The UK’s café and coffee shop culture continues to boom, bringing in £6.4bn in revenue in 2024 – up from £6.3bn in 2023 and £6.2bn in 2022. Profit margins sit at a steady 8%, down from the heady heights of 11% in 2015.
However, with Costa, Starbucks, Pret A Manger and The Nero Group dominating 40.4% of the UK market, average industry figures may well be skewed upwards by their colossal marketing budgets, high street dominance, and purchasing power.
What kind of profits, then, can an owner-managed independent café expect from their new venture?
Industry-wide statistics
The average café business in the UK is generating revenue of £788,400 and profits of £56,763 in 2024, according to IBISWorld data. The industry’s average profit margin stands at 8% – a significant increase of 3.7 percentage points year-over-year.
The average revenue per employee in the café sector amounts to £66,601 for the 2023-2024 period, while the average cost structure breakdown reveals that purchases constitute the largest expense at 44.1% of costs, followed by wages at 25.3%.
While larger chains may skew these figures upward, these industry averages provide valuable benchmarks to aspire to. For instance, examining your cost structure in comparison to the industry average could reveal opportunities to optimise purchasing or wage costs. Similarly, the revenue per employee metric offers a solid productivity target.
It’s also important to note that local market conditions, your café’s unique positioning and its size will all impact how your business compares to these averages.
Biggest profit margin pressures for café owners in 2024/25
Average industry profit margins have sunk significantly since 2015, when they sat at a healthy 11%.
The reason for the decline? It is primarily down to a gloomy mix of successive national minimum wage rises and food (and coffee) cost inflation.
The national minimum wage has climbed steeply from £8.21 in 2019 to £11.44 in 2024 and is expected to inch up further to ~£11.89 in 2025. Meanwhile, food prices in the UK were up a staggering 26% in 2023 compared with their pre-coronavirus (COVID-19) pandemic levels.
In most cases, café owners have shielded their margins by passing on the costs to their customers or by making staffing adjustments – with variable success. Pret A Manger, for example, has attracted the ire of some of its subscribers after axing its 20% discount on food and watering down its five-coffee-a-day deal. Navigating product price increases will therefore need to be done gradually and delicately.
The good news is that food price inflation is falling, sitting at 3.9% in March 2024 – down from 5% in February and well below the 19.6% a year earlier.
Wage costs are a bit more difficult to get around, however optimised shift patterns may help: analyse peak and off-peak hours, and schedule staff accordingly to avoid overstaffing during slow times.
Protecting your profit margin as a new café owner
Your coffee offering will be one of your biggest profit-makers, with many cafés collecting a margin of up to 95% per cup – much higher than the 60% margin that food usually collects. Pushing these high-margin items and pulling the plug on your unpopular low-margin items will help to keep you on the straight and narrow.
One thing to note, however, is that in times where customer wallets tighten, premiumisation is key to capture the spend for those who want to give themselves a treat. This means avoiding your bog-standard café offerings and going with something differentiated – maybe that’s the ever-popular Bubble Tea, pistachio-cream croissants, or inventive sandwich concoctions.
Low-cost filter coffee may seem the way to go, but customers are increasingly expecting specialty coffee. The bottom line? Cheaper is not always better, and there needs to be a careful play-off between margins and providing a premium coffee experience.
With purchases taking a hefty 44.1% of total revenue on average, it’ll also be well worth looking for cheaper suppliers or negotiating lower costs with your existing suppliers. Think about where you might be able to secure bulk discounts, or whether you could enter a regional consortium with non-competitors.
