Cafe Investment Gone Wrong - Looking for Ideas!

ModBot on 09/03/2023 - 06:09
Last edited 12/03/2023 - 07:04

Hello Fellow Ozbargainers!

I'm long time follower of this forum and absolutely love so many insights from different people and thought it might be good to post this here.

Background
Come from an IT background and have a stable income. I've always wanted to be my own boss and have done quite a few small gigs myself and have always done well. Aimed at having a side-hustle which can generate some money by investment which has good ROI.

Situation
I recently invested in a cafe business (had 0 experience though have worked at a restaurant) with three partners(including myself). We did our due diligence of checking POS records and all other accounts. Spoke to a business consultant before taking over - the sales were good, and considering we continued with the same sales and an increased wages for staff, we would make our returns back in 8-10 months.

However, since we took over, the sales have reduced by about 30 - 40%. We retained 90% of the staff. Our Google reviews were ~4.5 stars when we took over and we have actually managed to increase our average to 4.8 stars. No matter how much effort we put in, we are not even breaking even. All of us have full time jobs and we all ensure that there is no impact to our full time jobs by taking turns of doing things.

I know interest rates are hiking but from what I can understand from other cafes is that their businesses are not seeing much of a drop. I'd not want to name the cafe over here but it's located in a posh suburb with about 3 cafes within 50m.

I'm here to ask my fellow Ozbargainers what would you have done if you were in the same situation?

So far we have -

  • Started the dinner service with an exciting menu but not many people know about it
  • Spoken to multiple social media marketing agencies - they are expensive!
  • Handed out flyers with discount coupons (we are right opposite to a school)
  • Started Happy hours in the evening
  • Tried Instagram advertising - didn't work that great.

Things we are considering:

  • Letterbox droppings (not sure if this will work - I usually throw away any junk from my mail but most of our customers have suggested doing this)
  • Updated website
  • Social media marketing
  • More signage
  • Google / Meta advertising

All of the above needs more $$$ to be pumped in to which everyone of us are a bit hesitant at this stage due to the uncertainty.

I understand that this is a very generic question and like I said, I would not want to name my cafe here as it won't be the right thing to do but I was hoping to gather some interesting feedback on this forum which has helped me in the past.

There has been a steep learning curve for all of us and we really want to make this a successful business but with the uncertainty, we feel that we are trying to win a lost battle!

Happy to answer any questions that you have as long as I don't breach OzB T&Cs.

Please note: All of us are immigrants and have worked on low wages when we came into this beautiful country. When we took over this business we were very clear that we are NOT going to underpay anyone and have a fair working arrangement with every staff. Please do not suggest to cut on wages / staff!

UPDATE

Thanks everyone for the feedback - looking for some specific feedback on offers that would pull you in to a cafe. I've gone through all the comments and there are very good suggestions out there. Here is the link to my comment with all feedback

Financial

Comments

  • morse on 10/03/2023 - 04:37

    Social media for sure - try Facebook, still very popular with old people (40+) with money. Before trying a new place I always check out their social media for at minimum their menu, photos of their foods and any deals they have. Any social media worthy menu items eg pretty açai bowls, stuff with melty cheese, a brûlée topped pastry item.

    Consider a really good deal to grab people’s attention, eg coffee and a wrap takeaway $10-12. A place near me did this and now it’s super popular and busy.

    Affordable add ons eg $2 hash brown, 1-2 cheaper cookie options

    Lunch deal menu specifically for the teachers at the school. Make it so they can call in advance and pick up.

    Make sure your staff are friendly and get to know the customers, remember their names, ask how they are today etc. If people feel rapport with staff they will keep coming back.

    Be young kid friendly. Adequate high chairs that are kept clean. Babycinos that are cheap. Adequate pram circulation. Depending on how much space you have and your target market a small kids space like a cubby with toys that’s well contained (any cafe that has this in my area does well)

    Be allergy and special diet friendly. Make sure there are options the major ones and accommodate reasonable substitutions.

    Lastly ensure your coffee is actually good. Seek honest feedback. Get your coffee snob friends to taste and review. Make sure all your baristas are up to scratch.

    • lostgoat on 10/03/2023 - 07:40

      try Facebook, still very popular with old people (40+) with money

      I can't find em . They are just above Scumtree Lowballers in my view .

      • morse on 10/03/2023 - 07:44

        Lol - I was referring to myself. I eat out at cafes. And if ever I check out a cafe on socials it will be on Facebook. I do like just a plain old website too though. I will say that I spent proportionally more dining out at a young person. But equally I have more money now and still eat out at least 3 times per week and get a takeaway coffee most days, so I guess I’m OPs target market.

        • ModBot on 12/03/2023 - 06:49

          Thanks, I've taken this into account! You're right, your age group is my target audience!

  • b2tf on 10/03/2023 - 05:44
    +1

    Check the mortgage % of your suburb. If its more than the average, then interest rates rises are working to reduce demand.

    If the only price you have increased is coffee, then you are not catering for inflation of your other inputs, and losing $s.

    Good marketing and a busy / friendly ambience are your friend. Ofcourse the food needs to be great.

