How to start a cafe or restaurant

Opening a cafe or restaurant means finding premises, signing a lease, fitting out a kitchen, registering as a food business with your council, and hiring people — which makes it the most expensive kind of business most people ever start. The licensing is straightforward and mostly free; the money and the risk are in the property. This guide covers what you actually sign up for, what the fit-out costs, how the margins work, and what a day in a cafe really earns.

At a glance

The premises and the lease: the part that actually carries the risk

Everything else on this page can be undone. A lease usually cannot.

When you take a commercial unit you are agreeing to pay rent for a fixed term — often five or ten years — and that obligation does not disappear because the cafe is quiet. If you close after eight months, the rent normally keeps running until the lease ends or you find someone to take it over. Landlords also commonly ask a new company for a personal guarantee, which means you personally owe the rent even if the business is a limited company. That single signature is the difference between a business that can fail and a life that can be damaged by one, so have a solicitor read the lease before you sign it. This is not a page that can give you legal advice, but it can tell you which questions to ask.

Ask about all of these before you agree anything:

• Term and break clause. How many years, and is there a point where you can walk away? A break clause is the most valuable thing in a first lease.
• Rent, and rent reviews. How often does it go up, and by what measure?
• Rent deposit and rent-free period. Landlords often hold three to six months' rent as a deposit, and often give a few rent-free months for fit-out. Both are negotiable.
• Business rates. A separate bill from the council on top of rent. Small business rate relief means many small units pay little or nothing (in England, 100% relief up to £12,000 of rateable value, tapering away by £15,000), but you must check the rateable value of that specific unit.
• Service charge and insurance. Common in parades and shopping centres, and easy to forget when you budget.
• Dilapidations. At the end of the lease you may have to put the unit back the way you found it. Ripping out a kitchen costs real money.
• Planning and consents. In England most shops and cafes sit in the same planning use class, so a change from shop to cafe often needs no planning permission — but extraction flues, external seating and signage frequently do, and the rules differ in Scotland, Wales and Northern Ireland. Never assume a unit can legally be a kitchen; ask the council's planning team before you commit.
• Landlord's consent for works. You will be cutting holes for extraction. Get it in writing.

The practical rule is the one every experienced operator repeats: rent has to be affordable on a bad month, not a good one. A common sanity check is rent as a share of sales, and if it is climbing towards a fifth of what you take, the site is unlikely to work.

Fit-out and equipment

The unit you fall in love with is rarely ready. A previously fitted cafe with working extraction saves you tens of thousands; a bare shell costs you that instead.

What the money goes on:

• Extraction and ventilation — canopy, ducting, fan, and often a gas interlock system. This is the single biggest surprise in most first fit-outs, especially in a flat above a shop or a listed building.
• Kitchen equipment — cooking line, fridges and freezers, prep benches, a commercial dishwasher, a sink layout that satisfies the environmental health officer.
• Coffee — a machine, a grinder, water treatment. Some roasters will loan or lease a machine against a bean contract, which is worth asking about.
• Front of house — counter, tables, chairs, lighting, flooring, decoration.
• Systems — an till and card system, card reader, accounting software, a booking system if you take reservations.
• The small stuff that adds up — crockery, cutlery, glassware, pans, packaging, uniforms, signage, menus.
• Opening stock — a full larder and a full cellar before you sell anything.

Buy second-hand where it does not touch the customer. Auctions of closed restaurants are full of good, cheap kit, and a used stainless steel bench is identical to a new one. Spend the money on the things customers feel: coffee quality, seating comfort, lighting and the noise level.

Then budget one more thing that nobody enjoys budgeting: money to trade at a loss for the first few months. Cafes take time to be found. Plan for it and a slow start is a plan working; do not plan for it and a slow start is a crisis. If you are looking at how to fund the gap, our funding guide explains the options open to a new business.

Registering as a food business, and the hygiene rating

The paperwork is the cheap part, which surprises people.

Register as a food business with your local council. It is free, it is done online, and it must be done before you open — commonly at least 28 days in advance. Registration is not approval. It puts you on the list to be inspected.

