The dream of owning a cosy café is one of the most common small business aspirations. The reality is that cafés operate on razor-thin margins where a few percentage points make the difference between profit and loss. A café that looks busy can still be losing money every month.
Before you invest $100,000–$300,000 in a café fit-out, a feasibility study tells you whether the numbers actually work — or whether your dream needs a different location, concept, or price point to become viable.
The Café Economics Reality
Cafés have a unique financial profile that makes feasibility analysis critical. Revenue per transaction is low (typically $6–$15 for a coffee and food item), which means you need high volume to generate meaningful revenue. Labour is intensive — you can't automate an espresso machine's personality. And competition is fierce in most urban areas.
The industry rule of thumb is that a successful café needs to generate $250–$400 per square metre per week in revenue. Below that, the rent and labour costs typically consume too much of the revenue to leave a viable profit margin.
Key Feasibility Factors for Cafés
Location and Foot Traffic
For a café, foot traffic is revenue. Unlike a destination restaurant where people travel specifically to dine, most café customers are passing by or live/work nearby. Your feasibility study should quantify the available foot traffic at different times of day and estimate what percentage can be converted to customers.
Morning peak (7–9am) typically drives 40–50% of daily revenue for coffee-focused cafés. If your location doesn't have strong morning foot traffic — office workers, commuters, school parents — the most profitable daypart is compromised.
Revenue Modelling
A café revenue model is built from: average transaction value × daily transactions × operating days.
For a typical 40-seat café:
- Morning coffee peak: 80–120 transactions at $5.50 average = $440–$660
- Morning food: 30–50 transactions at $14 average = $420–$700
- Lunch service: 40–60 transactions at $16 average = $640–$960
- Afternoon trade: 20–40 transactions at $8 average = $160–$320
- Daily revenue range: $1,660–$2,640
- Annual revenue (6 days/week): $518,000–$824,000
The feasibility study should model conservative, base, and optimistic scenarios with a realistic ramp-up over the first 6–12 months.
Cost Structure
| Cost Category | % of Revenue | Monthly ($65K revenue) |
|---|---|---|
| Cost of goods (coffee, food, packaging) | 30–35% | $19,500–$22,750 |
| Labour (including owner) | 30–38% | $19,500–$24,700 |
| Rent and outgoings | 8–12% | $5,200–$7,800 |
| Utilities | 3–4% | $1,950–$2,600 |
| Marketing | 2–3% | $1,300–$1,950 |
| Equipment maintenance/replacement | 1–2% | $650–$1,300 |
| Insurance, accounting, miscellaneous | 3–5% | $1,950–$3,250 |
| Total operating costs | 77–99% | $50,050–$64,350 |
| Net profit | 1–23% | $650–$14,950 |
That range tells the story: a well-run café in a good location with tight cost control can be nicely profitable. A café with slightly high rent, slightly high food costs, and slightly low foot traffic can lose money while looking busy.
Break-Even Analysis
For a café with $15,000 monthly fixed costs (rent, insurance, base utilities) and a 65% gross margin on each transaction:
Break-even daily revenue = ($15,000 ÷ 26 days) ÷ 0.65 = $888/day
At an average transaction of $10, that's 89 transactions per day just to cover fixed costs — before paying any staff or making any profit.
Your feasibility study should determine whether 89+ daily transactions is realistic for the proposed location. If the foot traffic analysis suggests 60–70 transactions on a good day, the concept isn't viable at this location and rent level.
CAPEX Requirements
| Item | Range |
|---|---|
| Espresso machine (commercial) | $8,000–$25,000 |
| Grinder(s) | $2,000–$6,000 |
| Kitchen equipment | $15,000–$40,000 |
| Fit-out and furniture | $40,000–$120,000 |
| POS and technology | $3,000–$8,000 |
| Signage and branding | $3,000–$10,000 |
| Initial stock | $5,000–$10,000 |
| Licences and permits | $2,000–$8,000 |
| Working capital (3 months) | $20,000–$50,000 |
| Contingency | $10,000–$25,000 |
| Total | $108,000–$302,000 |
The NPV and payback analysis should determine whether this investment generates adequate returns. Typical café payback periods are 2–4 years for viable concepts.
When the Café Idea Doesn't Work
Your feasibility study should flag non-viability if: the rent ratio exceeds 12% of realistic revenue projections; the location can't support the break-even transaction volume; nearby competition offers a similar concept at lower prices; the required staffing costs push the prime cost (food + labour) above 70% of revenue; or the NPV is negative at a reasonable discount rate.
A negative feasibility result doesn't mean you should abandon the café dream — it means this specific combination of location, concept, and pricing needs to change.
SimpleFeasibility generates café feasibility studies with real local market data, cost benchmarking, revenue modelling, break-even analysis, and interactive What-If scenarios. Test different locations and concepts in minutes. Test Your Café Concept Now →Related Articles: