The coffee industry is brewing, and Australians’ love of coffee has seen the number of coffeehouses and coffee shops in the country increase dramatically in the past decade. While competition is fierce, the cost of doing business in the industry is also growing. If you are thinking of opening a coffee shop, make sure you do your due diligence and obtain proper advice to avoid issues in the future. This article will cover some things to consider when opening a coffee shop, including:
- business structure;
- leasing;
- staffing of employees;
- food safety laws;
- council regulations;
- supplier contracts;
- online food ordering; and
- franchising opportunities.
Business Structuring
When starting a coffee shop, you will need to consider your business structure, whether it be a:
- sole trader;
- partnership;
- company; or
- franchise network.
This will require a number of key documents depending on the structure you pick, including:
- shareholders’ agreements;
- partnership agreements; or
- franchise agreements.
You will need to register your business and obtain an Australian Business Number (ABN) before you begin operating.
Leasing
Once you find the best commercial premises for your business, you will make an offer to the landlord or their agent. This process can work in many ways, but you will typically negotiate with the landlord or their agent on the key commercial terms. Once you have agreed on these, you may receive a Heads of Agreement or Term Sheet. This is a non-binding document that outlines the agreed terms, which is then transferred into the formal Lease Agreement.
Continue reading this article below the formStaffing your business
When starting your business, you will likely require staff to assist you in serving customers. You will need to decide whether you would like to employ staff on a full-time, part-time or casual basis. You will need to pay your staff in accordance with the relevant Fair Work Award, which outlines the minimum rates of pay.
Food Safety Laws
It is no surprise that coffee shops must adhere to strict food safety laws. Administered by the Food Standards Code of Australia, any establishment selling food or drink must follow food hygiene and preparation guides. These laws set out general food and safety standards, including serving temperatures of drinks and storage of perishable material. It also deals with hazards and risk management (no one likes a burnt coffee, especially not one that actually burns you!).
Each State and Territory has different licensing processes for food. If your coffee house sells food, including meat, dairy, seafood or plant products, you must plan your food licence ahead of time. All food businesses must display a food licence or a copy of the licence in a prominent place. You must not commence any trading until you have been informed that your application has been processed.
Council Regulations
Every coffeehouse is different, but you may be required to obtain permits and pay annual fees for outdoor dining and street advertising. Each State and Territory has a different development assessment process to ensure minimum standards are met and to meet the community and other local businesses’ interests. If you intend to make physical changes to the premises, you must provide a Construction Certificate to certify that the proposed works comply with the conditions of the development consent. Following this, an Occupation Certificate is required to certify that construction was completed by the Construction Certificate.
The supply and sale of alcohol are strictly regulated. You must have the appropriate liquor licence, and staff must hold a Responsible Service of Alcohol. Most importantly, the type of liquor licence you hold must complement the approved use under the Development Consent, or the liquor application may be refused.
Supplier Contracts
When you are opening a coffee shop, one of your most important decisions will be what coffee you will use to serve customers. You will enter into an agreement with a coffee supplier, which will typically outline details such as the:
- cost per kilo;
- minimum order per month;
- payment terms; and
- terms regarding any equipment provided, loaned by you.
Online Food Ordering
With an increasing number of businesses offering takeaway services post-pandemic, you may also consider making this option available to your customers. You could launch your own application for customers to pre-order coffee and food, or you might decide to partner with a takeaway delivery service like Uber Eats or Deliveroo. There are pros and cons to each option that are important to consider.
Franchising Opportunities
As your coffee business grows in popularity, you have the option to franchise your business model. A franchise is a business system where you, as the franchisor, assign the right to franchisees to market and distribute goods or services under the franchise brand.
Before setting up a franchise, you should consider whether your coffee business is suitable, including whether:
- your business is established enough to run a franchise;
- there have been testing outlets or branches, and whether these were successful;
- your business brand is distinctive; and
- your business has a solid reputation.
If your business fulfils all of the above, you may be ready to franchise.
The ultimate guide to setting up a franchise.
Key Takeaways
There are a number of things to consider from a legal perspective when setting up a coffee shop. There are even things you may not have considered, such as playing licensed music and enforcing smoking bans. Before you open, you will need to:
- consider what business structure you will start the business under;
- secure and sign a commercial lease; and
- ensure you have complied with all council and food safety regulations.
Once you open, you will need to consider:
- employment laws;
- whether to use an online delivery service; and
- negotiate/ enter into supply agreements.
If you need assistance in understanding what you need to set up your business, our experienced business lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
Some key considerations include whether you will buy an existing business are start your own from scratch. If the latter, consider what business structure you will start the business under. You will also need to secure and sign a commercial lease and ensure you have complied with all council and food safety regulations. Choosing the right locations is also essential, and you should consider the target market for your new cafe.
You will need to decide whether you want to employ staff on a full-time, part-time or casual basis. Additionally, it is important to ensure that you pay your staff in accordance with the relevant Fair Work Award, outlining the minimum rates of pay.
You will likely need to enter into an agreement with a coffee supplier. This agreement will generally cover the cost per kilo, minimum order per month, payment terms and terms regarding any equipment loaned by you.
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