The hygiene inspection and rating. An environmental health officer visits, usually unannounced after you open, and rates you from 0 to 5. The rating is published online and must be displayed in Wales and Northern Ireland; display is voluntary in England, but customers look it up either way. Customers check it. So do delivery platforms. Getting a 5 is not luck: it is about having a written food safety management system, temperature records, cleaning schedules and staff training, and having them from day one.

Training and records. Anyone handling food needs appropriate training, and a Level 2 food hygiene certificate is the normal baseline. You will also need a documented food safety management system — the Food Standards Agency publishes a free pack designed for small businesses.

Allergens. You must be able to tell a customer what is in every dish, accurately, every time. Food prepacked for direct sale — the sandwiches in your own chiller — needs full ingredient labelling with the 14 regulated allergens emphasised. This is a legal duty and a safety one, so build it into your recipes rather than bolting it on.

The other bits. Commercial waste collection (a domestic bin is not legal for a business), used cooking oil collection, a grease trap if the council asks for one, pest control, and a music licence if you play music in a public space. Public liability and product liability insurance are expected, and employers' liability insurance is a legal requirement the moment you have staff — our insurance guide covers what each one does.

Alcohol, and whether you need it

If you want to sell alcohol you need two things: a premises licence for the building, applied for through the council, and a personal licence holder named as the person supervising sales — usually you. In England and Wales the application fee is set by the building's rateable band (£100 to £635 for most premises, up to £1,905 for larger alcohol-led venues, plus an annual fee), and a personal licence costs £37; Scotland and Northern Ireland operate different systems. The premises licence sets your permitted hours and conditions, involves advertising the application and can be objected to by neighbours or the police, so allow months rather than weeks.

It is worth the effort if evenings are part of your plan. A cafe that becomes a wine bar at 5pm sells its best-margin product in hours the rent is already being paid for. If you are strictly a daytime coffee shop, skip it and revisit later.

Staff, rotas, and what a wage actually costs

The moment you have staff, two things change. You take on employer duties — a contract, the minimum wage, holiday pay, payroll, and pension auto-enrolment (at least 3% from you on a band of their earnings). And every wage costs you more than the wage.

Employer National Insurance and pension contributions add roughly 10-15% on top of what lands in someone's bank account. Budget £12 an hour and the real cost to you is closer to £13.50. Over a year of shifts that difference is the size of a small car, so put it in your numbers from the start.

The craft of running a cafe profitably is mostly rota craft: matching people to the hours the customers actually come. Two staff on a dead Tuesday morning is money leaving the till. One member of staff during Saturday brunch is a queue walking out of the door. Track sales by hour for a month and build the rota from what you find, not from what feels safe.

A rough working check used across hospitality is wages as a share of sales, commonly somewhere around a quarter to a third for a cafe. Add your own hours honestly. If the business only works because you do 60 unpaid hours a week, it does not work.

Where the margin actually is: drinks carry the business

Your gross margin — what is left after you have paid for the thing you sold — is very different on food and on drink, and that difference decides whether a cafe survives.

A flat white might use 45p of beans and milk and sell for £3.50. A cooked breakfast might use £3.20 of ingredients and sell for £10. Once you take the VAT out of both prices, the coffee keeps well over 80% of what it sells for and the breakfast keeps around 60%. Wine and beer sit up with the coffee. Food, especially good food with real ingredients, sits well below it.

Two things follow, and both are practical:

Sell a drink with everything. A plate that leaves the pass without a drink alongside it has given away the best margin on the table. That is not a sales trick; it is just the shape of the business. Train for it.

Watch your food cost percentage. Take what your food and drink cost you, divide it by your sales, and you have a number you can check weekly. Most kitchens aim to keep it inside a range and know immediately when portioning, waste or a supplier price rise has pushed it out. Waste is the silent line — over-prepping, spoilage and staff food are all real cost, so count them.

Our pricing guide covers menu pricing properly, including why the average spend across your whole menu matters far more than the price of any single dish.

The daily arithmetic: covers, average spend, and a quiet Tuesday

Here is a whole cafe worked through, so you can see where the money goes.