  • archieduh on 10/03/2023 - 08:27
    +1

    Let us know the cafe name, at least half of us will visit and let you know our honest opinion.
    You mention your Google rating went frorm 4.5 to 4.8. i can't think of any reason related to the food, staff or interior then. So intrigued that I want to visit. DM me :)

  • Jhonka on 10/03/2023 - 08:28
    +1

    Just do what everyone else does and launder money for bikies.

  • SmiTTy on 10/03/2023 - 09:32

    Let's do the next Ozbargain meet up here and help these guys out!!

  • Ricktheroller on 10/03/2023 - 09:37
    +1

    Do you leave your lights on at night? https://www.ozbargain.com.au/node/760992

    • ModBot on 12/03/2023 - 06:50

      No, we shut all lights. Only our refrigerators are on.

      • Ricktheroller on 13/03/2023 - 16:59

        Missed local traffic advertising opportunity then!

  • centrelink on 10/03/2023 - 09:39

    Owner probably built a relationship with some of the customers m, they were not interested in your coffee after they left, so my guess is the social interaction aspect is missing on your part. Hire someone whise main goal is to be friendly to everything

  • devank on 10/03/2023 - 09:46
    +3

    These are the few things that make me buy or go back again.
    1. Combo deals (Coffee and something else to eat). Upsale for you.
    2. Daily special on different items. This makes people try different items.
    3. Owner in the background or filling gaps. This somehow gives me the confidence that they care.
    4. Pretty and friendly staff
    5. Loyalty program. This ties your customer.
    6. Online order. The ability to order on my way is great; again, it locks your customer.

    Any chance, you can get feedback from your previous owner?

  • design2last on 10/03/2023 - 09:59

    I see this every single week. Same old story. Same inevitable outcome if you continue down the path you are going. If you want some advice, shoot me a message.

  • Nebargains on 10/03/2023 - 10:21
    +3

    I think a lot of people are over thinking this, a 20c increase in coffee is not going to make much difference, most cafes have increased prices multiple times in the last 12 months. Sure some people will stop buying but the alternative is you make less per cup and then may struggle to increase prices in the future.

    Also wouldn't worry about social media marketing (a lot of people are saying the opposite), typically the only time I check the social media of a cafe is if I want to check their open hours on like a public holiday or something. Also think coupons and letterbox drops may cheapen the cafe and make it less desirable. If I am looking for a good coffee and somewhere to sit down for breakfast ill just google cafes in the area I am looking, maybe look at google reviews at photos, thats it, suspect most people are the same, can't even recall looking at Facebook or whatever and having a cafe advertised to me.

    Was the fact that there was new management advertised at all? That is usually a massive turn off to regulars, not only does the signage make it look cheap and nasty but for customers who were loyal to the old owner and staff (even though staff haven't changed) they may not go back because the menu may be different and may get bad meals. I am 100% guilty of avoiding places for a while to see new reviews after new people took over.

    Also find the dining service to be a bit weird unless it is in an area where people are looking to go out for dinner. Most cafes that I am familiar with open 6:30-7:30am (depends on location) and are closing mid after noon.

  • fprjet on 10/03/2023 - 10:50

    Make sure previous owner hasn't opened a cafe down the road (this happens even though when you sell the business there are provisions for you not to do this, he customers must be going somewhere….how well did you knw your customers/regulars see if you can find out where they went and why? Do you have a buy 5 coffees(takeaway) get one free.post on your facebook community eg Bentleigh community hub or similar and tell people your new owners come in and say hi get a free coffee for breakfast or a glass of wine with dinner……Smooch till they know you better……Also who is managing the business and head waiter are they people persons to they go out of their way to give a pleasant service….Lastly what a waiting periods like , to get seated , to get food etc….

  • Baysew on 10/03/2023 - 11:08
    +2

    As a small business owner, when things go bad, I always blame the economy, politicians, the weather, cut throat competition, Google, lack of parking, landlord, staff, suppliers.

    When things go well, obviously I am a business genius.

    • Cluster on 10/03/2023 - 11:50
      +1

      That goes for big business too.

      Things going well? I am a genius. Pay me another few million in bonuses.

      Things going poorly? It's the economy, my lazy and entitled workers, the suppliers. They're all at fault.

  • lglglg on 10/03/2023 - 11:11

    Personally, I can get quite attached to the staff and owners running a cafe. The other shop further down might have better coffee but I tend to stick to the same one as there is a relationship going. I used to patronise a particular cafe with the owner running it and the small chat helps (and a free biscoff biscuit). When they sold the cafe, the chatter is gone, the new owner left it to a cafe manager and the rapport is lost. I now follow my mates to the other cafe instead and I can see that business at the previous one has definately gone down.

    Buying into a business takes a lot of dedication and being on the ground is important unless you have a very good cafe manager or partner that is dedicated to that business regardless of how well the business performs in the past. If possible, consider managing the cafe yourself but consult your staff members as I assume they have more experience. Spend most of your time understanding your customers and monitor the differences between your cafe and your competitors. Find the differentiating factor or niche that attracts people to your cafe and then focus on how you can retain them.

