The Lolly startup check list covers everything you need to open your hospitality business, writing your business plan, a check list of equipment you’ll need, taking payments, opening and attracting customers and having them come back.
This guide covers:
- Write a business plan
- The rules and regulations – setting up your business
- Food Standards rules and regulations
- Create your brand identity
- Sourcing a food van
- Taking money and card payments
- Design your menu
- Develop relationships with suppliers
- Market and promote your café
- Hire and train staff
- Open for business
- Customer Loyalty
- Other resources
Write a business plan
Your business plan is an essential first step in the process of setting up your café. A good business plan analyses your business idea, the market, and it’ll serve as a plan going forward for several years. It is your road map to success and it is necessary to help you to secure funding if you are looking for financial support; like a small business loan from your bank.
You need to include:
- Title page and a table of contents
- An executive summary, which is a summary of what’s included in the plan (write this last)
- Company description, an overview of your company and the services you will be providing to your market
- Products and services, this is a detailed section regarding your products and or services and what makes them different to your competitors
- Marketing plan, describe how you will attract customers
- Operational plan, a description of how the business will be operated day to day
- Management, include a section on who will run the business and the philosophy that you will be following
- Financial plan, showing your working model for finances and what you are looking for from your investors
A good business plan needn’t be long and complex it just needs to explain the most important information; what you want to achieve, how you will get there and the things you need to do along the way.
The rules and regulations
When you start up a café you need to think about the structure of the business as well as the health and safety requirements of the food service industry. To begin with you need to determine the type of business you need to set up.
What type of business?
- Sole trader – which means you’ll be self-employed. Being a sole trader is fast, easy and inexpensive to set up. As a sole trader you can employ staff and you are the only person in the business who will make your business decisions. The financial responsibility of any debt associated with the business, if it fails, becomes your personal responsibility. You don’t pay tax and National insurance as PAYE (pay as your earn) and your expenses are tax-deductible meaning the remaining profit is taxed as income. Your earnings are taxable at the current rate of tax for the earning band that you reach which can take you into the 40% tax bracket and above. You’ll also have to complete self-assessment forms.
The biggest risk of being a sole trader is the personal liability if the business fails and the exposure to higher levels of taxation.
- Partnership – where you are in business with another person or more than one person. This is a common extension of the sole trader model, for example, when two friends decide to work together. The partnership is just as flexible, has the benefit of two or more heads, and the business won’t collapse if one of you is sick or needs a holiday.
There has to be an agreement as to how the liabilities, ownership and profits of the business are split and what happens if one partner wants to leave, it’s is usual to cover this in a partnership agreement. The only legal requirement is that each partner is registered as self-employed and each submits a separate tax return.
In a standard partnership all partners are responsible for all the debts owed by the business. This doesn’t only apply to debts you have incurred as a partner but to those of any partner, so you need to pay particular care to the conduct of the people you go into business with.
Your share of the profits will be taxed as income.
- Limited company – the biggest advantage of a limited company is that you can control your exposure to financial risk. Your limited company is a separate legal entity to you personally. If the business fails it is the limited company that is responsible, not you directly. This is called limited liability.
Tax is calculated, first at the small profits corporation tax rate and your earnings (taxed as the personal rates of tax) are accounted as an overhead of the business, reducing the company’s tax liability. You will need to file statutory accounts and it’s a good idea to work with an accountant. If you want to have a limited company you need to register with Companies House.
- Limited liability partnership (LLP) – LLPs may be seen as a hybrid between limited liability companies and traditional partnerships, in that they offer the limited liability available to limited company shareholders combined with the tax regime and flexibility available to partnerships. The number of partners is not limited but at least two have to be ‘designated members’ responsible for filing annual accounts.
Do you need to consider VAT registration for a café?
VAT stands for Value Added Tax. Businesses that are ‘VAT registered’ charge VAT on the goods and services they provide. If your business has a turnover (not just profit) above the ‘registration threshold’, (which changes from time to time) it must be VAT registered. Some businesses choose to register for VAT, even though their turnover is below the registration threshold. If your business is VAT registered, you will be able to reclaim the VAT you pay to suppliers. And you will also need to charge VAT on certain things.
