How To Open A Cafe

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Starting a cafe business is an exciting venture – your business could become someone’s go to place for their favourite morning latte, the meeting place for friends or a much needed lunch break for a busy professional. A good cafe is always a welcome addition to the business market.

Before you begin to serve those morning coffees, starting a cafe requires a lot of research. After all, it is still a business, so as its owner you need to make sure you’re well-prepared for the business journey. We’ve broken down some of those most important legal aspects to help get you started.

Business Structure

One of the first things you need to decide is what kind of business structure your cafe will adopt. If you’re running this on your own, you may wish to operate as a sole trader. If this cafe is a venture you are undertaking with another person or multiple people, then consider a partnership structure. You may even think about registering your cafe as a company, either at the beginning or somewhere down the line.

Each of these structures have their pros and cons, and whether or not it’s right for you will depend on your specific business plan and goals. So, after assessing your financial situation and your long-term goals, it’s a good idea to do more research into these structures to see which one will suit your needs.

Lease

Next, you will need a location for your cafe. You will likely need a Retail Lease. There are a number of things to consider when looking for the right property.

Competition – are there any nearby cafes? You will need to think about your level of competition and whether you have the resources to maintain a competitive edge.
Accessibility – take into account factors such as parking, walking distance, wheelchair entrance and proximity to busy areas. This can affect your foot traffic.
Does the property in question need any upgrades? When you open a cafe, there are certain fixtures you will need in place. Ensure any space you consider for your business has the capacity to accommodate everything you will require.

Once you have found the perfect space for your cafe, you will need to negotiate a Lease Agreement. The contract will need to include your lease terms, the amount of rent and the length of the lease. It should also include other relevant terms depending on your business, such as whether you can play loud music.

It’s always advisable to consult a professional to ensure your agreement covers everything you will need.

What Kind Of Documentation Will I Need?

Opening a cafe involves a lot of paperwork! The following are some of the main types of documents you will need to gather:

Business Agreements

If you’re engaging in a partnership, it’s best to have a Partnership Agreement detailing the liabilities, roles and responsibilities of each partner. Likewise, if you have decided your business will operate as a company, then you must look into filling the right paperwork and designing a company constitution.

It’s always advisable to have an experienced legal professional draft these.

Licences

To run a valid hospitality business, you will need to meet the standards and apply for certain business licences that will allow you to operate. A food and beverage licence is also required, depending on where your business is located.

Luckily, licence applications can be done online. It isn’t always a simple process, so feel free to chat with one of our lawyers if you need assistance in ensuring you don’t miss any key steps.

Council Approvals

Depending on the local council your business falls under, many local governments require small businesses to have work health and safety certificates, fire safety, zoning, and building certificates. It will differ from each council, so check out the regulations for your local council.

If you live in Sydney, you can get started on the City of Sydney’s website.

What Are My Employer Obligations?

As a cafe owner, you will likely be hiring staff. As an employer, you have a number of obligations towards your employees. Some of these will include:

Employment Contract – your contract should detail both your employees’ responsibilities and yours towards them. You will also need to consider things like wages, hours worked, benefits.
National Employment Standards – Fair Work Australia sets out some basic standards that need to be met in the workplace, such as giving employees the right to request flexible working arrangements.
Workplace Health and Safety is a core part of the hospitality sector. Every employer must make sure they meet these standards and give their employees a safe space to work.
Training – Employees are going to represent your business. That’s why investing time and resources into making sure your staff are prepared is always wise.

There are more things for you to consider in the workplace, so as an employer, make sure you understand your obligations to your employees.

Food Regulations

The Australia and New Zealand Food Standards Code is a legally binding document that sets a uniform standard for all food that is prepared for commercial purposes in Australia. The guide covers important aspects such as adding substances into food, processing requirements if you’re handling meat as well as use and storage of food.

The other regulations you will need to observe will depend on your state and local council.

For example, in NSW, the Food Act 2003 (NSW) and the Food Regulation 2015 (NSW) apply. Check the relevant legislation for your state or consult a legal professional to walk you through everything.

What About My Suppliers?

Finding the right suppliers is integral for any business. For a food business, it is crucial. As food and drinks are at the heart of your business, having quality, reliability and a good working relationship with your suppliers is going to be a key factor in the success of your business.

Having a Supply Agreement in place can aid with running things smoothly. A Supply Agreement will often include things likes:

Description of the products and produce
Delivery details such as the method, time and place
Warranties in case something doesn’t go according to plan
Liability – holding each party accountable for their own actions.
Dispute resolution – in the event of conflict or confusion at some point in the working relationship, having a strong supply agreement in place to clarify matters is extremely beneficial.

What If I Want To Work With A Food Delivery Company?

Food delivery services are increasingly in demand. Opening your business up to have food delivered by Uber Eats or a similar service is a great way to expand the customers you serve. Utilising a third party to deliver food to your customers comes with its own set of considerations before you get started.

First, it’s important to decide which one you will use. Consider factors such as the areas they service, which app is the most popular in your location, what other kinds of restaurants they are partnered with and what those restaurants sell so your business can set itself apart from all the others.

Fees and commission must also be taken into consideration. Each service operates differently, some charge a joining fee, a commission or both. It’s important to decide which delivery service is best from a financial perspective for your business as some will be more expensive than others.

Another factor is the rules and regulations each delivery partner has for their business. It’s important to get familiar with each one, especially if you’re planning on using multiple services. Then, ensure you are aware of any differences and operate accordingly.

Finally, photos are going to play an important role. The delivery services themselves may even have a standard in regards to the photos, so be sure to check them out. You may wish to consider investing in professional photos to capture your menu.

How Much Does It Cost To Open A Cafe?

The cost associated with opening a cafe will vary depending on your business. It will depend on whether you are purchasing a franchise, starting your own cafe from scratch, purchasing a pre-existing building, renting a space, renovating or what kind of location your cafe is in. This will impact the overall number.

Generally, all factors considered, starting a cafe can cost anywhere from $200,000 to $500,000 (this is a rough estimate – remember that the price depends on a number of things!)

What Else Do I Need To Know?

Opening a cafe, like starting any small business, requires a lot of investment, time and planning. Having a business plan can help you navigate through all the different aspects. Laying out everything that has been mentioned in this article is a great first step.

You will also need to consider other things such as your brand, aesthetics, menu, marketing and any potential hurdles as well as solutions to them.

Next Steps

There’s a lot that goes into opening a cafe business. If you would like a consultation on your options going forward, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.

Sapna Goundan

Sapna has completed a Bachelor of Arts/Laws. Since graduating, she's worked primarily in the field of legal research and writing, and she now writes for Sprintlaw.

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