A friend of a friend opened a café last year. Her spreadsheet had forty seven lines on it and she was proud of it, reasonably. Espresso machine, grinder, undercounter fridge, dishwasher, counter, tables, chairs, signage, EPOS, first stock order. She raised the money, spent it almost exactly as planned, opened in April and ran out of cash in July while trading well. The forty seven lines were all correct. The list was missing the only two categories that matter.
The lease costs money before the fit-out does
Before a single tile is laid, a commercial lease takes cash out of you in three or four directions.
A rent deposit is typically three to six months of rent, held for the term, and it is the single largest cheque most café operators write. A landlord will ask for more from a newly incorporated company with no accounts, and a personal guarantee instead of a deposit is not a saving, it is a different risk.
Then legal fees for both sides, because you will usually be paying the landlord's costs as well as your own. Then a survey and a schedule of condition, which sounds like an optional extra until dilapidations are assessed at the end of the term against a standard nobody recorded at the start.
Then Stamp Duty Land Tax, which people forget applies to leases. For non-residential leases it is charged on the net present value of the rent over the term: nothing up to £150,000 of NPV, 1% between £150,001 and £5 million, and 2% above that. A modest café lease often falls under the threshold, but a ten year term at a decent rent does not, and it is a bill that arrives at the worst moment.
Negotiate the rent-free period as hard as you negotiate the rent. Three months rent free at the start is cash in your pocket in the exact weeks you need it. Landlords give it more readily than they give a lower headline rent, because the headline rent is what their building is valued on.
Check whether the lease is inside or outside the Landlord and Tenant Act 1954. Inside gives you security of tenure and a right to renew. Outside means you hand the keys back at the end, and the fit-out you paid for stays. Contracting out requires a formal notice and a declaration before you commit, so you will know if it has happened, provided you read.
Fit-out is priced per square foot and ruined by the services
Contractors quote café fit-outs by the square foot, and the range is wide because the phrase covers everything from a paint job to a rebuild. Light work on a unit that was already a food business can be modest. A shell unit with no drainage, no three phase power and no extraction route is a different building project entirely, and quotes commonly land two or three times higher per square foot.
The expensive items are never the ones in the photographs:
- Extraction, ducting and the discharge point, which usually needs planning permission
- Drainage, grease management and any trade effluent consent
- Electrical supply upgrades, which can involve the distribution network operator and a long lead time
- Accessible WC provision and level access under the building regulations
- Making good the ceiling, the floor and the shopfront that looked fine until it was opened up
On planning, most café uses sit in Class E since the 2020 changes to the Use Classes Order, which means moving from a shop to a café often needs no change of use consent at all. Hot food takeaway is a separate, sui generis category and does need permission. The duct on the outside wall needs permission almost regardless.
Register with your local authority as a food business at least twenty eight days before you open. It is free, it is a legal requirement, and it triggers the inspection that generates your food hygiene rating. Display of the rating is mandatory in Wales and Northern Ireland and voluntary in England, but the score appears online either way.
New equipment is a purchase, used equipment is a gamble with better odds
A reliable espresso machine and grinder are worth buying properly, because they are the two things that stop you trading when they fail and the two things that determine the product. Almost everything else can be bought used from a catering auction or a closing site at a heavy discount.
The rule that holds up is this: buy used where a failure costs you a day, buy new where a failure costs you the week. Fridges, prep benches, shelving, tables and chairs are all sensible used. Anything with a compressor should be tested running before you pay. Anything gas needs a Gas Safe registered engineer to commission it in a commercial kitchen, whatever the seller told you.
For tax, the Annual Investment Allowance lets most businesses claim 100% relief on qualifying plant and machinery up to £1 million a year, and companies have full expensing on main rate plant. That does not help cash flow at the moment of purchase, but it changes the after tax cost meaningfully and is worth discussing with your accountant before you choose between buying and leasing.
The twelve weeks nobody budgets for
Here is the category the forty seven line spreadsheet was missing. After you open, you have wages, rent, utilities, stock, card fees, insurance, software and waste collection going out every week, and takings that are not yet what they will be.
A new café does not arrive at its natural trade on day one. It builds as the street learns you exist, as the first reviews land, as people who tried you once come back. Three months of trading below your eventual level is normal and not a sign of failure. Running out of money in month three is what turns it into one.
So budget working capital as a line as large as your fit-out contingency. A sensible planning assumption is enough cash to cover your full fixed costs for twelve weeks with takings at roughly half of what your model says. If your model cannot survive that, the model is the problem, not the café.
Two other things belong in that reserve. Card processing takes its cut before the money reaches you, and although interchange on UK consumer debit cards is capped at 0.2%, the total merchant service charge you actually pay is higher once the acquirer's margin and scheme fees are in. And business rates: the Valuation Office Agency sets your rateable value, small business rate relief gives full relief below £12,000 with a taper to £15,000, and reliefs for retail and hospitality have changed almost every year. Find out your rateable value from the VOA before you sign, not after.
Where this shows up in the game
The Café & Coffee Shop is one of the five business types in Business Baron's free game, so you can open one without paying anything. Fitting out a unit is a project rather than a purchase, and a fit-out that runs over means rent and rates on a unit that is not yet earning. The opening week is rarely the hard part. The weeks after it usually are.