  • johnode on 10/03/2023 - 11:36

    Just brainstorming: Have you got a loyalty card system in place? Can you double the offer temporarily? Instead of a free coffee after 8 or whatever it is, make it 4? Staff could just double stamp it. Hopefully word will spread, then taper it off.

  • Cluster on 10/03/2023 - 11:49
    +1

    8 to 10 month return on a business sounds highly suspicious right from the start. Unless someone was retiring, why would they sell a money maker like that? Or price the business so low? Something was wrong with the business and unfortunately you're only discovering that now.

    • GourmetFoodie on 11/03/2023 - 12:48
      +1

      I agree. I mentioned that earlier in the thread too but amazed how many people seem to have gazed past that part of the story. If it seems too good to be true it usually is…

  • adpaholic on 10/03/2023 - 11:52

    Target on take away . Those apps usually charge like 30% but still can help to increase some income .

    Cafe business keep going down as more people work from home now

  • random101 on 10/03/2023 - 13:15
    +2

    It’s a common practise for people to ‘cook the books’ leading into a sale.

    The only real way to review the ‘books’ is to spend everyday there for a few weeks.

    They could have strong seasonal trade, construction, businesses opened or closed near by, ect ect.

    Then there are people who professionally flip cafes, go in with a strong brand establish it - while it’s hot they’ll flip it.

    Sidenote - I could never open a cafe/restaurant I couldn’t imagine the stress.

    • Typical16-bitEnjoyer on 13/03/2023 - 07:15

      only real way to review the ‘books’ is to spend everyday there for a few weeks.

      But that involves actual real effort and work, which peeps buying cafes as side hustles don't know anything about.

  • Hangryuman on 10/03/2023 - 13:19
    +3

    I've seen cafes come and go with ups and downs, so I'll toss in a few thoughts

    3 partners all working full-time elsewhere ? Who's watching the business ? While the cats are away the mice will play !

    My first job in a Mexican restaurant kitchen, the boss didn't allow us to eat any of the food. So my friend the cook would wait until the boss went out, and prepare me 6 beef tacos - my main meal for the day as a student - I loved those things. So sure - when boss is there, all can look above board - until boss walks out …

    as others said, what did you change ? I'd spend time in the cafe, asking each customer what could be improved, and listen carefully to what they suggest. One cafe near me has an Indonesian rich guy (his father complains is 'not making any money') who proudly promotes Indonesian-grown coffee. Trouble is - I don't like the taste, and suspect others similarly.

    Happy staff do not equal productive staff - too much happiness suggests low productivity.

    I would avoid letterbox brochures - when I saw those (rare these days) I would know 'ah - this place doesn't have enough customers so needs to advertise - I don't need to go there then !'

    The most powerful form of advertising is word of mouth - chat to the customers, ask them what they like and what would bring more people, and listen.

    If you want to attract queues, have Instagram specials 2 for the price of 1 - that can trigger some FOMO in gen-Z passersby or whatever. Some time ago places used to give discounts if you showed them you had 'liked' them on Facebook, etc.

    Something like 90% of unsatisfied customers will not say anything to the staff, leave and never come back, then tell 2 of their friends to avoid it. So businesses can lose customers, not know why, and be out of business in 6 months.

    So the 10% who care enough to complain and tell you about problems, you should say 'thank you for letting me know!' If you then fix the problem, they tend to become evangelists telling 10 of their friends about the wonderful place, and then people will DRIVE ACROSS TOWN to come to the place their friend recommended.

  • maximus117 on 10/03/2023 - 13:20
    +5

    Hi OP, I am in the restaurant game for a while. Also an immigrant and had restaurant overseas as well. The only way you can make money in hospitality business is one of the owners needs to be a chef and thats the only way you can control quality. Looking at your comments quality may or may no be the issue. However you have not mentioned if all 3 owner are working at the cafe or have you go full time staff to do that? Owners working at teh venue siginificantly reduce cost during tough times.
    Also dont forget recent inflation and increase in interest rates has caused less disposable income for most. This is the reason the whole industry has seen drops of 20-35%.

  • pformag on 10/03/2023 - 13:56
    +1

    When did you buy this cafe? Im in wholesale food packing, since Feb 2022, we have had substantial increases over the whole year, min of 30% rise across most products in food service, we are only starting to see costs come back now. Most food service products are imported, and shipping rates have only dropped to normal levels over the last 3-4 months.

  • Jules_d1 on 10/03/2023 - 14:03
    +1

    Have you actually approached the school? I have friends that are teachers and they always do a coffee run to a cafe close by as it's 100x better than what they have in the staff room.

    Give em a couple freebies and get them hooked. Heck, if they want to order multiple coffees at once, offer to deliver them. Might be handy for staff meetings!

    Are there sporting events at the school? Give a few freebies to the parents and onlookers.

  • catbug on 10/03/2023 - 15:28

    Not sure if anyone has mentioned this but talk to the customers! No better way to know what they’re thinking, what they want, what they don’t like than to speak to them directly. No need to do a survey on them but just have a chat, and record the answers afterwards or ask them to answer a type form type survey if you think that’s a good idea.

  • [Deactivated] on 10/03/2023 - 16:00
    +1

    I'm not going to read 3 pages of comments, but it's pretty clear the economy is struggling.

    I mean, the Government is trying to get people to spend spending.

    Mortgages are going up, probably people's car loans and I suspect the first hit will be hospitality.

    People will cut out coffees, dining out etc.

    People must love in a bubble if they don't think it affects the majority of people.

    My loan went from like 2%< to like 4.1%- it's a huge difference.
    Yeah, I can service the loan but yes I have to stop spending elsewhere.

    I think it'll get worse.

  • parismeow on 10/03/2023 - 16:12
    +1

    What about getting on event catering sites to offer events/office catering

    • argamond on 11/03/2023 - 21:00

      I think this is where you should be going. Catering for business is a good way to add additional revenue with the same staff. Need a bit of organisation and prep

      What are your local businesses (office) and how have WFH and COVID changed things?

      Coffee should be your best sales, and maybe give discounts/loyalty to your frequent drinkers (like 10th coffee free). You should be able to make it back - as these are the ones that may drink 2-3 coffees a day, 5 days a week. Near my place, I see a lot of parents getting coffee after walking their kids to school

  • [Deactivated] on 10/03/2023 - 17:08
    +5

    Check the Cash to EFT ratio. Check the stock to sales ratio.
    Whilst you are at check your number of transactions and average sale value.
    Your coffee ratio to sales and milk & beans/cup should be a good indicator.
    Are your profits walking out the front door and disappearing out the back?

    • wtfnodeal on 12/03/2023 - 14:08

      Exactly. OP needs to find out whether there is also a drop in gross profit per coffee or per meal etc to know what and where has gone wrong. It could be that there is an increase in number of cups of coffee sold but a decrease in revenue due to several reasons especially if the owner leaves it all to the staff to deal with the POS and cash takings. I had seen a pub that had negative gross profit per glass of wine/beer sold as the owner relied solely on the staff in charge of the stock handling, POS and cash takings.

  • [Deactivated] on 10/03/2023 - 17:55

    If my finances got tight, the first thing I would change is saving $5-15 per day on coffee and cakes etc

    Most of the posh suburbs have lost a lot of equity recently and are paying way more with recent rate rises. The wealth effect influences spending.

    You could try implement and easy way to get feedback from your customers (QR code survey or talk to them?)

  • lainey13 on 10/03/2023 - 18:01
    +1

    Do you have a coffee loyalty card?
    Perhaps instead of targeting an evening restaurant crowd, you could target after school snacks and treats with more kid friendly options. Morning coffee and breakfast offerings and deals, then switch to afternoon snacks for kids and parents (board games, reading material etc). Having a cafe that morphs into a restaurant at night is a difficult sell, I can't think of many small shops that do this.

  • serpserpserp on 10/03/2023 - 19:45
    +1

    There is a reason the previous owner sold so cheap. ROI for a business is never <1 year. Yes, if you want to increase sales, you have to put in time and effort or invest money. Otherwise if you want to increase margin the owners all have to work in the business

  • KaTst3R on 10/03/2023 - 19:51

    Try camping outside of your competitors and see if they are seeing similar trends like half empty cafe etc. It could just everyone is cutting discretionary spending. I know I did.

    If they are booming with business and you are not, then it is pretty obvious.

  • Xenawarriorprincess on 10/03/2023 - 21:59

    What state are you in? Could the books have been high because of the government hospitality vouchers/scheme I’ve forgotten the name of? It was in Victoria and you got a % back from what you spent.

  • TimApple on 10/03/2023 - 22:24

    It might be the effect of interest rate hikes.

    Business are always cyclical, don’t expect a consistent revenue when you’re running a business.

  • Nillionaire on 10/03/2023 - 22:40

    which city are you in? I can take my friends to check it out and offer some critique or ideas - we like trying out new places and can point out all the stuff that makes a place attractive or unattractive to Gen Z

  • Nillionaire on 10/03/2023 - 22:46

    do you have signs outside advertising specific drinks targeting primarily the school kids? something like:

    • [DRINK NAME]: GET YOUR MORNING ENERGY BOOST
    • FEELING HOT? COOL DOWN WITH OUR [DRINK NAME]

    maybe let the school office know you guys are open to catering their events. or maybe partner with them to hold a design contest at the school with some rewards for the winners, that could get you a lot of exposure though idk if the school would wanna charge you for a partnership like that

  • Nillionaire on 10/03/2023 - 23:01

    possibly a factor in declining sales after your takeover if a lot of people went through what I did:

    1. due to COVID im in lockdown and don't have an income so I don't / can't spend
    2. lockdowns are lifted and I feel finally free and treat myself to a (profanity) of shit including coffee every morning
    3. me personally (and the economy) not doing well financially, deciding on new years to be more sensible with my spending and cut out coffee at cafe's every morning
  • trantonz on 10/03/2023 - 23:24

    There are a lot of things that can go wrong, but one thing for sure is DO NOT lower your prices since that would create a new price anchor in customers' mind and they will more likely to spend only when there is promotions.
    Also I might be wrong but people in posh suburbs are most likely business owners who might own lots of assets but not necessarily cash in hand. Hence a few bucks here and there might not always be possible.
    I would consider social medias to reach potential customers for sure however no marketing is as good as worth of mouth. Have a few real baristas to try your coffee. Real barista, not coffee maker, there're differences. Good coffee is a must for a cafe but sadly nowadays people focus more on "latte arts" but not coffee quality. A good barista can turn a cafe around. Listen to customers' feedback especially that old lady who comes in every other days.

