There’s something about cafés that makes business enthusiasts want to give it a shot despite its competitive nature. More than just serving good coffee, there’s a whole complex process behind establishing a coffee shop—but it doesn’t have to be complicated.

Third wave coffee chain Habitual Coffee has been around since 2015. Owners Raph Garcia, TJ Rocamora, and Kaye Ong came from different backgrounds unrelated to food, but somehow they all ended in the same business venture, putting up Habitual Coffee with an investment of P30,000. Now, they have three branches. How can start-ups do the same?

Opening a coffee shop
There’s more to opening a cafe than just knowing how to make a good cup of coffee
CONCEPT

Choose a concept that reflects who you are and what you want to serve to your customers. As much as possible, add a personal touch to your concept. The hardest part about opening a café is building a brand that will touch people.

Assess your coffee shop’s visibility:  What’s the foot traffic like in your café’s location? How easy is it for people to get to know your brand?

“Third wave coffee has been a thing globally. I guess my partners [and I] are all exposed to third wave coffee abroad and it was something that we grew accustomed to having instead of just commercial coffee. It started out as a hobby to brew at home and then there was an opportunity for us to have a space that was low cost when we started in Ortigas,” says Garcia.

As a start-up, they were experimental. They didn’t know the limits of opening a cafe and so they had to test it. What’s the base segment that can appreciate good coffee? What’s the best concept that can serve more people? “Moving forward, if and when we open more branches, we already have an idea based on all the things we’ve tried. It’s about having this kind of mentality [to be experimental yet discerning] for startup methodologies,” says Garcia.

Habitual Coffee has already expanded into three branches over their years of operation
Third wave coffee chain habitual Coffee has been in the industry for almost five year already and has really seen the change in a Filipino coffee drinker’s habit
LOCATION

In opening a café, Garcia puts a lot of emphasis on finding the right location. Go for a space where you can tap the people you wish to reach—those who can really appreciate the type of coffee you serve. An accessible location plays a crucial role in your cafe business. Assess your coffee shop’s visibility:  What’s the foot traffic like in your café’s location? How easy is it for people to get to know your brand?

“Once you go to a place the fourth time, you’ll probably go there forever,” Garcia recalls a saying. 

“It’s hard to get a location. Say, you go to the mall and you bring a concept to them. Hindi ka nila papansinin in the beginning. It’s only after you build your brand slowly that you’ll get better locations,” says Garcia.

There was a time when they got offered a space in a mall, but it was situated far back from the entrance. They knew that if they wanted to get a good spot, they had to first create a name for themselves, and so they decided to decline the offer. They experimented with different café formats: a small kiosk, a small coffee bar in a furniture store, a cinema-level café with outside seating, and so on. 

For Garcia, location is the most important aspect in opening a cafe

Habitual Coffee’s first location in Ortigas is a hidden destination type, meaning the people who go to their café are those who really seek them out. Following that, their Makati location paved way for more people  to have access to the kind of coffee they serve. No matter how good your publicity is, if it’s not easy for people to access your location, then your café needs to work twice or thrice as hard. 

There are two things you need in your café’s supply chain: reliable suppliers and back-up suppliers.

To gauge the success of a location, Habitual Coffee turns to their number of regulars. “Once you go to a place the fourth time, you’ll probably go there forever,” Garcia recalls a saying. 

SUPPLIERS

When it comes to suppliers, business is all about timing. When there’s a wave of new categories of products, people will flock to it,  joining in on whatever the industry is trying to do. So it’s important to find your footing with the right individuals. As a budding business, it’s best to try to be part of groups that can give you an overview of the ins and outs of the coffee industry.

Through the years, Habitual Coffee started to focus on local coffee. They are the first local partner of Kalsada Coffee, a coffee producer in Benguet. Kalsada Coffee helps farming communities process their coffee to a level where they can export it to the U.S. Half of their coffee is exported to the U.S. and then the rest are consumed locally. 

In opening a coffee shop, a concept says a lot about what your brand stands for
Choose a concept that’s personal and will easily connect with your customers

“We took on the mission of improving Philippine coffee, while at the same time trying to push this product to the local market. Harris [Conlin] said 97 percent of coffee consumed in the Philippines is imported and you see it even with the specialty coffee shops. They’re all mostly imported coffee. We’re one of the few who really push for specialty grade coffee that’s local,” says Garcia.

