now firstly let me say, I do believe that if you are going to do something, you need to do it properly. 

The first point is to check whether you can have coffee, some shopping centres may not allow you to have it. I know people that have looked into coffee machines and had an argument with the landlord as it was mucking up another tenant they had nearby so the landlord said *NO*.

Now you need to determine what is your selling price. Coffee prices vary today from a $1 to about $4.50 a cup. You will need to investigate what you can get. If you can give people a place to sit and drink in your shop, do you have free wifi available to them and can you provide them with something to do e.g. read magazines as long as they buy coffee you can charge a little more or whether you can only do takeaway? Ask yourself what you would pay for a good cup of coffee in your proposed settings. It has to be good as Australians are serious about their coffee and have a high standard for their coffee.

Now, what sort of coffee machine are you thinking of getting?

Now the machine, the minimum, I think you could get away with commercially would be a $1,000 for a second-hand machine and a decent grinder (if you are going to do it commercially I do recommend a separate grinder). That one would probably get you about $3.5 a cup. If you are looking at new you are looking at about $7,000 to $12,000 and if you want something and those will get you about $3.50 to $4.50.

An automatic machine is about $2,000/year but you are not going to get as good a price for coffee from these machines probably about $1 to $2.50.  The big plus here is you can often negotiate a trial period to test it out.  

I do recommend that you get a machine from a place which fixes them as these machines frequently break down. You will need to check how quickly their support is and who pays for it. One of my clients told me that if they were not close to the service bay for the machine, he would have pulled out of coffee. The machines break down often.

The unit profits are excellent. 

A kg of coffee will vary in price, on the bottom end is the caterer's special which I would avoid. I brought some a while ago and threw it in the bin as it was that bad. In the supermarket, you can get decent coffee for about $20/kg. You may do better but let start with that for a first-level approximation. Now it depends on how much coffee you use for a cup, I use double most use single, but I would say for a 1kg bag of coffee beans, you will get around 60-140 cups of coffee, so that is 20 cents a cup. 

Milk is now about $1.20 per litre, as you need about 150 mm, so that is about 20 cents a cup.

Then there are cups and cleaning costs, about a third of barista time is taken up cleaning, you always have a rag nearby, just for the machine I would say every 200 coffees you are looking at about $2.50 in cleaning you are looking at a few cents a cup just in cleaning.

Then there is cleaning cups, tables and the rent on the area. There is some work involved.

Now in your costings, you need to add a bit because of lost coffee, people demanding fresh cups for some reason, e.g. not enough milk, the taste is not right, etc.

So a typical scenario here would be a fixed cost for the hardware, labour, rent and a variable cost of about 60 cents a cup.

Now you need to do your figures. People who charge a $1 are doing okay in coffee as the margin it there so if you can get $3.40/cup that is almost $2.80 profit. Plus there are heaps of addon sales if you want it eg cakes and biscuits. 


Finally, I do suggest that if you are going into it that you do a course. There are plenty around, the one I did years ago was 6 hours, is overkill as most barista today do much less, but it did give me a good rundown on coffee, so I suggest that you do it.


As far as your software is concerned, do not worry as our point of sale system is widely used in coffee shops so you have the perfect software to handle a cafe now.

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