  • Mrgreenz on 10/03/2023 - 23:32
    +2

    "we would make our returns back in 8-10 months."

    Hey, I have a great deal for you, one that make the cafe losses look like small fry. I have inheretance in bank account, i just need small investment to unlock family inheritence, would you like to be special partenership?

  • MementoMori on 11/03/2023 - 00:09

    Could you pay the previous owners to come in as 'consultants' and check over everything that you're doing?

    Maybe they were upselling more, or some other thing.

    I'm sure for $100ph it would work great for both of you.

  • T1OOO on 11/03/2023 - 01:30

    Sorry mate. Somethings changed that you haven’t noticed hence you arnt able to communicate it here either.
    Take a think and ask the staff if you can’t work it out.

    Cheers

  • Punda on 11/03/2023 - 01:40

    Did you change the name?
    Did you change the staff/ management?
    Did you tell people of change of ownership?
    Uber eats is not worth it, you lose 38% but you need to be in it.
    Don’t forget the interest rate rises and other cost of living increases.
    Your cost of sales/ goods and all utilities will have increased.
    You need to post on FB/insta to build up some hype. Get everyone sharing. And share to local community pages.
    Try to create some community goodwill with a free BYO CUP T/A coffee morning once a month.
    Do you owners have your fingers on the pulse re trusting your staff are ringing up sales and reconciling your tills daily?

  • Punda on 11/03/2023 - 01:50

    Use an online booking system to create a data base then send out offers.
    Respond to google reviews, people love that.
    Get your google rating up.
    Invest in an expert to get you to the top of the search results.

  • IgorPrev on 11/03/2023 - 06:13

    Is the cafe using UberEats / DoorDash / Deliveroo ?

    It's worth getting on those apps just for the publicity.

    Is the 30% drop a figure from when you guys took over or a figure that you notice declining after you took over ?

    Look into cross selling - link up with nearby businesses. Do a contra of some kind with cross advertising.

    Do a RedBalloon / Groupon offer that gives people an experience by linking up with another business in the area.

    For example:

    3 course dinner for two and a movie ticket for the nearby cinema. Negotiate a wine for $5. Negotiate tickets for $8. Get the chef to be crafty with a one time low COGs bulk stock purchase and curious menu. Prepare for influx of groupon purchases.

    Could be a nearby cinema, hotel, comedy club, bar - anything else nearby enough.

    This worked very well for a Thai place in a restaurant precinct of a shopping centre with a Cinema.

    Get creative with sponsoring nearby schools / health organisations / office buildings that put your name stamped everywhere.

    Do a coffee happy hour for 1 hour per day between certain times and collect emails for a shoutouy whenever you randomly decide to do it again. $2 coffee Tuesdays. $2 coffee special on for the next hour.

    You're an IT guy - make a Loyalty App and start tracking customers and gathering data. Find a way to gauge foot traffic in the area digitally.

    Run surveys about what brings people in - what do people dislike - what would really bring someone in if they weren't even thinking of coming in etc

    Food and beverage sample day - at fairs / events / on the corner / near schools / offices. Give out free samples inviting people to try that new delicious item on the menu.

    Get creative about customer engagement. Invent a game that customers can play to get their discount. Make it tasteful to your brand. Something as simple as a chocolate wheel on a day like Valentine's day. If it's too tacky for the area you're in - do a business card drop box raffle - give away a dining experience for 3 business card winners.

  • TubeLight on 11/03/2023 - 09:24

    My two cents from a customers perspective.

    Cafe business seems to be highly inelastic (if that's a word) to change. Sometimes the slightest of changes can put off longtime customers. Cafes especially seem to be victims of their own success at times. When the foot fall grows, the coffee and the service seems to suffer. Things are rushed to serve the growing number of customers. While you gain new ones, the old ones tend to dislike it.

    If the coffee and service has remained the same, you need to give it time to establish a rapport with the customers. And make sure the face of the cafe i.e the manager or the main person is extremely customer friendly and has a smiling and welcoming face. I've seen many a places where the owners try and be the face of the cafe and they're miserable. Customer service is an undervalued skill. We all think we can do it, but the truth is that it takes a people's person to do it right. I don't have a smiling face and would therefore not be the face of such a business if I owned one.

    And remember, the approach towards the customer should be that they are always right. So if someone comes up with a complaint, make them feel heard. Don't be dismissive of their concerns. Seen too many people do that. My local cafe got a new barista and I didn't like the coffee she made. I spoke to the owner more like a concerned customer to say that it might impact his business. His response was to completely write me off. A better way to approach this would be to say that she is new and that we will work to get her up to speed. That's all it takes.

    All the very best, I really hope it works out for you mate. I've been thinking to start something in addition to my full time job as well. This has been a great post.

