There is a frustrating situation that many cafe owners know all too well.
The cafe is busy.
Tables are full. The coffee machine is running constantly. The kitchen is pumping out food. Staff are running around. The EFTPOS machine is constantly being used.
And yet, when you look at the bank account, there doesn’t seem to be much money left.
So where is it going?
The problem is that being busy and being profitable are two completely different things.
A cafe can generate a lot of revenue and still make very little profit.
If this sounds familiar, the answer isn’t necessarily to get more customers.
You may need to work out why the customers you already have aren’t generating enough profit.
Revenue Isn’t Profit
Let’s start with the most important distinction.
Imagine your cafe takes $20,000 in sales in a week.
That sounds pretty good.
But then you have to pay for:
- Food
- Coffee
- Milk
- Drinks
- Wages
- Superannuation
- Rent
- Electricity
- Gas
- Insurance
- Cleaning
- Packaging
- Repairs
- Equipment
- Software
- Accounting
- Marketing
- Merchant fees
- Waste
- Other operating expenses
What is left after all of that?
That’s the number that matters.
A cafe doing $20,000 in weekly sales with $19,500 in expenses is not necessarily healthier than a cafe doing $15,000 with $12,000 in expenses.
The first cafe is busier.
The second cafe may be considerably more profitable.
The First Question: Where Is the Money Going?
If your cafe is busy but you’re not making money, don’t immediately start looking for more sales.
Start investigating.
Look at the major areas where your revenue is being consumed.
Food Costs
Are you charging enough for the food you sell?
Labour
Are you using too many staff for the level of sales you’re generating?
Waste
How much food is being thrown away?
Rent
Is your occupancy cost appropriate for your sales?
Pricing
Are your menu prices high enough to cover your actual costs?
Stock
How much money is sitting in ingredients and stock?
Discounts
How much revenue are you giving away?
Owner Withdrawals
Are you taking money out of the business without properly accounting for it?
You need to find the leaks before you can fix them.
Your Food Might Be Too Cheap
One of the most common problems in hospitality is underpricing.
Cafe owners often look at what competitors are charging and think:
“The cafe down the road sells it for $14, so we need to charge $14.”
But your costs may be completely different.
Perhaps your rent is higher.
Perhaps your wages are higher.
Perhaps your ingredients are more expensive.
Perhaps your portions are larger.
Perhaps you have more staff.
Perhaps your overheads are significantly higher.
Your pricing needs to work for your business, not somebody else’s.
Know the Cost of Every Menu Item
You should know approximately what it costs you to produce your major menu items.
Take a bacon and egg roll.
You need to account for:
- Bread
- Bacon
- Eggs
- Sauce
- Butter or oil
- Packaging if takeaway
- Other ingredients
Then compare that cost with your selling price.
But don’t stop there.
You also need to consider the labour and overhead involved in producing and selling it.
The purpose isn’t to calculate every item down to the last cent every single day.
It’s to understand which products are commercially strong and which aren’t.
Your Best Seller May Not Be Your Best Product
This surprises a lot of cafe owners.
The product you sell the most isn’t necessarily the product that makes you the most money.
Imagine:
Product A
Sells 50 per day.
Gross profit per item: $3.
Daily gross profit: $150.
Product B
Sells 20 per day.
Gross profit per item: $7.
Daily gross profit: $140.
Product A is your best seller.
But Product B isn’t far behind despite selling less than half as many units.
This is why you need to look at profitability as well as popularity.
Stop Looking Only at Sales
Your POS system contains a huge amount of useful information.
Look at:
- Total sales
- Number of transactions
- Average transaction value
- Best-selling products
- Worst-selling products
- Sales by hour
- Sales by day
- Sales by category
- Discounts
- Refunds
- Add-ons
- Payment methods
One of the most useful numbers is your average transaction value.
If 200 customers spend an average of $14, you’re doing:
$2,800 in sales
If you increase the average transaction to $16:
$3,200 in sales
That’s an extra $400 from exactly the same number of customers.
Sometimes improving the value of each transaction is easier than finding hundreds of new customers.
Your Cafe Might Be Overstaffed
This is a sensitive subject, but labour is one of the biggest expenses in many hospitality businesses.
Being busy doesn’t automatically mean you need more staff.
You need to look at the relationship between your sales and your labour.