There are two things you need in your café’s supply chain: reliable suppliers and back-up suppliers. It’s much easier to have a back-up supplier for food because there’s always the grocery store. It is known, however, that certain products are harder to find if you’re aiming for a specific quality. When it comes to coffee, Habitual Coffee places their trust in Kalsada Coffee as they’ve already grown together as businesses. 

All major manufacturers of coffee equipment have a local distributor. With the help of the internet, information on choosing the right equipment isn’t hard to find.

Picking the right partners, having the mentality [to troubleshoot] in case something goes wrong, and organizing things using technology will help [in supply chain] management,” notes Garcia.

Habitual Coffee has an internal inventory system that can project their sales on a weekly basis. Based on what the system reports, they determine how much supply they need. As they have multiple branches, they opted to not buy a truck for their deliveries and instead rely on application-based transportation solutions.

One difficulty they encountered in the past had to do with their supply of fresh milk, which they sourced from Lipa: Because its shelf life is only around three to five days, they had to shift suppliers multiple times. There were instances wherein a lot of their milk was wasted due to spoilage. Now, they found a supplier for Australian milk that’s specifically made for coffee, which is halfway between fresh milk and regular milk you can find in groceries. Their milk supply can now be stored for up to six months. 

Habitual Coffee wanted to focus on Philippine coffee and so they are working with Kalsada Coffee to source beans from provinces in the country
Remember: Have a supplier and a back-up for it

Their first coffee beans were from EDSA Beverage Design Group’s (EDSA BDG) single origins. Most cafés would go for EDSA BDG’s blends, such as Dark Matter Theory (flavor profiles include caramel, cherry, and roasted nuts), which is cheaper but is also good for espresso. Habitual Coffee, however, wanted to focus on single origins from the beginning so they began with their Kenyans and Ethiopians, and then they’d also buy from other local roasters like Yardstick and Coffee Empire. 

EQUIPMENT

All major manufacturers of coffee equipment have a local distributor. With the help of the internet, information on choosing the right equipment isn’t hard to find.

“There are many local roasters who can make it easier for you [to open your own café]. They have the equipment and coffee beans for anybody who wants to get started—there’s EDSA BDG and Yardstick Coffee. Many people started opening shops and [it’s] thanks to these companies,” says Garcia. 

For start-ups, Garcia recommends the cheapest possible equipment because most likely the first location you’ll land on will not be so good.

Choose equipment that is efficient and versatile. Interestingly, Habitual Coffee only has one grinder—but this already allows them to grind different coffee anytime (as opposed to the traditional grinder that will only leave you with one choice of coffee for the whole day). 

The equipment Habitual Coffee started with was AeroPress simply because it’s cheaper—it’s how they brewed at home. They didn’t need to buy an AeroPress, they just needed a grinder. The decision, according to Garcia, wasn’t made out of sheer novelty. It was a way to test the minimum, viable, small business they can put up and gauge how people would respond to specialty coffee. 

 Habitual Coffee is known for their AeroPress Coffee as one of the owners, Kaye Ong, is a world champion in the field of AeroPress brews
For startups, it would be best to start with the cheapest equipment possible and then gradually upgrade once the cafe performs well

In the end, they found that specialty coffee can grow to a certain amount. There was interest as people started opening more specialty coffee shops and big brands began coming in—there was a market for this kind of coffee and a lot of people were genuinely interested. That’s when they knew they had to invest and open a big branch. 

For start-ups, Garcia recommends the cheapest possible equipment because most likely the first location you’ll land on will not be so good. The best ones are reserved for businesses that already have a name. But if you’re lucky and if you find a location that works for your chosen concept, then that’s the time to invest on high quality equipment.

The owners of Habitual Coffee opted for warm and bright tropical colors to match their local coffee instead of a dark and wooden aesthetic, which was comfortable but contradictory to what local coffee wants to communicate.

“Go for reliability. For coffee, there are certain brands that a coffee enthusiast would know. If you pass that hurdle, then you’re good. But if it’s a cheaper brand, then the coffee enthusiast won’t really pay attention to you. [However], if it’s not your target market, then it doesn’t matter,” explains Garcia.