To find out more about VAT registration visit HM Revenue & Customs.
You must keep records of all your business income and expenses. This will help you to prepare your accounts and fill in your tax return. Having a record of all the money coming in and going out can also help you to run your business efficiently.
An EPoS or PoS system can help you to do this and track your profitability.
You must keep all records for at least five years from the latest date for sending back your tax return. If you would like advice about record keeping, contact HM Revenue & Customs or an accountant. You should also keep all the invoices and receipts for foods that you buy.
Before you make any of these decisions it is advisable to discuss the options with a qualified accountant who will help you to arrive at the decision that is right for you.
Food Standards rules and regulations
The rules and regulations don’t need to be daunting here’s a simple guide.
There is no law that states that you have to undertake formal training to open and run a café, coffee shop or small restaurant. It is essential however that you and your employees working with food have the appropriate level of training in order to do the job to the required standard.
The legal responsibility does rest with the business owner, so it’s within your own interest to make sure you meet all the necessary requirements. Your business will also have to be registered with the local authorities so you need to be aware that you are likely to have face-to-face inspections in the future. You’ll have nothing to worry about if you do everything as you should.
Managing Food Safety: The Food Standards Agency (FSA) is the Government body responsible for all food safety standards. The FSA will provide you with all of the advice on food hygiene matters and has produced a Safer Food Better Business publication to help you to comply with the law and keep your site safe for the public. Food safety and hygiene regulations say that you must be able to show what you do to make and sell food that is safe to eat and have this written down. The FSA pack helps you to do this.
The pack covers training staff in food safety standards, managing suppliers, knowing what to look out for. It also helps you to understand your responsibility regarding the records you need to keep about the traceability of food and ingredients, withdrawing products from sale and transporting food.
If you don’t have any previous experience good food hygiene it is essential to the success of your business. The pack also advises you on keeping your customers safe and will protect you and your reputation. The four key things to remember for good food hygiene are known as the 4Cs:
Rules about menus, food descriptions and VAT
Pricing, displaying prices and charging VAT: When you sell food or drink for people to eat or drink on the premises you must make the prices clear, for example, on a price list or menu. You must include VAT in the prices when appropriate.
Whether or not you need to include VAT in your prices, and what rate of VAT, depends on a number of different things. In general, businesses selling food or drink that is ready-to-eat or drink should charge VAT at the standard rate.
If you sell food or drink to be consumed on your premises, or if you supply hot takeaway food, you must charge VAT at the standard rate on these products.
For more information about when you need to charge VAT visit HM Revenue & Customs.
If you add a service charge (a percentage or amount), or if there is a minimum charge, you must display this as clearly as the other prices.
Describing food: Food and drink must be described accurately on menus, blackboards and adverts. Any illustrations must accurately represent the food you are selling. Descriptions and illustrations must not be misleading. Descriptions like ‘fresh’, ‘home-made’ and ‘suitable for vegetarians’ can easily be used misleadingly.
Food allergen information – it’s law: Think carefully about foods causing allergic reactions when describing the foods you are selling. If someone with a food allergy asks about the ingredients in a particular food, always check and never guess.
Alcohol: You must have a licence to sell alcoholic drinks. There are also rules about the quantities of beer, wine and spirits you can serve. Your local authority will be able to advise you on both of these issues.
Visit the Food Standards Agency website food.gov.uk, or contact your local authority, for advice on how to make sure your descriptions do not mislead.
Hazard Analysis Critical Control Point (HACCP) is an internationally recognised system for the management of food safety and its focus is identifying ‘critical points’ in a process where food safety hazards could arise. Think of the HACCP as a guide to prevent things from going wrong.
Food hygiene regulations: The most important food hygiene legislation that applies specifically to food businesses
- Regulation (EC) No. 852/2004 on the hygiene of foodstuffs
- The Food Hygiene (England) Regulations 2006 (as amended) and equivalent regulations in Scotland, Wales and Northern Ireland
For more information on these regulations, see the ‘Food hygiene – a guide for businesses’ booklet or contact the environmental health service at your local authority.
