How much does it cost to open a new cafe in Singapore? Owning a cafe seems to be a common dream for many people, and with new cafes sprouting out all over Singapore every other week, is opening a cafe – especially for first-timers who have no financial backing and experience in the cutthroat F&B industry – really that easy?
We’ve previously written on the topic of 10 things you should know before opening a cafe, and there are indeed many challenges that most people are unaware of when it comes to running a cafe.
We spoke to several cafe owners to get a gist on how much it costs to open a new cafe in Singapore - from rental, to interior design, labour cost, and kitchen equipment. And now, here’s what you should know to have a better idea, and to possibly help you in your decision-making and planning:
RENTAL
The biggest obstacle to your dream of opening a cafe. Rental in Singapore is insane – think about the cups of coffee and the number of cakes that you have to sell just to cover your rental, and we haven’t included other expenses yet. Ideally, your rent should be about 10% of your total revenue, but most new cafe owners will testify that it is almost mission impossible as rentals are constantly going up, and you’d have to pay a crazy amount to get a spot in a prime location.
For areas near the central business district such as Duxton Road and Tanjong Pagar, the current going rate for a small ground floor shophouse unit (we are talking about something smaller than 1,000 sqft) is around S$10,000 to S$15,000 (rental for the second and third floors of a shophouse is usually much lower), while it can go as high as S$30,000/month for a 2,500 sqft unit.
In the past two years, we have witnessed the trend of many new cafes opening in residential neighbourhoods and while it is significantly cheaper, you will still need to fork out around S$5,000 to S$7,000 a month for a 800 to 1000 sqft unit in neighbourhoods such as Everton Park, Rangoon Road and Jalan Besar.
There are other factors that you should also consider. First, if you are taking over the unit from another tenant, there will usually be a takeover fee which can be a sizeable amount – usually five-digit.
Second, leases in Singapore are usually not very long, so there is the challenge to recover your cost within the short timeframe. There is a huge risk of your landlord increasing your rental significantly after the end of the contract. Experienced F&B owners will try to negotiate for a rent-rise cap, but new cafe owners do not have any bargaining power, so this is pretty much out of the question unless you have connections.
Third, and also one important point to note – you cannot expect to pay rental by the number of months you’d like to pay for. There is always a certain period to commit to, and that depends on the landlord. But the norm is a minimum of 6 months, so do take that into consideration for your initial start-up capital – it would be a big sum to fork out at the very first stage of securing your location.
Fourth, in the event that you are forced to move out of the premise after the end of the contract, you will have to bear the cost of relocating to another place. On top of that, there is sometimes a restoration fee (S$4,000 to S$5,000) that you need to pay renovation contractor to restore the cafe to its original state.
Cost of rental: Minimum S$5,000/month, but expect to set aside at least 6 months of rental as your initial start-up capital.
KITCHEN EQUIPMENT + MACHINES
Most of the best independent coffee shops in Singapore use the top range espresso machines – such as Synesso, Slayer and La Marzocco – and they cost around S$25,000 to S$30,000 each. Of course, not every cafe owner is willing to spend so much on an espresso machine for a start. A decent machine can be as low as S$3,500.
Having a good grinder is also essential for making good espresso, and it can cost as much as S$5,000 for one. A good cafe that is serious about their coffee will usually have two grinders (one as backup), so that’s another S$10,000.
Add in other kitchen equipments such as ovens (anything from S$5,000 to S$30,000); dish washers (S$2,000 to S$3,000); fridge, freezers & ice machines; customised cake displays (S$4000 to S$5000); plates and utensils; and coffee/bar counter (S$10,000 to S$15,000)…
Cost of equipment: At least S$50,000
UTILITY BILL
Utility bill is incurred once you start to renovate your cafe. It ranges from S$800 to S$2,000.
Cost of utility bill: At least S$800/month
INTERIOR DESIGN + FURNITURE
There are plenty of other expenses such as the interior design of the cafe, lighting, furniture and decorations, carpentry, painting, and flooring. These are decided by how lavish you want to be when it comes to decorating your dream cafe.
Cost of interior design & furniture: Anything from S$20,000 to S$100,000
LABOUR COST – SALARY FOR STAFF
This deviates according to the size of the cafe, but we can safely say that a typical cafe requires two staff (three or four staff on busy days and the weekend) on the floor serving and clearing tables. You will need another two to three staff/baristas at the counter who are in charge of drinks and cashier. On top of that, for cafes that serve a proper food menu, the kitchen requires at least two to three chefs/cooks to function.
Most cafes pay S$7 to S$8 (per hour) for part-timers, whereas full-time local (Singaporeans and Permanent Residents) staff get around S$2,000 to S$2,200 (excluding CPF) a month. Non-Singaporean staff earn slightly less (S$1,600 to S$2,000) but there is a foreign worker levy – which can range from S$300 to S$700 per worker, depending on the number of foreign workers you have – to factor in.