  • mooney on 11/03/2023 - 09:48
    +1

    Hi. What kpis are you looking at for your cafe? Do you measure traffic? You say you increased prices, I’m guessing customers didn’t know until they entered the cafe. If you had stable customer traffic but sales declined then it could indicate price impacting conversion.

    If traffic has declined then you’re right to look to invest in ways to improve visitation. To help here maybe you can identify times when the cafe is regularly super empty. That’s when to stick a deal in the window ‘free cake with every coffee’ type promo.

    How much $ do you get per transaction? If volume is down can get get more $ per customer? Offer multi deals… if only one in 10 buys coffee and cake, would you make more if 3 in 10 bought both but with a deal to incentivise the multi buy.

    I would not spend any money on marketing until you’re super clear what your issue is. Is it traffic, is it conversion, is it value? Once you know that your approach should be more effective.

    Good luck.

  • croc330 on 11/03/2023 - 10:05

    One thing, very surprised that nobody mentioned it; could you add Boba Tea to your business?
    A local Asian restaurant I frequent occasionally sells it, and it seems that it brings in more money than the food! And their food is superb.
    A constant stream of young customers are in and out constantly. More for Boba than anything else.

    Just a suggestion. Do any of your competitors locally have it?

    Hope the idea helps.

  • lostgoat on 11/03/2023 - 10:24

    One thing I don't understand is I can find regular. 50% + stacked off the 3 delivery services but don't ever get offered 10% off direct contact with a business ( I don't bother even as I know I can't get a better deal )
    No wonder everyone orders via them .

  • Protractor on 11/03/2023 - 11:24

    Possible issues.
    Timing and the growing social distillation of the tribal default position of humans.

    Covid, overpopulation and rapid global changes, combined with rancid social media have turned the species feral and reactive.Depending on the nationalities of the partnership and the location of the business you could be dealing with the 'race' thing .

    Maybe open a sovereign citizen cafe? What could possibly go wrong? Hell, franchise the concept. Cookers for cookers.
    I wish you luck and hope it comes good.

  • PeeTeeJay on 11/03/2023 - 14:37
    +1

    Hello,

    I work in the hospitality industry, and have worked in it a long long time.

    Firstly, as others have said, the economy is in a down turn at the moment. Times were good, but they cannot be good forever, and so now we are in a bit of a harder environment, thanks to many factors already mentioned in this thread. No point repeating what has already been said.

    My advice to you is this - do not try to make changes to chase more money! In this time, your regular customers are key. They might not come as often as before, but they are your regulars, your regular income. What you have to do is buckle down and survive. You need to get through this, so that while other competitors are closing and getting knocked out, you're still around. And when things get better, and they will, you are still around and will reap the benefits because you're the only one still around.

    Do not try to make drastic changes, like overly changing your menu to bring in new customers (thereby losing your regulars who want their usual goods), or changing the recipe or the quality of the ingredients to cheapen the cost (thereby losing your regulars who want their usual goods)! You get the idea. And do not spend money trying to change the look too much! Cleaner, maybe. But full changes like renovations are a huge risk. You would be spending money you don't have, in an environment where its impossible to make it back, and you would then be in a horrible bigger negative funds position.

    One of the biggest costs to a business is the pay you got to pay your staff! So you have to look at how many staff you have, and if you really need all the staff on hand. If it is quiet, that means you have staff not doing anything. So now is the time to cut the shifts of the staff who aren't pulling their weight. During the quiet times, it is the easiest to know who your good works are - workers who try to find something to do because there is nothing to do. Ones who stand around and do nothing, ones who play on the phones while they wait around. Staff like that. It'll mean you got to put in more hours when it gets busy. It'll mean you might not make as much income when it is quiet. But that is what it is to own a business. Some staff might argue against doing that is not 'in their job description'. These are the staff you might want to get rid of. A Manager who refuses to sweep the floor or clear a table because it is beneath them, and whom just stands around playing games on their phone because there is 'nothing to do'? Get rid of them, find someone better. Sometimes your job will require 'other duties as required'. I've known of chefs who refuse to wash dishes, and just sit there playing games on their phones when it is quiet.

    You've already mentioned you've got great staff, which is awesome. Look into your suppliers - look around, compare prices, and then go back to your supplier and let them know you've found a cheaper price but you want to stay with them due to the relationship you have, and ask them if they can match or beat it. Because like you, to the suppliers, their regulars are key too!

    Stop the dinner service - it is going to cost you too much in wastage and staff. If you're a cafe that closes at 3pm and is finding people coming at 2:30 wanting to eat, then maybe change to 4pm and work from there. But you gotta decide if the extra hour is worth it. But people don't generally think of cafes when it comes to dinner. They think of established dinner places for dinner. It will take a long time and money and effort to convince people to come to your cafe for dinner. All of which is not something you should be wasting now, especially when money is key.

    I could go on and on, but I'll leave it at that. As mentioned earlier, I've worked in the hospitality game a long long time. I have seen many many many restaurants come and go. A lot.

    • Typical16-bitEnjoyer on 13/03/2023 - 07:21
      +1

      I work in the hospitality industry, and have worked in it a long long time

      Totally believe you, considering your key point is to just simply shitcan and blame staff. Typical.

