Is it too late to buy a coffee franchise?

Is it too late to buy a coffee franchise 1

Some people will look at their market and say the coffee business or café business is saturated already, and that there is no opportunity for new brands to enter successfully.  International brands (and franchise brokers) will tell you differently and that there is always gaps in any industry in any market.  So, what is the real story?

To some extent, both are.  The café business is mature in most countries, including here in Asia.  Just opening the same style café with the same design and menu as those around you for sure is a recipe for failure.  On the other hand, bringing in a great International concept that offers something unique can be very successful.  Particularly after a rough 2020 when unfortunately some local cafes didn’t manage to survive, there are now great locations open for development and significant gaps in consumer demand that need to be filled.

Let’s dig a little deeper into the subject by answering some key questions.  Why should you consider investing in a coffee franchiseHow much money do I need to open a café?  How profitable can it be?  And what is the best café franchise to invest in?

Why should I consider investing in a coffee franchise

Why should I consider investing in a coffee franchise?

There are quite a few reasons to be interested in this industry.  Let’s review a few.

  • High focus on take-away and delivery. Not many foods are as good when they get delivered or picked up and transported from one place to another.  This is part of the reason that restaurants were hit so hard during the recent/current Covid-19 pandemic.  Cafes and bakeries however, travel well, and except for the ambiance are virtually the same enjoyed at home, your office, or walking down the street, as they are in the café itself.
  • Smaller kitchens and storage. With smaller less complicated menus, kitchens can be much smaller, less expensive to build, and have a much lower manpower requirement.  Normally chefs and other highly specialized talent is not required.  This also means for the same size space, a café or bakery will have more available customer space (more seats).
  • Footprint (size of the location) are more flexible. A restaurant typically has very specific requirements when it comes to space.  A concept that is designed for 200sqm will normally find it difficult to fit into 100sqm or even 150.  Likewise, there is often no advantage for that same concept to be put into a 300sqm space, which would just increase the occupancy costs with little to no return on investment.  Yet, I have seen (and built), cafes as kiosks, or in very small spaces of just 50sqm and also very large cafes of 300+ sqm.  Obviously the smaller locations may have limited or even no seating but it is possible and common.  This, along with the reduced menu typically will mean that most cafes will require less CAPEX (investment) per location than your average restaurant.
  • Simpler, less complex operation. As a restaurant entrepreneur, I often say you are either a F&B person or you are not.  That goes for investors, franchisees, and even staff.  The mindset of working in the restaurant industry is quite different than many other types of business.  Cafes and bakeries are still different than running retail or education franchises for example, but do not require the same level of understanding and experience that a full restaurant needs.  They require less R&D (research and development) for example as most consumers order their same favorite drink or bakery bite each visit.  Restaurants need to be continually re-inventing themselves or at least their menus to keep guests coming back and stay ahead of their competition.

 

How much money do I need to open a café

This is highly dependent on the specific brand and their design standards, as well as the location itself.  Regarding locations it makes a large difference if it had previously been used for F&B previously as kitchen, bathroom, and electrical service can sometimes be saved.  Certain brands like Starbucks have quite expensive fitouts and can increase your CAPEX (initial location investment) a lot.  One of our brands, WAYNES, has very attractive stores, in a light European style, that often cost $150,000 – $200,000 usd.

How profitable is a coffee shop?  What is the best coffee franchise?

This is another question that is difficult to answer for any franchise.  Deciding to buy a franchise is a great way to start, as their experience and systems help you maximize revenue, while minimizing expenses.  Picking the “right” concept for your particular country is also an important step in having a profitable business.  Looking for something that is unique, not just a weaker copy of the major competitors in your market helps.  Local market knowledge and finding good locations is extremely important for a profitable outlet.  Finally how much you focus and manage the business to maintain high quality, great customer service, and clean/comfortable environments is key.

In general, the right brand, in the right location, and run well can average an EBITDA of 25-35%.  A ROI (return on investment) can be in 2-3 years.

There is no right answer to what is the best coffee franchise.  We are very selective on café brands to represent as we want successful partnerships that will be win-win for the long term.  It’s important that you have something unique to offer in the marketplace.  I also think it is important to not try to compete with Starbucks.  You will never match the power of their brand.  A previous client of ours was Delifrance.  They were unique due to the focus on proper French bakery and desserts.  We currently represent WAYNES.  They are very different in menu, design, and style to the traditional American style cafes like Starbucks.  Both represent great franchise opportunities in Asia.

How profitable is a coffee shop?  What is the best coffee franchise?

Conclusion:

All across Asia, cafes remain as popular as ever.  Opportunities still exist all across our region in the coffee industry and it remains an attractive investment in the F&B industry.  For brands looking to enter your country, check here:

Franchise Opportunities – vffranchiseconsulting

Robert has over 25 year of F&B, including director level position in several well-known coffee franchises, and has lived in ASEAN for more than 13 years.  He is currently the Director of Franchise Development & Operations at VF Franchise Consulting.  You may contact him at [email protected]

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