In your business plan you’ll work out how much money you need to start up your café. To meet these start up costs you may have to contact possible investors, family or friends, crowd funding, apply for loans or use your savings.
If you are looking for funding it pays to shop around – the bank where you have your personal bank account might not be the best bank for business lending. You could also find help via an association like the Federation of Small Businesses.
If you need to be really creative think about other options such as renting out your spare room, if you have one, to provide income to cover some of your costs.
Create your brand identity
Branding can be a beast of a subject – it pays to get your logo produced professionally and if you’re having a website designed you might be able to get your logo designed by your web designers at the same time.
When briefing a designer be sure to share with them your vision and philosophy of running your café, such as the décor, your menu style you typical customer. This will help to create an appealing style and colours that will work with your interiors.
Your ultimate goal in developing your branding style is to create ‘one voice’ that is consistent across all of your promotional materials, through to your lunch menu and even the décor of your loos – yes they matter.
Choosing the right premises is a major decision for many businesses. The right location can be critical for attracting customers and employees, while the premises themselves can significantly influence your success.
You also need to take into account how the decision to lease or buy your premises affects your costs and the flexibility you have to react to future changes in your premises requirements.
Visit several commercial agents who are active in your target area or consider hiring a chartered surveyor to search for you. The benefit of working with a chartered surveyor is that they will know the market, what’s available and are experienced in negotiating price and terms of a contract. They will protect your best interests too. Unlike commercial agents, who primarily work for the landlord or seller.
If your chosen location is a former café or food establishment it usually pays to make updates and changes so that it suits your vision.
Don’t just focus on things like walls colour and lighting and other fixtures. For a café, in particular, the traffic flow of the kitchen is important, so when planning this area consider where the food preparation will take place, you want food preparation staff to have to move as least as possible so that they can be efficient.
Whilst you are very likely to think about the comfort of customers who will come a relax and stay a while, give consideration to take-away customers, people who grab their food or drinks on the go cost you less to serve.
If you want to make changes to your premises, remember that you need to tell the environmental health service at your local authority as you might need planning permission.
You will need to pay business rates on most premises.
Rules about premises
When you choose the premises for your business, it’s important that they:
- Comply with the necessary regulations
- Are suitable for the purpose of your business
- Allow you to prepare food safely
You must keep your premises clean and maintained in good repair and condition. Your premises must allow you to follow good food hygiene practices, including protection against contamination and, in particular, pest control.
The following rules apply to your whole premises, not just the areas used for preparing food.
Hand washing facilities and toilets: You must have enough wash basins for staff to wash their hands, with hot and cold running water, and materials for cleaning hands and drying them hygienically. Separate sinks must be provided, where necessary, for washing food and cleaning equipment. There must also be enough toilets and these must not lead directly into food areas.
Changing facilities: You must provide adequate facilities for staff to change their clothes, where necessary.
Other requirements: Your premises must also have adequate ventilation, lighting and drainage.
Food preparation areas: There are rules that apply to rooms where food is prepared, for a full guide visit food.gov.uk/food-hygiene-guide
Health and safety: You must work in a way that protects the health and safety of your employees and other people who might be affected by what you do. If you have five or more employees, you must have a written health and safety policy, which describes your health and safety arrangements.
For more information, see the www.gov.uk website and the Health and Safety Executive website www.hse.gov.uk
Fire safety: You must carry out a fire risk assessment at your premises and take fire safety precautions to help protect you, your staff and customers. The type of precautions you must have will depend on a number of things, such as the size of your premises. For advice, contact your local fire authority.
If you are planning to adapt your premises, it’s a good idea to get fire safety advice before you start the work.
Contact your local authority before you start
Before you open your business, get in touch with your local authority, they will be able to help you with the following:
- To understand if you need to register your food business or apply for approval
- Plan your business
- Organise waste and recycling collection
- Access training and tools
Register your business
If you are planning to start a new café or you’re taking over an existing café you must register your premises with the environmental health service at your local authority. Registration applies to most types of food business, including catering businesses run from home and mobile or temporary premises, such as stalls and vans. You should register your premises with the environmental health service at your local authority at least 28 days before opening – registration is free. If you have more than one premises, you will need to register all of them. You can register here.