For example, if your cafe is taking $3,000 between 7am and 11am, you need to know how much labour is being used to generate those sales.
Then compare that with a quieter period.
If you’re paying almost the same number of people to work during a $1,000 period as a $3,000 period, you may have a scheduling problem.
The solution isn’t necessarily cutting staff.
It could be:
- Better rosters
- Cross-training
- Clearer roles
- Better station layouts
- Faster preparation
- Improved ordering systems
- Better forecasting
You want the right number of people in the right positions at the right times.
Look at Your Quiet Periods
A cafe might be packed from 7am to 11am and almost empty from 1pm onwards.
That’s not necessarily a problem.
The problem occurs when you’re carrying the cost of being open without enough sales to justify it.
Look at each trading period.
Ask:
What does this period generate in revenue?
Then:
What does it cost us to be open during this period?
You may discover that certain hours need to be improved, changed or reconsidered.
Alternatively, you might find an opportunity.
Perhaps your afternoon trade could be improved with:
- Afternoon coffee promotions
- Cakes and slices
- Takeaway options
- Business catering
- Meetings
- High tea
- Delivery
- Special events
Don’t automatically assume quiet periods are simply “how it is”.
Food Waste Is Profit Going in the Bin
If you throw $300 of food away every week, that’s $15,600 over a year.
And that’s before considering the labour involved in preparing the food in the first place.
Waste can come from:
- Overproduction
- Incorrect portioning
- Poor stock rotation
- Expired ingredients
- Menu items that don’t sell
- Preparation mistakes
- Incorrect orders
- Damaged products
- Poor storage
Start recording what gets thrown away.
Don’t just write:
“Food waste.”
Write:
3 chicken wraps
2 salads
4 muffins
1 kg tomatoes
Now you can start identifying patterns.
If the same products are being thrown away every week, you have a problem that can be fixed.
Your Portions Might Be Too Large
Customers don’t always need bigger portions.
If your meal costs $3.50 in ingredients and you’re giving away an extra $1 of food through oversized portions, that might not seem like much.
Across hundreds of meals, it adds up.
Portion control isn’t about making customers feel like they’re being ripped off.
It’s about consistency.
If every cook serves a different amount, your food costs become unpredictable.
Use consistent recipes, portion guides and preparation methods.
Check Your Supplier Prices
You might be selling the same products at the same prices while your costs have quietly increased.
Your supplier raises the price of:
- Coffee
- Milk
- Eggs
- Bacon
- Chicken
- Flour
- Cooking oil
- Packaging
You keep your menu prices unchanged.
Eventually, your margin disappears.
Review your major suppliers regularly.
You don’t necessarily need to change suppliers.
Sometimes simply asking:
“Is there a better price available based on our current volume?”
can start the conversation.
Don’t Let Your Menu Get Too Big
More menu items can mean more sales.
But they can also mean:
- More ingredients
- More stock
- More refrigeration
- More preparation
- More training
- More waste
- More complicated ordering
- More kitchen labour
If you have 30 food items and five of them barely sell, those five items may be costing you far more than you realise.
Look at your sales data.
Ask:
Would we actually miss this item if we removed it?
If the answer is no, it may be time to reconsider it.
Your Display Cabinet Can Be Costing You Money
A full display cabinet looks great.
But if you’re producing more food simply to make the cabinet look full, you may be creating unnecessary waste.
Your cabinet should be designed around sales.
Track what sells at different times of the day.
You may discover that you need:
- More sandwiches at lunchtime
- Fewer salads on certain days
- More muffins in the morning
- More cakes in the afternoon
The goal isn’t to have the biggest display.
It’s to have the right display.
Watch Your Discounts
Discounts can make customers happy.
But they can also destroy your margins.
Suppose you sell an item for $15 with a $5 gross profit.
You offer 20% off.
The customer now pays $12.
Your gross profit has dropped from $5 to $2.
You have reduced the selling price by 20%, but you’ve reduced the gross profit by 60%.
That’s a very different result.
Before offering discounts, understand what they are actually doing to your profit.
Look at Your Rent
Rent is one of those costs that can be difficult to change.
But you still need to understand it.
Ask:
What percentage of our sales is going towards occupancy costs?
If your sales have grown but your rent has also increased significantly, the additional revenue may not be contributing as much as you think.