Take Rosie, opening a 30-cover cafe in Shrewsbury. "Covers" just means seats. She opens six days a week, 8am to 4pm, does breakfast, lunch, coffee and cake, and works the floor herself with two part-time staff across the week.

On an average day she serves 100 customers spending an average of £11 each — some just a coffee, some a full lunch. That is £1,100 a day, and across 26 trading days a month it is £28,600 through the till.

Now the first honest adjustment, and it is a big one. A cafe crosses the VAT registration threshold of £90,000 of sales almost immediately, and most of what a sit-in cafe sells carries VAT at the standard rate. So of that £28,600, roughly £4,767 belongs to HMRC and £23,833 is Rosie's sales — the word HMRC uses for that number is turnover.

Against that, every month:

• Food and drink she has to buy in, at about 30% of sales: £7,150
• Staff wages of £7,000, plus employer National Insurance and pension at roughly 12% on top: £7,840
• Rent: £1,800
• Business rates: £300
• Gas and electricity, because kitchens are heavy on both: £900
• Insurance: £90
• Card fees at about 1.5% of what goes through the till: £429
• Waste collection, cleaning, laundry: £250
• Equipment servicing, gas safety, extraction cleaning, repairs: £200
• Accountant, till system, software: £180
• Marketing: £150

That is £19,289 of costs against £23,833 of sales, leaving about £4,544 a month before tax — roughly £54,500 a year of profit before tax. For a business she is in six days a week that is a proper living, and it is what a cafe that is working looks like.

Now the quiet Tuesday. Strip out the food she buys and Rosie's costs come to about £12,139 a month, which is roughly £467 a day that has to be covered before she earns anything — and that number does not care how many people come in.

• A quiet Tuesday with 55 customers takes £605 through the till. After VAT that is £504, and after the food it used, about £353 is left. Against £467 of daily costs, Tuesday loses about £114.
• A Saturday with 160 customers takes £1,760. After VAT and food, about £1,027 is left. Against the same £467, Saturday makes about £560.

So the weekend pays for the week. That is normal, and it is why the two questions that decide a cafe's fate are "how do I make Tuesday busier" and "what does this site do in February". Before you sign a ten-year lease, sit outside the unit on a wet Tuesday in January and count the people who walk past. That hour will tell you more than any spreadsheet.

Test the idea before you sign anything

A cafe is one of the few businesses where you can try the product long before you take on the risk, and the people who do it tend to open better cafes.

• A market stall or a weekend pitch costs a pitch fee and teaches you your prices, your speed and what people actually buy.
• A residency — a kitchen inside a pub, a counter inside someone else's shop, a pop-up in a co-working space — gets you real trading days with someone else's rent and someone else's extraction.
• A food truck or trailer is the fuller version: a real kitchen, a real hygiene rating and real customers, with wheels instead of a lease. Our guide to starting a food truck business covers the registration, the pitch fees and what a trading day earns.
• Supplying wholesale — your cakes in three local coffee shops — proves the product with almost no fixed costs.

None of these is a lesser version of the plan. They are how you find out whether people will pay your prices, which dishes sell, how long a service takes and what your average spend really is, using numbers you have earned rather than numbers you have assumed. Then you sign the lease knowing what you are doing. (This page is part of our wider guide to starting a business.)

Getting your first customers

A cafe has one advantage no online business has: the shopfront. Passing trade is real, so signage, lighting and an open door do genuine work. But nobody discovers a new cafe by accident any more.

Local search is where it starts. A free Google Business Profile with good photos, correct opening hours and a steady flow of reviews decides who wins "cafe near me" and "breakfast near me". Fill it in properly on day one, and ask happy customers to leave a review while they are still at the table.

Instagram, not Facebook, for this trade. Food and rooms sell in pictures, and Instagram is where people decide where to have brunch. Post the food, the space and anything new, consistently, on one platform rather than half-heartedly on three.

Then the local things that still work. A soft opening for neighbours and nearby businesses before you properly launch. A loyalty card that brings the same commuter back nine more times. An account with the office block across the road. Talking to every other independent on the street, because they will send you people. Our guide to marketing a small business covers local search, reviews and social properly. Want help getting customers? Our sister agency The Fractions runs ads and builds websites for small UK businesses — the pages, the ads and the enquiries behind them.