Since Habitual Coffee has become known for their AeroPress brewing and for using Kalsada Coffee and other origins readily available, they use branded equipment (such as La Marzocco and Malkhonig). 

DESIGN

The design of your café says a lot about the kind of experience you can offer your customers. Plan the direction you want your coffee shop to take—are you going to serve specialty, imported, or local coffee?

One of Habitual Coffee’s first branches had industrial, warehouse-like interiors— a minimalist concept with concrete walls. According to Garcia, it went well with their push for specialty coffee, resonating in particular with people who were more discerning about coffee. 

The aesthetic of Habitual Coffee revolves around warm and bright tropical colors to match their push for local coffee in the market
A cafe’s design reflects what kind of service and experience a customer is bound to receive

“They felt like they were in their place. But there were people, I guess a more mainstream crowd, who were turned off by it. When people talk about third wave coffee, most would say it’s snobby—you have to gain certain knowledge and palate to be able to appreciate it. As we went on with the business, it became something we wanted to distance ourselves from,” explains Garcia.

The owners of Habitual Coffee opted for warm and bright tropical colors to match their local coffee instead of a dark and wooden aesthetic, which was comfortable but contradictory to what local coffee wants to communicate. Their café became a local, personal oasis from the bustle of the city.

Based on Garcia’s observation, people start to enter cafés lunchtime onwards, whereas in other countries, coffee shops are usually open from 8 a.m. to 3 p.m. to cater to the morning crowd.

Connecting with the customers matters to them and so they structured their café in a way that would let them make the most out of their small location. They make it a point to always have bar seats in order to accommodate the customers who want to connect with the staff, know more about the coffee, or watch how their food is prepared. It’s also a place where they do cupping sessions. This kind of architecture really serves as an opportunity to know the café and, more importantly, the people in it.

MENU

Always remember your concept. Craft a menu that fits the lifestyle of your market, and that includes ensuring that the people in your location can afford it.

When customers enter Habitual Coffee, they can first choose an origin and from that decide how they want it to be. With that first step, customers are made curious about what the Philippine origins are, what makes each of them special and different from one another, thus raising awareness on the quality of Philippine coffee.

By understand the habits of their customers, they were able to gauge what are their preferences in terms of coffee
Having the customers pick an origin raises awareness on the kind of quality only Philippine coffee possess

Another important thing to remember when crafting your menu is to know exactly what the market needs. Based on Garcia’s observation, people start to enter cafés lunchtime onwards, whereas in other countries, coffee shops are usually open from 8 a.m. to 3 p.m. to cater to the morning crowd. In the Philippines, people usually get coffee as a way of taking a break from work. 

Acknowledging the lunch hour rush, Habitual Coffee’s food offerings are patterned in a way where people can eat lunch (yes, they have rice bowls in their café) and have coffee afterwards, which is unusual compared to the breakfast menus of many cafés.

But remember: what’s most important in a café’s menu is of course the coffee, the core product. Everything else can be subject to change. 

When it comes to coffee, Habitual Coffee has seen changes in their five years of operation. “Our bestseller is still a flat white, which is Australian and is basically a cappuccino. So now, we know that people like coffee with milk. There’s people that drink black, so we make black coffee the best way we can. There are those who like it iced. Even something that was taboo in third wave coffee years ago—sweeteners. We’re just very deliberate [on what the market needs],” explains Garcia.

There are items on their menu that are location-specific. Cold brews with milk tea and coffee fusion (plus sinkers, too) are available at  their Uptown branch while milkshakes are served in their Vertis North branch. Each location has opened their business to new market segments, pushing them to adapt to different preferences. It’s a crucial part of their identity-building. 

 One of their bestsellers is steak and eggs
Knowing that most of their regulars mostly come in during lunch time, they opted to provide rice bowls to keep up with their consumers’ lifestyle

“The location is set but everything else is just a variable now. [The current menu now] It’s not even halfway through what we want to build so we’re still developing from here,” says Garcia.

Pastries are staples in a café set-up, then the rest are the more flexible items. Habitual Coffee started with having no food at all, but eventually added a few pastries and some sandwiches to their menu (in collaboration with the owner of their first location, Richie Manapat). 

