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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; and 
  • online food ordering.  

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.

If the chosen space is in a retail complex, you will receive a Retail Lease Agreement and Disclosure Statement. For commercial leases, you will receive a Commercial Lease Agreement. These lengthy documents will contain all the agreed terms of the lease, including how landlords will calculate rent increases. 

Staffing 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. 

For the hospitality industry, this may include the MA000009: Hospitality Industry (General) Award 2020. You will also need to ensure that you adhere to the laws outlining the minimum and maximum number of hours per shift. 

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!). 

If you are opening a coffee shop, you will have a safety inspector audit the entire process, perform frequent inspections and safety audits, and educate the employees.

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.

It is important to ensure that you have this contract checked over to ensure that you can meet all of the supplier’s requirements and are not exposing yourself to too much risk. 

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. 

For example, launching your own application gives you the ability to retain all the profit from the sale. However, you will need to invest in app development and consider online payments, alongside privacy obligations. Using an established service can give you greater exposure and ensures you do not need to worry about developing or maintaining the technology. However, these providers will typically take somewhere between 15-30% commission on the sale. 

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, contact LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page.

Frequently Asked Questions

What do i need to consider before opening a coffee shop?

Some key considerations include considering what business structure you will start the business under. You will also need to secure and sign a commercial lease and ensure that you have complied with all council and food safety regulations.

What staffing considerations are there when opening a coffee shop?

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. 

What considerations are there relating to the coffee supplier contracts?

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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