Sourcing a food van
First you need to decide what you’re going to trade from. Are you thinking about a market stall, a truck or van, a cart or trailer? Do you want to buy or lease it? Next think about size, it is big enough for you to prepare all your food on-site or will you have to do that somewhere else? Have you considered the maintenance of what you chose, do you know a mechanic should you breakdown?
The equipment you keep on board will be determined by the space you have and what you’ll be cooking. As minimum you’ll need to think about:
- A safe food preparation area
- Good lighting
- Storage for food, ingredients and utensils
- Fridge / freezer
- A grill / fryer / stove or other cooking equipment
- Electrical outlets
- Extractor fan
- Grease trap
- Water heaters and tanks
- A hand washing sink and a dish-washing sink (yes you need two)
How much does it costs to start a mobile catering business? From between £5,000 – £50,000 will afford you a small second hand catering trailer or market stall through to a large fully customised van for your needs.
You’ll need a trading license if you plan to operate on public streets or roadsides. You don’t need a license, however, to operate on private land or at organised events. Your local council needs to know where and when you plan to trade. Your council can refuse the license or grant one that is for fewer days than you apply for. But, if you don’t have one or trade against the terms of your license the fine is up to £1,000.
Insurance: You need public liability insurance to cover you for any injury that you may cause to the general public and you’ll need employers liability insurance for the health and safety of the people who work with you.
Choosing the right van for you: Buying a food van is a specialist business, the following organisations have listings on their websites:
The legislation governing vehicles and trailers involves several government agencies with overlapping priorities and scope – which can lead to grey areas and inadvertently breaking the law resulting in penalty points and fines. The Nationwide Caterers Association, NCASS, has a wealth of experience to help you to keep up to date with changes to the law and keeping your insurance valid. They are expert in:
- Driver licensing
- Tachograph requirements – for example, if you drive a vehicle and trailer with a combined weight of over 3.5 tonnes you’ll need a tachograph
- Drivers’ hours regulations
- Operator licensing (full and restricted)
- Showman’s exemptions
- Vehicle weights and lengths
- Type approval
What you need to know before you buy anything: When budgets are tight, buying second hand or cheap can be appealing, but it’s risky and your equipment might not be legally acceptable. When you’re running a food van or trading at an event, your equipment is the most important thing that you own, be prepared to budget correctly and don’t think that you can get away with camping equipment, it just won’t work.
How to avoid costly mistakes: Make sure that all gas equipment is CE marked and has a flame failure device. If it doesn’t have a CE label, don’t buy, no matter what the seller tells you, you won’t be able to obtain a gas safety certificate and you can’t trade without one.
If you are taking over a premises that was previously a food establishment you may be able to utilise the existing equipment. Even if this is the case, you may need to rent or purchase additional equipment to fit your offering.
Look for savings where you can, such as picking up used furniture at a junk shop or go to an auction.
Don’t economise on the key equipment that is essential to your food service, such as industrial sandwich toasters or an espresso machine. If your customers are looking for a premium coffee they are likely to know the difference between a good and bad one.
Consider renting equipment if it’ll save you money: www.u-select.co.uk
What you’ll need for your café front of house and kitchen:
- Toaster – six slot
- Sandwich toaster
- Potato baker
- Salamander grill
- Undercounter fridge
- Single bowl sink
- Bean to cup coffee machine or coffee jugs and plungers
- Water boiler
- Glass fronted upright fridge
- Handwash station
- Turbofan oven
- Microwave oven
- Table top fryer or free standing
- Glass washer
- Preparation tables
- Cleaning equipment
Taking money and card payments
Many start up café owners are so excited about the prospect of having their own café they don’t think about how they will take money until the last minute.
There are a number of options for you to consider.
You can start out with a simple till. This will get you started but won’t help you to understand very much about your business and how its performing, from monitoring your stock levels to who has the best sales figures or understanding trends; like your busiest times, when you might need an extra pair of hands to help out.