  • syncoroll on 11/03/2023 - 16:05

    Just to add my 2 cents in, you should focus on word of mouth through social media. I suggest you look into an instagrammer by the name of adrianwidjy. Case study: theres a icecream parlour in burwood by the name of Kirin icecream. I quite like the place and it was not that popular despite the quality icecreams they made. This instagram food influencer made a few posts to his audience, causing copycat foodies to also post their take on the place. You should check his post on it and the place's google page. It has blown up.

    Im sure he was invited to create a insta/tiktok review of this place and now i cant go to my favourite icecream place cause theres always a line out to the street for the icecream.

  • Tiredman on 11/03/2023 - 16:47

    Bit odd to be able to get returns back in 8-10 months? Not sure if you spend a week just observing the business. See the actual flow of customers before committing.

  • ModBot on 12/03/2023 - 07:00
    +2

    Thanks to everyone who has taken the time out to respond to this thread. I appreciate all the feedback and am definitely considering a few of them to be implemented. Here are answers to a few of them.

    Having a personal connection with the locals and the customers - this is the biggest feedback that I have received and we will definitely work hard to achieve this. All I want to say is we all work full time in the morning but again, remember, we are at the cafe ALL the time. We knew that support from the local community is going to be the key here. We work from the cafe.

    Working in the cafe -
    Yes, like I mentioned - we work in the cafe, we are on our feet when possible. Talk to as many customers as possible. We do the suppliers ordering, ensuring that we have enough veggies, etc.

    Shutting the Dinner service -

    Now this one is very confusing! Over the last couple of months that we have kept open, we have slowly noticed that our dinner service is improving in terms of customers coming in for dinner. What we are missing is marketing - we have tried FB / Insta advertising but it doesn't work that well. I got 0 bookings for a week via Insta after running ads for 2 weeks. How do I know this - I asked every customer personally how they knew we were open for dinner.

    Dinner service is what is keeping us afloat. I understand that it adds the cost - but our dinner is very low cost in comparison to the morning service as we have minimal staff and the owners handle the front - including the bar.

    Our customers have the same feedback - DO NOT shut dinner. They have nowhere to go locally where they can drink and enjoy some food within walking distance.

    Quality of coffee -

    We know this is extremely important for a cafe. And that's exactly why my barista has about 15 years of experience - he's the highest paid in the cafe. We do all kinds of coffees - if you want to have something very special there is no other cafe in the area who does coffee like us. Our Google reviews reflect the same feedback!

    Staffing -

    Lots of people have mentioned this and I have understood from all comments it's important to look after myself and the business! If I don't cut hours, I risk losing them and the business. Thanks for this feedback, I'm going to religiously work on the shifts and have a chat with the staff.

    Cooked books by previous owners -

    This is an interesting one. Before we took over, we went through as much details as possible. Spoke to POS company, tax records, etc etc. Though the sales that were promised were that of including cash, we disregarded them as many times cash isn't recorded on the POS (They have recorded it but I didn't consider ANY cash sales) I took sales records for different periods.

    • During Covid
    • Before Covid
    • After Covid
    • Full year
    • Half year

    All of the above had a pretty good average sales - except when the "During Covid" period. And remember this was only for the morning service. When they tried dinner, they were Jam packed.

    We also did a trial for 2 weeks before we took over. Our contract had a sales figure which if not met, the sale wouldn't go ahead. I agree that could have been easily manipulated by calling friends and family. Hence this was just for name sake. In fact the first couple of weeks we constantly hit the same as they hit. We started seeing the drop since Late-Nov.

    Offers -

    There are some comments mentioning this. I would definitely appreciate more feedback on what sort of offers can be put in to have customers visit us more often. Our worst days are Tuesdays and Wednesdays. So I'm happy to offer something.

    I've already tried 10% discount for dinner reservations and that is a hit and miss.

    We do have loyalty cards but it's not digitalized. I will see how this can be digitalized !

    Next steps:

    • Working on offers - I really appreciate more examples of this and what would entice you all to go in to a local cafe.
    • Staffing!
    • Website / Social media marketing
    • Quality control (I'm sure we are not going wrong here but I will ensure that this is correct)
    • Add interesting items on the menu

    I'm sorry if I have missed anything but this forum has given me a really good feedback. I've read through each and every comment on the thread and have taken notes. I will definitely implement a few.

    • Koipanda on 21/03/2023 - 11:53

      Add some delivery service apps. Just inflate the price on the app to cut the crazy overheads

  • Herbse on 12/03/2023 - 09:37
    +5

    Cafe investment. What a misnomer.

    People start a business to get away from boring jobs, work for themself, be their own boss, do something they're passionate about. 90% of these don't make a profit in the first 5 years and when they do it's not high yield.

    If your doing this for quick cash. You're in the wrong mind set.

    All the best.

