Something I have learned from years of coaching indoor playground owners is that this type of business model operates the BEST when the owner feels truly aligned with their company, and when they set their business up in a way that amplifies their strengths and passions.
For example, Art Factory Play Cafe and Party Place is a perfect portrayal of owner Tal’s artistic gifts. At her facility, Tal combines art classes and DIY projects (for both children and adults!) with play and parties that create a sense of community and belonging to her customers. You can tell as soon as you walk in the door that Tal had a vision for her space, and part of that was to foster creativity, something she cares deeply about.
Another example is Gentle Hands Play Space in Tallahassee. Owner Alicia spent much of her professional career working with young children. She designed her space and created her streams of revenue with the intent to help parents navigate early childhood development in a fun and fresh way. She sells sensory bins, hosts really high-quality music classes, and interweaves her play-based learning philosophy throughout her entire facility.
I truly believe that a play-based business will enjoy the highest level of success when the owner and the staff remain passionate about what they are providing to their community. And this is a BIG reason why I do not truly believe in franchising play spaces– different areas NEED different things. Owners need flexibility and room to dream and be agile and pivot based on their competitive landscape and what their customers are saying.
NOW, having said all that– that there is immense value in our uniqueness– there are just some things that I believe– at least right now in 2022, all play spaces need in order to survive. Because while our play spaces are “labors of love” for many of us owners, it’s also a business…right?
We have bills we have to pay that just don’t stop coming. We have staff to compensate. We have families to provide for. So in my group coaching program, Play Maker Society– I help owners to do just this– to marry their strengths with what their business needs to survive.
And one of those things that I have grown increasingly passionate about, especially since the pandemic, is that having cafe and espresso offerings is REQUIRED for the survival of the modern-day play space.
And I say survival, but that’s not what I really mean. Because we don’t JUST want our business to survive, right? We don’t want to just scrape by every single day, barely affording our rent and not paying ourselves enough as owners. We want our businesses to THRIVE.
To provide freedom for our families and not just suck all of our time and energy away from our loved ones. And by the way– that is a really important distinction. Because a lot of owners getting ready to open will say to me, “well, Michele– I’ve done the math and I will be fine without a cafe– I’d rather not take on the extra expense or responsibility of a cafe.” So to that I usually say… well, okay— but is your GOAL to be “fine”? Is your goal to have to work MORE hours in order to make up for the revenue that your cafe could easily be ALREADY generating during the hours you’re ALREADY operating?
Before I get into the first of several reasons why cafes are essential for a thriving play-based business in 2022 and beyond– I just want to clarify one thing. When I say “cafe” I am mainly referring to coffee, espresso, and similar drink offerings. I am not necessarily talking about food-service, but we will touch on that as well.
Alright, let’s do this!
1. Cafe Items Are High-Profit Margin
Before we get into this one, I wanted to go back to business school really quickly and do a little review of terms so that it makes as much sense as possible.
Start-up costs are all expenses incurred to plan, register, organize and launch a new business venture. In terms of a cafe, start-up costs, which are sometimes also referred to as “sunk costs”, would include cafe equipment like your espresso machine, any plumbing or construction needs, any other equipment needs like your espresso grinder, blenders, and all of the miscellaneous materials needed to make that first drink. And by the way, if you want a tour of our cafe counter and all of the equipment we operated with and why– I have a youtube video showcasing this here.
Operating expenses, on the other hand, are costs you incur in the day-to-day process of running your cafe. Things like hourly wages, cleaning supplies– things like that.
Now that we have those two definitions out of the way for clarification purposes, we are going to talk about the cost of goods sold.
Cost of goods sold is the cost it takes you to make a menu item and prepare it for sale. So, for example, let's take a latte. You’d have to calculate what the cost of one-shot of espresso is (not your price, what you PAY), the cost of one cup or so of milk or milk alternative, and the cost of a shot of flavor. You’d also have to add in the cost of the cup, sleeve, and lid as well as any whipped cream or garnishes. So to recap here– the machine itself would be categorized under start up costs, and the wage of the person making it would be categorized under operating costs- because they are getting paid hourly whether or not they make any drinks.
Now as I write this I am looking at one month of my cafe sales broken down by item, price, cost, and with profit margin calculated, data that I share with my Play Maker Society members.
And as another review, a menu item’s profit margin tells you how much the product sells for above the actual cost of the product itself. Essentially profit margin calculates how much out of every dollar you make from that item is PROFIT. Now as a note here, this calculation, when done per item, only takes into account cost of goods sold and NOT operating costs or start up costs.