Cost of salary: S$20,000 to S$25,000 a month
TRAINING COST FOR BARISTAS
If you are well-versed in coffee and can train your own baristas, good for you. But if you need to send your staff to a coffee academy for basic barista training courses, it starts from S$200/participant. For professional certification classes, it ranges from S$500 to S$2,000 based on the proficiency.
Cost of barista training: Starting from S$200/participant
HOW MUCH IT COSTS TO OPEN A NEW CAFE IN SINGAPORE
To start a decent cafe in Singapore, we are looking at a minimum sum of S$120,000 to S$150,000. The amount can vary quite a bit depending on the scale of your cafe. Some cafe owners spent S$120,000 while there are others who pumped in more than S$250,000.
The odds are very much stacked against independents who do not have sufficient financial capital and liquidity, the proper experience of running a F&B establishment, bargaining power, as well as the right connections to sustain their businesses. Moreover, many new hipster cafes are too often more hype than substance by focusing too much on the aesthetics and miscellaneous furbishing instead of working on the more important factors like food and service.
The general advice from most of the cafe owners that we spoke to is to really think twice before you start a cafe. Also, accumulate some experience of working in a cafe to get a feel of what life would be like. There are many things that you never knew about working at a cafe; things that happen behind the scenes, things that regular customers would not otherwise observe or realise, and they are not always the prettiest things to share.
Contrary to popular beliefs, owning a cafe is not glamorous or cool as you think. Not only do you have to spend long hours at the cafe every day, you will also face challenges that you would have never imagined. If you are considering to open a cafe, make sure you have a sound business plan and enough capital for the initial start-up, as well as additional money for your payroll and rental. After paying for food costs, rental, salary and other expenses, the actual profit margin left is around 10%. So, if you are opening a cafe to get rich, think again.
Good luck and all the best for your cafe venture!
Only those who has too much spare change will splurge for Synesso, Slayer and La Marzocco .
High cost for the equipment, high maintenance cost, too much fiddling of controls which no baristas bother.
It’s probably going to rip you another time for regular maintenance.
The parts are proprietory which are crazily expensive and there are many gears involved in the already stressed rotary pumps, meaning they wear out faster.
After the hype of pressure profiling, most baristas eventually settle with a profile of low ramp up then gradually down.
That’s exactly trying to mimic a spring lever espresso machine.
Go take a look at the veteran and top baristas around the world, most stick to Spring lever aka spring piston espresso machines for a good reason.
They do its best to extract with the least configuration and are hardy like a tank, easily outlive the user with a few replacement of basic spares.
Such expensive profiling machines are mainly used in America, not Europe. Even La Marozzco isn’t well sold in Italy.
There’s no such thing as the best coffee in the world, it’s a matter of preference. Stop believing in buying the most expensive commercial machines will give your skill a notch up.
IF your coffee isn’t fresh enough, or preserved well enough. It simply won’t work.
If you over-boil your milk, your milk recipes simply taste bad.
And spending $5000 for a grinder is equally silly. All grinders need its own caliberation by the user.
No grinders are intelligent enough to set itself.
After a good caliberation, all grinders of the same class works the same.
Talking about burr overheating, it’s only a matter if you are doing industrial amount of grinding.
Talking about grind retention, all grinders will retain.
It’s not the grind retained that’s the problem, is the oil that stays behind. Which actually don’t matter much.
Don’t read too much information from Urnex and its affliates.
That’s why…people think it’s so damm easy. The fact is…even the peanuts don;t cost peanuts.
Milk and Honey Gelato starting pay for new staffs (part timers) is $5.50and the highest they can go is $7
Full timers <1.2k
Can anyone advise if business insurance is required for cafes? How much approximately is it? Thanks!
Hi from Malaysia, just found your site. I love everything about your entry. It really gives me an insight story of opening a cafe
keep up the good work
Really helpful and insightful information for people considering this business option seriously
Would like to know what it will cost to set up same thing here in Melbourne, Australia.
Don’t forget that you’ll also need to engage the services of a design company to create a brand, website and marketing collaterals for your cafe. ($10,000—$30,000)
Thank you for the insightful post!
Came across this while doing some research. Starting an F&B cafe is a dream for many students & youth, but most don’t consider the high initial startup costs. Also, business strategy is really important, especially in this industry where high demand is usually fads & social media hype – really short term and unsustainable. Branding & food quality is essential to cut through the crowd & survive.
very informative post. however, how much do cafes earn? thats another important piece of information! anyone with any inputs on that??
Thanks so much for your advice on starting a café, although I my situation is a little different your post will help a lot. I want to start a coffee shop rather than a full service café, and also in the US. Though it looks like the prices you estimated were pretty similar to places in the States. I find that surprising, I don’t know if that means it is really expensive over there, or a really good deal over here.
Wow. Very helpful.
Do the cafe needs any license as it would sell some cakes etc??? Needs business license too?????
Can anybody open a cafe? Any restriction with visa status??
That is freaking expensive! My dream of opening a cafe is mission impossible. Is it possible to get investor to fund in your cafe? How do you guarantee your cafe will earn money? Will it bankrupt if it do not earn money?
Does anybody know good coffee academy with an affordable rate?
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