But remember: what’s most important in a café’s menu is of course the coffee, the core product. Everything else can be subject to change.

 For Habitual Coffee, it’s about, well, understanding habits—how they work and how to form them.

In terms of pricing the items on your menu, the standard is usually cost-plus—or the cost multiplied twice or thrice, which depends on the owner’s discernment. What Habitual Coffee does is to try to perceive its value to the customers. The owners ask themselves, “How much would I pay for this so I can have it as often as I like?” 

“There are places that cost P500 per dish. You aren’t going to go there everyday, you’ll probably go there once or twice a month. But for something that you want to have on a daily basis, it has to be priced lower. It’s gauging what the top end of that is: Will people have it all the time?” Garcia says.

Find people who have interests other than coffee, who know what they’re talking about. The more topics there are, the better chances of finding a connection with the customers.

For Habitual Coffee, it’s about, well, understanding habits—how they work and how to form them. There are people in their café who’d order their steak and eggs everyday, there are those who’d have it every after yoga session, and there are those who would come order it every week. It’s about having a price point that encourages repetition.

Not everything is of great quality and offered at a price where the farmers make more.

HIRING

Go for the friendly ones—but not the type that’s loud and aggressive. They should be confident, not egotistic. You can also opt to provide internal hospitality training for your employees as what Habitual Coffee does. This will develop your staff’s character towards approaching customers. Find people who have interests other than coffee, who know what they’re talking about. The more topics there are, the better chances of finding a connection with the customers.

Garcia places a huge value on the relationship they have with their regulars
Hiring the right type of people in your coffee shop aid you in establishing a good connection with your customers

Aside from finding people with the necessary skill set, it’s also about hiring those who can still learn more about coffee and who can connect with the customers. Employees who can give customers recommendations or show them the way around the city says a lot about the quality of your cafe’s service.

“The thing about cafés in the Philippines is that its [production] volume is not as high as in Western countries. In U.S. cafés, they can do 300 to 1,000 cups a day. Dito, 100 cups, okay na,” says Garcia.

A lot of cafés in the Philippines have to supplement with food because food offerings comprise 20 to 30 percent of the business. That percentage, according to Garcia, is the difference between you being profitable or not. When deciding how many people you need per shift, assess the performance of your coffee shop. If you’re on that lower end, one person per shift and a mid-shift would work. If there’s a rush, you need at least two employees for coffee alone. The food section should have a separate team.

“If you reach 200 to 500 cups—parang panaginip lang ‘yun sa Pilipinas, for coffeethat’s when you need two baristas at the bar and two cash registers,” says Garcia.

“If you go to Starbucks, the least busy is the one at the cashier. The next busy one is doing all the frappuccinos. Starbucks kasi is 70 to 60 percent frappuccino. I’d say 10 to 15 percent lang ‘yung coffee, the other 10 to 15 percent is tea,” Garcia says.

Garcia observes that there are big coffee shops that, upon first opening, would start with ten people, with the number gradually decreasing from there. Habitual Coffee started with just two people. During weekends, however, it’s different. That’s the case for bar service but if there are tasks aside from coffee operations, such as servers and dishwashers, then you need to hire additional staff. Scheduling shifts are highly dependent on the number of customers in your cafe at a given time.

“If you reach 200 to 500 cups—parang panaginip lang ‘yun sa Pilipinas, for coffeethat’s when you need two baristas at the bar and two cash registers. But now, it’s not like milk tea where there’s a line outside the door. There’s a line sometimes, but it’s just a short line. Kapag naubos na ‘yun, there’s some downtime before the next rush or paisa-isa lang throughout the day,” says Garcia.

MARKETING

Word of mouth begins in the coffee community. An established social media presence will aid in promoting your cafe. After that, everything else will be a magnifier of the things you do—the food, the service, and the experience.

Instagram is the most effective social media platform for Habitual Coffee
For Habitual Coffee, social media doesn’t necessarily boost sales; however, it gets them the awareness that their business needs

Ong’s win in a local AeroPress competition and in the World Championship (placing third) last 2015 helped elevate Habitual Coffee’s status to an international scale. People from abroad would come to the country and really look for them. 