So while the entire spreadsheet is available for PMS members, I am going to share some examples.
Our profit margin for a cup of coffee, including the cup and such and creamer and other fixings was around 85%. Meaning that for every $1 we made in coffee sales, $.85 of that was PROFIT and went to covering our operating or overhead costs, recouping our start up costs, and increasing our owners compensation.
And here’s the thing- almost ALL cafe items are very high in terms of profit margin.
Hot tea, for example, we sold for a 90% profit margin. Hot cider that came from a powder mix? Also 90% profit margin. When we as owners can buy in bulk, we can charge fair prices that our customers are more than willing and happy to pay and still make these incredible margins on our cafe items.
So when people tell me, oh– adding a cafe would be too expensive. I tell them, well– if you really do the math, how long would it take you to recoup your cafe start-up costs and begin funneling your cafe profits right into covering huge costs like rent and payroll?
And you know I love numbers so let's do a little math.
Let’s look at the cost of MY equipment. Now again I have this all broken down item by item inside PMS but this includes my commercial espresso machine, my grinder, my knock box, all my milk pitchers– AND all the training expenses and products we used to train with and that first initial stock-up order.
Now note here this does not include my counter or anything like that–because I would have had the counter installed either way. And it doesn’t include my sinks or dishwasher because we needed those items anyway– lets not split hairs here.
But anyway, all of these items totaled to around $7,000. Now… do I regret not getting a fancier espresso machine and one that could make multiple drinks at once and steam milk a lot faster? YES, but again– can’t go back now. And if you want to see my full set up go to YouTube.
But anyway, MY start up costs for the cafe specific items was $7,000.
So going back to this ONE month of cafe sales. That month, which YES was one of our busier months (March 2019) – we made a NET profit of $11,437.17. Meaning we made over $11,000 AFTER our cost of goods sold was already taken out of the equation.
So not only did I fully cover our entire start-up costs for the cafe specific items in ONE month– our cafe sales contributed almost $4,000 to cover payroll, rent, owners compensation, and other costs.
This is absolutely incredible and let me be the first to say– there is no secret sauce here. I didn’t do anything special or get any sort of unique or outlandish results. When I talk to other play based business owners that really place a significant focus on their cafe and cafe sales– their results and profit are really similar.
So let me take a break here and– let me ask you. After this ONE month that it may take to recoup start up costs– what would $11,000 in additional PROFIT do for your business? Would it take some pressure off your open play sales? Would it reduce the amount of hours you need to work? Would you be able to hire and delegate more tasks? Would you be more free to dream, to relax, to spend time with your family– and realize the true “life of a business owner” lifestyle you dreamed of when you started drawing up your business plan?
Would it mean you had to coordinate less classes, order less retail items, simplify your business in any way? Would it mean YOU, as the owner, got to take home a bigger check each month? Would it mean more vacations and extras? Now let me play devil's advocate and let's say that $11,000 profit month was an outlier. Even if you did HALF of those sales and made $5,500 in profit– again this is net profit– NOT gross revenue. That would likely be GAME changing for your business. Even one FOURTH of that $11,000. If you made around $2,500 in profit– that;s LESS than the cost of wages for a manager or team lead that works 30 hours a week and makes $20 per hour.
So when people tell me a cafe is too expensive, or tell me it’s not worth the up-front investment, I do this little math exercise with them. Because the fact of the matter is, most play based businesses can’t afford NOT to have this additional revenue and profit.
2. Start up costs will be lower than you think
So as I mentioned in point #1, start up costs for MY cafe equipment was around $7,000.. But here’s the thing– on my podcast, I’ve shared some cafe related tips both from a former Starbucks Manager (for over 10 years!) turned play cafe owner and current play cafe owners and they all agree– it’s OK to start simple and expand from there.
I mentioned in yesterday's episode that we purchased a fairly basic commercial espresso machine for around $4,000 and it served us well. We started with a very simple coffee and espresso based menu and here’s the thing- I did make mistakes. For example I bought a really expensive commercial blender at one point and tried making blended drinks and smoothies before deciding it wasn’t a good fit for us. But I was able to sell that blender for nearly what I paid for it and we bounced right back.
You’ll hear from play cafe owners on my podcast that have been slowly expanding and tweaking their menu for YEARS. So if adding a cafe to your business seems expensive or even just overwhelming– remember, you can start small.
Really when it comes down to it, as long as you have a way to make drip coffee and a way to make espresso and steam milk, you’re off to a great start. Just with those two things, even without an espresso grinder or anything like that… you can already make coffees, red eyes, americanos, lattes, macchiatos… there are SO many menu items that can be made with these two base items.