If you’re considering moving, expanding or signing a new lease, don’t just look at the location.
Look at the complete financial model.
A beautiful location doesn’t automatically make a profitable cafe.
Your Owner’s Wage Matters Too
Another common problem is that the owner works enormous hours without properly costing their time.
The business appears profitable because the owner’s labour isn’t being treated as a real cost.
If you are working:
- Opening
- Closing
- Ordering
- Cleaning
- Managing staff
- Doing payroll
- Marketing
- Cooking
- Serving customers
- Fixing equipment
- Dealing with suppliers
you need to understand what that time is worth.
Otherwise, you may have created a job that pays you less than the people you employ.
The goal of a business should be to produce a return for the owner, not simply keep everyone else paid.
Busy Doesn’t Mean Efficient
Sometimes a cafe feels chaotic because everyone is working incredibly hard.
That doesn’t necessarily mean the business is efficient.
Watch your team during a busy period.
Look for:
- Unnecessary walking
- Repeated preparation
- Bottlenecks
- Poor communication
- Double handling
- Equipment positioned badly
- Staff waiting for each other
- Orders being remade
- Searching for ingredients
- Poorly organised storage
Every unnecessary movement costs time.
Every mistake costs money.
Every bottleneck limits how many customers your team can serve.
Efficiency isn’t about making people work harder.
It’s about making the process work better.
Find Your Break-Even Point
One of the most useful numbers for any cafe owner is the break-even point.
This tells you roughly how much revenue the business needs to generate before it starts making a profit.
If your fixed costs are $10,000 per week and your contribution margin means you need $20,000 in sales to cover those costs, then you know what the business needs to achieve.
Now you can start asking better questions.
What happens if sales fall 10%?
What happens if wages increase?
What happens if coffee prices increase?
What happens if rent increases?
What happens if we close one day a week?
Once you know your numbers, you can make decisions rather than guesses.
Don’t Try to Fix Everything at Once
If you’ve discovered that your cafe isn’t as profitable as it should be, don’t try to change 20 things tomorrow.
Prioritise.
Look for the biggest problems.
For example:
Problem 1: Food costs are too high.
Problem 2: Too much food is being wasted.
Problem 3: Average transaction value is low.
Problem 4: The roster doesn’t match sales.
Start with the biggest opportunity.
Fix it.
Measure the result.
Then move onto the next one.
Small improvements across several areas can have a significant cumulative effect.
The Goal Isn’t to Be the Busiest Cafe
This is the mindset shift many owners need to make.
You don’t actually want to be the busiest cafe.
You want to be a profitable cafe.
If your competitor has a queue out the door but makes less money than you, their business isn’t necessarily better.
Your customers don’t know your food costs.
They don’t know your wage costs.
They don’t know your rent.
They don’t know your margins.
They see the cafe.
You need to see the numbers behind it.
The Five Numbers Every Cafe Owner Should Know
At a minimum, you should understand:
1. Total Sales
How much money is coming through the business?
2. Average Transaction Value
How much does each customer spend?
3. Food Cost
How much does the food you’re selling actually cost you?
4. Labour Cost
How much are you spending on wages and related employment costs?
5. Net Profit
After everything is paid, how much does the business actually make?
If you don’t know these numbers, you’re managing by feeling.
And feeling can be very misleading in hospitality.
Busy Should Be Good News
A busy cafe shouldn’t automatically mean stress, exhaustion and wondering where the money went.
It should mean the business has strong demand.
The opportunity is to make sure that demand produces a healthy return.
Look at your:
- Pricing
- Menu
- Food costs
- Labour
- Waste
- Suppliers
- Average transaction
- Trading hours
- Systems
- Overheads
Find the leaks.
Fix the biggest ones.
Then measure what happens.
The Hospitality Takeaway
If your cafe is busy but you’re not making money, don’t immediately go looking for more customers.
You may already have enough.
The real problem could be that you’re:
- Charging too little
- Paying too much
- Wasting too much
- Overstaffing
- Underpricing
- Giving away too many discounts
- Carrying too much stock
- Selling the wrong products
- Running inefficient systems
A busy cafe gives you something incredibly valuable:
customers.
Your job as the owner is to build a business model that turns those customers into profit.
Because at the end of the day, turnover is vanity, and profit is what keeps the doors open.