Instagram is currently Habitual Coffee’s biggest market-driver. However, a certain number of likes on your post doesn’t necessarily translate into sales. The role of social media is to raise awareness about your café so that when people happen to be in an area (hence the importance of location) they can come by and try your coffee. 

“When we open in a new location, automatic na may photos. Compared to when we started, it took us a few months before reaching a peak. Now, even before we open, people are constantly asking, ‘Kailan kayo mag-bubukas?’ [With the help of social media], one month pa lang, okay na ‘yung sales,” Garcia says.

Even the simple effort of writing the customer’s name nicely (and correctly) on their cups goes a long way. Some customers come in so often that the staff don’t even have to ask their names, creating a sense of belongingness among customers.

Aside from social media, their aesthetic shows how much they’ve already grown as a business. From a simple sign that says “Habitual” (the word “coffee” wasn’t even there yet), their signage is now a giant acrylic sign that lights up. Aside from its role as design, it’s really their investment for marketing as people would really notice a cafe’s signage first before wanting to enter it. Garcia also considers rent a big part of marketing expense as this enables you to find a location where your target market can actually reach you.

To make sure their customers come back, their approach on hospitality is all about getting to know their customers, particularly the regulars. Again, it’s about maintaining a certain connection with the people who come in their café. Even the simple effort of writing the customer’s name nicely (and correctly) on their cups goes a long way. Some customers come in so often that the staff don’t even have to ask their names, creating a sense of belongingness among customers.

One dilemma the coffee industry faces  is if a café can survive on serving coffee alone.

“When it’s less busy, that’s when we try to strike a conversation. It’s not exclusive to the baristas. Even our kitchen staff customizes the food for our customers. There’s one, ipapatanggal niya ‘yung rice tapos tatlong itlog with the steak and eggs. There’s one na pinapatanggal niya ‘yung steak sa steak and eggs. He just wants the gulay, so when we see him come in, we know exactly what he wants,” says Garcia.

SALES

One dilemma the coffee industry faces is if a café can survive on serving coffee alone. In Thailand, all cafés only serve coffee. Comparing income levels, Indonesia, Thailand, and the Philippines are almost similar. But why can cafés from these countries survive on just serving coffee?

Coffee is the most income-generating item in Habitual Coffee's menu
Coffee still remains to be a cafe’s core product, volume- and profit-wise

“Aside from the coffee expenses, the next biggest expense is really your rent. It’s about controlling the size of the space relative to the expected volume. For you to be able to serve just coffee, you need the smallest possible space but still offer a place to sit down. For kiosks, it’s mostly takeaway coffee. For some places it can work but most Filipinos like to sit down. Although there are a lot of take-outs, 70 percent are dine-ins,” Garcia explains. 

According to Garcia, once you offer seating that’s when things start to get complicated. You’ll be providing WiFi and people are going to sit there for a few hours. It’s pretty straightforward: The turnover will be slower, but it’s how people would want to spend an afternoon taking a break.

“There’s a personal touch, there’s relationship building with people that come here everyday. Management sets the culture for that,” Garcia says

In their menu, it’s coffee, of course, that generates the most profit. Their gross profit is 75 percent, with food cost for coffee and food at 20 to 25 percent and 30 to 35 percent, respectively. For the pastries, since it’s all supplied, it usually goes like this: 50 percent gross profit on pastries and other consignment. Volume- and profit-wise, it’s always coffee that has the highest value. Food and other additional items on your menu can get  you through your rent expense.

MANAGEMENT

“A successful café is built on its culture. You’ll see me here brewing and serving. In terms of coffee knowledge, we all know what we need to know to be able to operate. I pass on the training to senior staff members and if they ever leave, we just train new senior staff. There’s a personal touch, there’s relationship building with people that come here everyday. Management sets the culture for that,” says Garcia.

For him, a café requires breaking the fourth wall to be able to build a connection with the customers. One will easily know if a café doesn’t have that kind of culture—there might be good service, but that’s not enough. A café always has to go back to service on a personal level.

During their first year of operation, their food costs reached 40 percent, and they weren’t measuring anything at all.  The moment they started counting daily, their costs dropped from 40 percent to 25 percent.