The admin

Most food businesses of this size run as a limited company rather than a sole trader, because a lease, staff and suppliers all sit better inside a company — but be clear-eyed about it: if the landlord takes a personal guarantee, the company does not protect you from the rent. Our structures guide covers the trade-offs, and Plan's setup step covers sole trader and limited company. If you do form a company, issue 100 shares rather than one; it costs nothing extra and makes bringing in a partner or selling a stake far simpler later.

VAT arrives early in this trade. Cross £90,000 of sales in a rolling twelve months and you must register. Food VAT rules are one of the genuinely fiddly corners of the tax system — hot versus cold, eating in versus taking away — so this is the point at which an accountant earns their fee. Our VAT guide explains the basics.

Records. A till system that reports sales by day, by hour and by item is not an extravagance; it is how you build the rota, cut the menu and spot a problem in week two rather than month five. Keep supplier invoices, count stock regularly, and reconcile the till every day.

Turning this into a plan

A cafe plan is four numbers and their consequences: customers a day, average spend, what the food and drink cost you, and everything you pay whether anyone comes in or not — rent, rates, wages, power, insurance. Put those down honestly, by season, and you get the answers that matter: how many customers a day covers the costs, what the rent limit is for a site you are considering, how many staff hours the takings support, and how many months of losses you need in the bank before you open.

Create a mini business plan in minutes with Plan.business. Put in your rate, your hours and your costs, and it works out the rest — what you will make, when you break even, and what you need to charge to hit your target.

Frequently asked questions

How much does it cost to open a cafe in the UK? The range is enormous, and premises decide it. A former cafe with working extraction, a short lease and second-hand kit costs a fraction of a bare shell that needs a full kitchen, ducting and shopfitting. Whatever the fit-out costs, add the rent deposit, opening stock, and enough money to trade at a loss for the first few months while people find you.

Do I need a licence to open a cafe? You must register as a food business with your local council before you open, and it is free. You do not need a licence to sell food. You do need a premises licence to sell alcohol, and possibly planning permission for extraction, signage or outside seating. You will also be inspected and given a food hygiene rating.

How much profit does a cafe make? Less than the till suggests, because VAT, food cost, wages and rent all come out of it. Work it as customers a day times average spend, take off VAT, then food and drink at roughly a third of sales, then wages plus 10-15% for employer National Insurance and pension, then rent, rates, power and everything else. A cafe that is working leaves the owner a proper wage; one that is not usually has rent or wages too high for the number of customers walking through the door.

Should I open a cafe or start with a food truck? If you have not traded before, start smaller. A market stall, a residency in a pub or a food truck teaches you your prices, your speed and your real average spend without a ten-year lease attached. Many good cafes started as something with wheels, and their owners signed a lease knowing exactly which numbers they were signing up to.

What is the biggest risk in opening a restaurant? The lease, not the cooking. Rent runs for the whole term whether the restaurant is busy or empty, and landlords often ask new companies for a personal guarantee, which puts you personally on the hook. Get a solicitor to read the lease, look hard for a break clause, and make sure the rent is affordable on a quiet month rather than a good one.

Figures correct as of September 2026. Tax thresholds, fees and rates change; check the linked GOV.UK pages before acting. Prices and costs shown are indicative and vary by area and by what's included.

What is Plan?

Plan is a free business operating system for people starting or newly running a UK business. It walks you, one simple step at a time, from your elevator pitch through brand, product and pricing, to a complete business plan — then uses everything it now knows about the business to help with the basics: logo and brand, marketing, a website, a bank account, funding, insurance, company registration. You can use as much or as little as you want.

Two ways to do this

Do it yourself, free. Plan walks you through the numbers — covers, average spend, food cost, wages and rent — one short question at a time, in your browser. Use just this bit before you view a single unit, and stop there if that is all you need.

Start free in Plan →

Or get help filling the tables. A new cafe lives or dies on being found in the first few months. Our sister agency The Fractions runs ads and builds websites for small UK businesses — the pages, the ads and the enquiries behind them.