    • weee on 12/03/2023 - 22:22
      +1

      this, its not an investment, its a career to the common people, doing some brain storm on obz dreaming about your holiday or mortgage fund being funnelled through this side hustle is just a dream, you should feel lucky that it's still running, be a true boss by getting intimate, be in the cafe physically 10 hours a day or pulling out now if you can before the partnership eats you up later on (could be very soon)

  • Ryk on 12/03/2023 - 11:35
    +1

    any changes to the settings on the seating, lighting, music or aircon?? even some minor adjustment in music style or volume, lighting or temperature could impact.

    Ask the customers what they have noticed.

  • Ughhh on 12/03/2023 - 11:40
    +1

    Watch Gordan Ramseys Kitchen Nightmare, might give you ideas.

  • Based Bargainer on 12/03/2023 - 12:30

    Ask the old owner for advice?

    • Herbse on 12/03/2023 - 15:12
      +2

      People don't sell businesses to get dragged back in and figure out how to make it work. They do it to relieve themselves of the stress and dramas

  • Gotchas on 12/03/2023 - 13:01
    +1

    Have you ruled out fraud by any of the stakeholders?

  • Alley Cat on 12/03/2023 - 18:48

    The original owners feel very happy and relaxed, going with the flow. You and your partners on the other hand, are quite stressed, in the sense that you are all go-getters, point and shoot, square and effective, that is not the best trait when it comes to the existing customer base. It's hard to be relaxed when you are on a loss of course, but very crucial in attracting customers who are after the old vibe. Either change how you are to fit the old model or find the customers who like your energy as is, which will probably lead to changing the decor and menu, the look and feel, among other things.

  • berger on 12/03/2023 - 21:06
    +1

    Look at Third Wave Cafe for an example. Their socials are non stop and the business thrives. Create an exciting special, blast it with paid advertising( min $1000 a month )

    My store we spend over $10,000 a month on marketing. It’s a huge bill but we need to be seen.

  • berger on 12/03/2023 - 21:14

    Start being the go-to destination for something special. Croissants perhaps.

    Find a gap in the market that’s not being filled in the local area

  • saltysalt on 13/03/2023 - 20:17

    I have a question for you. What is your favourite place to get coffee and why?

  • saltysalt on 13/03/2023 - 20:23

    Post some photos of the coffee / food so we can help you rule that out. You say the dinner menu is amazing so post up some pics of the plates.

    • ModBot on 14/03/2023 - 11:30

      I don't think OZb terms and conditions allow me to do so!

      Mods can comment on that one.

      • saltysalt on 14/03/2023 - 13:58

        Sure they do, imgur links.

        • ModBot on 14/03/2023 - 17:06

          @RichardL - pls advice

          • saltysalt on 14/03/2023 - 18:40

            @ModBot: Mate there isn’t simple solution you are going to find on here. Tbh that fact that you can’t answer a simple question about another cafe you like or post up a photo of your coffee tells me you are in denial or clueless about the whole operation.

  • samfisher5986 on 14/03/2023 - 15:54

    Maybe I missed it but haven't you missed the obvious questions?

    Are you selling less food/drinks, or do you have less customers? or both?

    If you have less customers and the menu hasn't changed, its likely they are going somewhere else. You might be able to find out where they are going and why by looking at nearby cafes.

    Good reviews mean that the customers were happy with the food/drinks, it doesn't mean that they want to come back or would visit your cafe over another place so its important to understand the mindset of a customer.

    I wouldn't be surprised if we can offer you some proper advice if you post the name of your cafe.

  • ModBot on 14/03/2023 - 17:09

    @RichardL - please advise if I can reveal

  • Gros21 on 15/03/2023 - 10:07

    was there any building or job sites that may of boosted the records at time of sales.

    If you want to to do sales find your target market eg tradey special or mum on school run special.

    Expand into other areas my local cafe during covid when were closed down were doing meal prep meals for the gym junkie type people.

    Alot of tradeys these days want a run and go healthy option. Mind you alot still went 2 redbull and a pack of durries

  • Nonowhatever on 24/03/2023 - 08:05

    Labour cost and stock control playing big part in the business. BAS pay installment for now to get cash flow.

  • tulip99 on 24/03/2023 - 09:14

    What about coming up with some gimmick lattes? Eg, I've just thought of a Lotus Biscoff latte! I haven't tried making it myself, but what about putting some of the LB spread in the bottom of the cup, then the espresso shot on top, stir it up, then add the steamed milk, and serve it with a complimentary LB biscuit packet, if they still come individually wrapped in a big packet from the supermarket?

    Pumpkin spice latte - you can buy pumpkin spice powder from iherb.com
    Salted caramel latte
    Hazelnut latte with hazelnut syrup and a complimentary hazelnut (wrapped) chocolate - maybe Lindt?

  • 50centscheaper on 26/03/2023 - 00:37

    I personally don't think you have done anything wrong , I think the ex owner just had a few good years as a result of COVID-19 & low interest rates.
    Last few years I was working from home most of the time so I would often visit local cafes . This year i have pretty much working in the CBD Mon - Fri.
    Further , the interest rates rise also put pressure on my mortgage repayment hence I don't visit cafes as often I used to.
    I think the two points above might explain part of the reasons why sales are decreasing

  • happy1923 on 19/05/2023 - 12:01

    Any changes to the situation OP? Has any new strategy helped?

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