For a better understanding of your business you can download point of sale (PoS) software onto your own laptop or tablet. Take a look here and download a free trial for 3-months then start paying monthly if you want to continue using it. This option is all in the cloud so it’s safe and secure and gives you great reporting functionality to really see inside your business. You can look at the sales in real-time from any device, which is great if you leave someone else in charge while you take a break or when you have a day off.
An electronic point of sale EPoS system usually comes with a till (hardware) and the PoS software already loaded up for you. There are compact smart EPoS solutions that will fit into small places or can be portable if you have an event outside and need to take payments where there is no power supply. Check out the EPoS options here.
Card payments are essential and contactless is becoming more and more popular. Contactless allows you to serve customers faster and will help you to make more money during a busy lunchtime service. Check here
There is a misconception that card payment machines are expensive, we can help with merchant set up– contact us to discuss your needs.
Design your menu
Of course décor and ambience is important to the customer experience, but the key element that will keep customers coming back is the food and drink selection. Take time to develop a menu with maximum appeal.
For a café in particular it is often better to keep the menu limited and seasonal, especially at first. Focus on key items that are complimentary such as pastries and cakes that pair up with teas and coffee options, or soup and sandwiches.
Make sure you are an expert on the items on your menu, whatever its size. Know where your produce comes from. If you can show your personal connection to the food you are producing you’ll stand out from larger chains and other cafés.
Develop relationships with suppliers
You need to build solid relationships with reliable suppliers who will consistently delivery to you on time.
If you need to find suppliers outside of your local area check these directories:
The magazine The Caterer has a very useful directory:
Once you’ve selected your suppliers work to establish and maintain a good relationship with them, but don’t be afraid to switch to a new supplier to get a better price or service.
Market and promote your café
If no one knows that you are going to be opening you won’t get the customers you need. Start spreading the word as soon as you’ve secured your premises. You can use press releases, finding a PR agent that will charge by the day will pay dividends here. You can use social media, word of mouth, posters, leaflets, advertise in your local press and host a launch event.
While you undertake all of this activity it is really important that you remain consistent with your branding and how you describe your café and what you’ll be offering.
Hire and train staff
Your staff will be the greatest asset to your business, treat and look after them well and you will be repaid. Having reliable staff will make your life much easier than working with people who consistently let you down.
When interviewing pay attention to personality, temperament and attitude. Have a list of questions prepared that will help you to determine how the person will behave in a given situation, such as, how would you handle a customer who becomes angry or obnoxious. Also ask for examples that are not necessarily related to the café.
It is important that you know the law regarding hiring staff. Check with www.gov.uk for the laws for the United Kingdom.
It is likely that you will have to provide some training – there are many useful resources available for training on-line that may be helpful to you and help you to save valuable time.
Open for business
Before you open for business you may want to have a ‘soft opening’ beforehand as a practice run to help you to iron out any hick ups. Invite a small group of guests, maybe just family and friends and run through the operation of your café to see what works and what doesn’t.
Make your grand opening as grand as you can with plenty of promotion, possibly some giveaways, balloons outside and ideas that will create attention and draw people in.
You will definitely rely on repeat customers to thrive. Loyalty programmes will keep customers coming back to you, ideas such as stamping a card to get one free coffee with 10 stamps filled. Don’t have restrictions that make them difficult to fill and make asking for their card part of the service at the time to pay, rather than hoping your customer will forget about the card from time to time to make them buy more.
If you have a PoS or EPoS solution there’s a good chance that it’ll have the capability to run loyalty programmes for you.
Running a café can be tough work in good times and difficult times. Starting up a café business may be the most rewarding thing you do and it can be a lonely road. First up, having a strong support network around you especially in the early stages can really help. You don’t have to be alone, the Government has created the Get Mentoring (http://www.getmentoring.org/) imitative where there are thousands of volunteer business mentors who are keen to pass on their experience. To find out more visit the Mentors Me website www.mentorsme.co.uk
Other government publications HM Revenue & Customs‘ Thinking of working for yourself?’ – a guide to order, visit http://www.hmrc.gov.uk
The Health and Safety Executive produces a number of factsheets that are relevant to catering businesses. See this link for a list: http://www.hse.gov.uk/pubns/caterdex.htm
Other publications for businesses can be found at: http://www.gov.uk/government/publications