There’s something about cafés that makes business enthusiasts want to give it a shot despite its competitive nature. More than just serving coffee, there’s a complex process behind establishing a coffee shop but it doesn’t have to be that way.
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 ended up establishing Habitual Coffee with an investment of P30,000. Now, they have three branches. How can startups do the same?
How to figure out your café concept
Choose a concept that reflects who you are and what you want to serve 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.
“Third wave coffee has been a thing globally. My partners [and I] are all exposed to third wave coffee abroad and it was something we grew accustomed to instead of just commercial coffee. It started out as a hobby to brew at home and then there was an opportunity to have a space that was low cost when we started in Ortigas,” says Garcia.
As a startup, they were experimental. They didn’t know the limits of opening a café 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.
How to find the right 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 appreciate the type of coffee you serve. An accessible location plays a crucial role in your 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?
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?
“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 were offered a space in a mall, but it was situated so 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 so they declined the offer. The three experimented with different café formats including a small kiosk, a small coffee bar in a furniture store, and a cinema-level café with outside seating.
Habitual Coffee’s first location in Ortigas is a hidden destination type—meaning the people who go to their café really seek them out. Following that, the Makati location paved the way for more people to access the kind of coffee they serve. No matter how good your publicity is, if it’s not easy for people to find you, your café needs to work twice or thrice as hard.
And 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.
How to find the correct café suppliers
When it comes to suppliers, business is all about timing. When there’s a wave of new product categories, people will flock, 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, try to be part of groups that can provide an overview of the ins and outs of the industry.
Over the years, Habitual Coffee has started to focus on local coffee. They are the first local partner of Benguet coffee producer Kalsada Coffee, which helps farming communities process their coffee to a level where they can export it to the US (Half of their coffee is sold in the US and the rest are consumed locally).
“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. 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 backup suppliers. It’s easier to have a backup 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.
“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 sales on a weekly basis. Based on what the system reports, they determine how much supply they need. They have also opted not to buy a truck for deliveries and instead rely on application-based transportation solutions.
There are two things you need in your café’s supply chain: reliable suppliers and backup suppliers.
One difficulty they have encountered is their supply of fresh milk, which they source from Lipa. Because shelf life is only around three to five days, they had to shift suppliers multiple times. There have been instances in which their milk was wasted due to spoilage. To avoid that quandary, they found a supplier for Australian milk that’s specifically made for coffee, which is halfway between fresh milk and regular milk found in groceries, and can be stored for up to six months.
Their first coffee beans meanwhile are sourced 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 also good for espresso. Habitual Coffee, however, wanted to focus on single origins so they meticulously chose Kenyan and Ethiopian varieties as well as beans from local roasters like Yardstick and Coffee Empire.
How to invest in café 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.
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 traditional grinders that only leaves 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.
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 people were genuinely interested. That’s when they knew they had to invest in better equipment and open a bigger branch.
For startups, Garcia recommends the cheapest possible equipment because most likely, the first location you’ll land on won’t be as 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 concept, then that’s the time to invest in high-quality equipment.
“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 its AeroPress brewing and for using Kalsada Coffee and other origins readily available, they use equipment such as La Marzocco and Malkhonig.
How to design the space
Your café’s design says a lot about the kind of experience you can offer 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.
“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.
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.
Eventually they 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.
Connecting with customers matters to them so they structured their café in a way that would enable them to make the most of their small location. They make it a point to always have bar seats to accommodate 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 serves as an opportunity to know the café and, more importantly, the people in it.
How to design your menu
Always remember your concept. Craft a menu that fits the lifestyle of your market, and that includes ensuring the people in your location can afford it.
When customers enter Habitual Coffee, they can first choose an origin and from there decide how they want to consume it. This kind of interaction delivers an experience that triggers curiosity about Philippine origins and what makes each of them special, thus raising awareness on the quality of Philippine coffee.
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 from lunchtime, whereas in other countries, 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 others.
When it comes to coffee, Habitual Coffee has seen changes in its 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 are 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 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 at their Vertis North branch. Each location has opened its business to new market segments, pushing them to adapt to different preferences.
“The location is set but everything else is just a variable now. [The current menu] 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 setup, then the rest are more flexible. Habitual Coffee started with no food at all, but eventually added pastries and sandwiches to the menu (in collaboration with the owner of their first location Richie Manapat). But remember, what’s most important in a café is of course the coffee. Everything else can be subject to change.
But remember, what’s most important in a café’s menu is of course the coffee. Everything else can be subject to change.
In terms of pricing, 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 every day, 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.
For them, it’s about understanding habits—how they work and how to form them. There are people in their café who’d order steak and eggs every day, there are those who’d have it after every yoga session and there are those who would order it every week. It’s about having a price point that encourages repetition.
How hire for your café
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 making a connection with 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 customers. Employees who can recommend to customers or show them their 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 the US, they can do 300 to 1,000 cups a day. Dito, 100 cups, okay na,” says Garcia.
Hence, cafés in the Philippines have to supplement with food because they comprise 20 to 30 percent of the business. That percentage, according to Garcia, is the difference between being profitable or not. When deciding how many people you need per shift, assess the performance of your coffee shop. If you’re on the 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 coffee—that’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 also observes that there are big coffee shops that, upon first opening, would start with 10 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 at a given time.
“If you reach 200 to 500 cups—parang panaginip lang ‘yun sa Pilipinas for coffee—that’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 pa-isa-isa lang throughout the day,” says Garcia.
How to market your brand
Word of mouth begins in the coffee community. An established social media presence will aid in promoting your café. After that, everything else will be a magnifier of the things you do—the food, the service, and the experience.
Ong’s win in a local AeroPress competition and at the World Championship (placing third) in 2015 helped elevate Habitual Coffee’s status to the international scale. People from abroad would come to the country and 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 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-bu-bukas?’ [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 graceful ode to aesthetics, it’s a clear return on investment in marketing as people would 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 to 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 into 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.
“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.
How to track and manage sales
One dilemma the coffee industry faces is if a café can survive on serving coffee alone. In Thailand, 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 coffee?
“Aside from the coffee expenses, the next biggest expense is 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 takeouts, 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 Wi-Fi 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.
On 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 pastries, since it’s all supplied, it’s usually 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.
The way to manage your coffee shop
“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 every day. 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 customers. You 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, Habitual Coffee’s 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 at 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. Habitual Coffee utilizes Stitch, a software specifically made for e-commerce, which they use 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.
Since there’s a specific way they want to handle things, they opted for custom solutions they came up with themselves. During the 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 that goes, “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 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 to go.
How to operate a café
When your café is finally up and running, you need to be mindful about which time of the day you need all hands on 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?
“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 Filipinos,” says Garcia.
How fast the staff can make coffee and how well they deal with order management are essential in a café. Also, having a ticket system aids in managing the flow of the 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.
Your best café strategy
“For bigger brands I think they’re trying to communicate with a lot of people who are the same. 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, and 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.