And usually with a commercial coffee maker you also have a hot water hook up meaning you can make that hot tea and cider, some of our most popular and highest profit margin items we had– and each take less than one minute to make. So just go into these episodes and the next few with an open mind because it is actually much easier than you think. And yes, you CAN open a cafe with zero coffee experience, even if you don't drink coffee yourself! More on that here on my podcast.
3. You’ll increase the amount of money you make every time someone comes in
So even though the pandemic is slowing down and people are feeling much more comfortable gathering in indoor spaces, I believe the pandemic has changed how people use play spaces for the longer term. We as owners can’t rely on maximum volume anymore and selling hundreds and hundreds of play passes per day– this is not a viable model.
And as an owner you likely already know- it takes work getting someone new in the door! You need to post on social media, run ads, stay consistent, and maybe you blog or go live or share reels or tik toks.
So wouldn’t you rather just pause for a second, and focus on better serving the customers who are already walking through your doors, instead of always hustling to find more more more customers?
When you have a cafe, even a basic one, you now have a way to increase the transaction value of every single family that is already visiting you.
We found that over two thirds of parents that came into our facility added on between one and three menu items during their visit, more than doubling the amount they were spending with us.
And again, this person is already coming through our doors. It doesn’t cost us anything extra in terms of advertising to double their spend. Just a friendly and informed staff member to walk them through the offerings.
This is incredibly valuable for businesses. And it isn’t increasing the transaction value for each customer just during open play– it’s during parties, classes, events, and every single time you welcome people into your space.
4. Having a cafe elevates your customers experience
Now sales are great, YES– because as I always say even if owning a play space is a “labor of love” it is STILL a business–
But adding a cafe can do more for you than just increasing your revenue and your profits. And I am not suggesting that you should be treating your existing customers like some sort of walking ATM that we want to drain of all their hard earned cash.
No. Adding a cafe can actually allow you to SERVE your customers at a higher level. And here’s the thing– they’ll likely thank you for it. Because here’s the reality. Parents and caregivers drink coffee. They are already spending money on teas, coffees, lattes, smoothies– all of these things. But they’re probably stopping elsewhere either on the way to you or on the way home.
By adding these offerings that we know caregivers are already interested in, we are simplifying their routine and we are providing them with convenience. Now, they don’t need to make coffee at home if their toddler is screaming and starting to tear up the living room by 8am and they just want to get out of the house for a change of scenery.
They don’t need to wait in the crazy Starbucks line. They don’t need to chug their drink before entering your play space because you don’t allow food and drink, starting their experience on a negative note.
Now they can just come-as-they-are and enjoy something nice for themselves, while their children play and have a great time. Next time they book or attend a party they can arrive knowing they’ll be able to mingle and chat with other parents while sipping a delicious hot latte. And that easter egg hunt they just registered for? It’s going to be that much more enjoyable because maybe now there will be unlimited coffee there.
Trust me, your customers will appreciate having this option. And if they don’t? Then they will be the 1 out of 3 customers that chooses not to add cafe items to their order and that’s FINE. It’s not like it's all of a sudden required to purchase coffee once you add a cafe. But we as business owners need to stop thinking of upselling or increasing transaction value as BAD or like a greedy sales tactic. We are simply offering an additional service as a convenience and your customers can make the choice for themselves whether or not they are interested. But shh- most of them will be.
5. Cafe offerings are an inexpensive way to Increase the value of any event or promotion
I mentioned earlier that most owners, when they think about cafe sales, think of it JUST as a way to increase revenue during open play hours. But that is just a tiny fraction of the time a cafe can benefit your business.
You can use your cafe offerings to increase the value of EVERY single event you host and allow you to both charge more AND elevate your guests experience. Let's take an easter egg hunt again for example. You have options! You can either add $2-5 to the ticket price and offer unlimited coffee and tea– which costs you just a few dollars in total for the entire event– and end up making $60 extra dollars at least for every time slot saying you sell around 30 tickets for each.
You could also choose not to offer ANYTHING as “included” and I guarantee you, parents attending WILL purchase coffee and other cafe drinks– allowing you to make that same $60 that way, or in some cases much, MUCH more –especially if it's an event where a lot of adults are in attendance. They purchased their tickets well in advance, so it’s much easier for them to justify spending that money on your cafe the day-of (since that ticket money has been long-gone and un-missed for weeks).