Garcia recalls an instance last Christmas in their Vertis North branch where regulars left presents under their makeshift Christmas tree. This shows how the staff there is championing hospitality and so he commends his senior barista’s unfailing connection with their customers. There’s even a regular who treated the staff to lechon. These instances prove that a café isn’t just about serving coffee, it’s more about creating a new home for their customers.

In terms of inventory system, the ones mostly available are for ready products. They made use of Stitch, a software specifically made for e-commerce, which they utilized for operations. There’s also another system that takes into consideration food costs that are subject to variables (attributing to ingredients that are organic or perishable), which makes it more difficult to track.

Habitual Coffee provides an internal hospitality training for their employees
Service at a personal level is what Habitual Coffee aims for

Since there’s a specific way they want to handle things, they opted for custom solutions they came up with themselves. During their first year of operation, their food costs reached 40 percent, and they weren’t measuring anything at all. The moment they started counting daily, their costs dropped from 40 percent to 25 percent. There’s a saying: “What gets measured gets managed.” Garcia believes that there are restaurant solutions companies out there that they still haven’t discovered yet, but in the meantime, they try to make the most out of their current system.

“Any inventory system that counts what you consume and what comes in, it’s already godsend for small starting businesses. You only start to automate things when you need to. We’re already three branches in—our inventory system needs to be centralized, it’s not like we order separately each branch, ” says Garcia.

Coming from a technology background, and with the help of certain staff with knowledge on engineering, Garcia was able to create an inventory system that comes from a business perspective—one that controls their costs. 

For Garcia, counter service works best for Habitual Coffee. Initially, they wanted to do the full 10 percent service charge. But since it’s a small café with limited seating, they wanted to see if full service would work. They tried this service format for a few days and figured it would work best for food-centered businesses. With coffee, however, it varies. People want their coffee in different ways—some stay the whole day and some want it on-the-go.

OPERATION

When your café is finally up and running, you need to be mindful about which time of the day you need all hands on the deck. That way, you’ll be able to operate according to your daily workflow. Ask yourself: What time do your customers really go to the café?

The first food offering Habitual Coffee added on their menu are pastries
Pastries and other consignment will still help you in paying for your cafe’s rent

“In the five years that we’ve been here, we learned about the habits of Filipino coffee drinkers. In the morning, people usually have coffee at home or at work [due to the traffic] so I think they don’t bother going to a café. So if you go here in the morning, most of the people who take away our coffee are expatriates, not the Filipino group,” says Garcia.

How fast the staff can make coffee and how well they deal with order management are essential in a café business. Also, having a ticket system aids in managing the flow of their coffee shop. Automatic machines where you can set how much coffee comes out is cost-efficient and is ideal as it frees up some hands during operation hours. They choose not to invest in expensive water boilers that can cost around P50,000 to P60,000, but they can’t deny the fact that technology is key to productivity and troubleshooting especially when the café is understaffed. 

“For bigger brands I think they’re trying to communicate with a lot of people who are the same. I think our brand is really about something more personal. Coffee is a habit and it’s personal. It’s not one way of drinking,” says Garcia.

Consistency in terms of quality and service is vital in sustaining a business. For Garcia, however, this can be contradictory to what specialty coffee offers. Consistency entails one flavor, while the value of specialty coffee lies in the variety of flavors it can offer with every cup. “If you taste our coffee three years ago versus now, it’s totally different. Even from two weeks ago. I think as long as it’s good in range, and we’re deliberate on how we want it to taste for the day—our customers already know that. It’s really the nature of coffee. The only way to have a really consistent flavor of coffee is if you burn it. Dark roast is really about making the flavors super consistent. Starbucks is a specialty coffee shop, but they are deliberate in doing dark roasts so that across the world, it’s one consistent flavor,” says Garcia. 

STRATEGY

“For bigger brands I think they’re trying to communicate with a lot of people who are the same. I think our brand is really about something more personal. Coffee is a habit and it’s personal. It’s not one way of drinking,” says Garcia.

If a café isn’t deliberate on making it personal, then the brand won’t really have an impact on people. 

Finally, at the core of the café business are the people who execute the intent. As a business owner, the important decisions (what risks to take, what direction to follow, what investments to make) rest on your shoulders. But also, don’t forget that it’s the people behind the bar that can translate your café’s vision to the rest of the world.

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