If you were to head down to Dunkin Donuts and grab a box of coffee and a stack of cups– I promise you, you will pretty much break-even since they have already worked their profit margin into what they charged you– and by the time you serve it, it won’t even be fresh. Plus, I want YOU to enjoy that profit, not dunkin donuts.
Now speaking of parties, unlimited coffee was ALWAYS our MOST popular add on.
We charged around $35-$50 for this (depending on the year), and again– it costs us just a few dollars to execute. And once people saw we were serving coffee– tons of guests decided to upgrade and order lattes and more specialty items which they paid for themselves.
On average, having our cafe open during parties made us between $50 and $100 extra per birthday party. Part of this was due to the fact that we focused on first and second birthday parties which always had WAY more adults than children in attendance. And another part was as SOON as one parent ordered a really cool drink– everyone seemed to want one!
And this is another example of increasing the revenue you’re making from people who you ALREADY worked to get in the door. You work hard to book your parties. Why not deliver an amazing experience and offer them a nice delightful drink to buy while they’re there?
Many people don’t think of these additional ways to make revenue outside of open play.
6. Having a cafe gives you more options for bundles or add one
So back in episode 25 of my podcast I gave you some ideas on how to bundle some items together to create a flash sale that can generate a quick cash infusion in your business. And one of the tips I shared was that, when you bundle items together, you really want to focus on high profit margin items– meaning things that cost you very little but are very valuable to your customers.
Things like – you guessed it!- cafe drinks. Adding a cafe is really an asset to your business and allows you to get really creative with your promotions.
In about 2 more weeks on my podcast (in April 2022) we are really going to dive into memberships and how to price memberships and how to increase your number of members. And as a little preview, one of my favorite ways to make a membership offer really valuable is to add member discounts for your cafe.
By offering members free coffee or member-only pricing for lattes and specialty drinks, you’re now able to provide them with…let’s say $2 of extra value every single time they come in.
If they visit 2 or 3 times a week that’s $24-ish extra in value you’re providing per month, and that will allow you to charge more while also making that membership look a whole lot more attracting and enticing. Let’s say you have 50 members. If you were able to increase your membership cost by even $20 per month, that’s an additional $1,000 per month in membership sales.
And here’s the beauty of it. For the people who choose the “freebie” of coffee– that coffee is there anyway. Chances are, your staff dumps TONS of coffee when it gets stale or at the end of the day. So not only might this cost you a tiny bit– it may actually cost you nothing.
And if they upgrade and order a latte? That staff member is there anyway, getting paid regardless of if they make this extra purchase or not.
Which brings me to my next point.
7. Having a cafe allows your staff to become more productive
As I mentioned, your staff is already there and you are already paying them. A lot of people assume that when you add a cafe you need to hire a ton of extra people and increase payroll costs.
But here’s the thing– we aren’t running crazy high volume coffee shops here. Chances are, people aren’t popping in on their way to work on a time crunch.
When people come in and order a drink, they’re planning on staying for a while. So even if there’s a little backup at check-in and it takes the barista 20 minutes to bring the drink over, it’s really never a big deal– we just make sure to let them know when they order it.
Chances are it takes them 20 minutes to get their kids shoes and coats of and get them settled before being able to sit down and enjoy their drink anyway. And same for parties. If a party is 2 hours long– I promise people will be OK with waiting a few minutes for their latte.
We successfully generated thousands of dollars per week in cafe revenue only having one staff member on at most times, unless it was a break week or a birthday party (where we had 2 hosts, but still only ONE manning the cafe).
So just know you can very likely operate a cafe while maintaining your current payroll budget and staffing plan.
8. Having a cafe allows you to grow your email list for free
One last benefit of a cafe I wanted to throw in here is that it just gives you one more creative way to get new people in the door and grow your business assets like your email list.
Back in episode 1 of my podcast I shared how we offered a free coffee coupon with the purchase of an open play pass in exchange for someone signing up to our email list.
Not only does this cost us very little, but it gets people into our space and to purchase an open play pass which is also a very high profit margin item. And it give us the chance to really WOW them and share what an amazing part of the community our play area is.
And YES, we can follow up with them afterward via email and allow them to continue to be a part of our world whether that’s through becoming a member, booking a party, attending an event, or just popping in for open play every once in a while.
Especially if you’ve been open a few years or have a lot of competition, it can be tough to get new people into the door and it can be expensive to advertise. A free coffee has been the most effective and least expensive way I have found to accomplish this and really gain lifetime community members and customers.
Alright well that wraps up my THESIS (or what felt like it!) about how crucial having a cafe is to the modern play space. Did I miss anything? Have I convinced you? Let me know and DM me on Instagram!