Are you thinking of opening a tea room? To embark on this entrepreneurial adventure, you have to know your market.
Market research is not only essential in giving you a better understanding of the current state of the tea room industry (from how it's doing, to what concepts are hot or not), but it also helps you decipher how to mould different aspects of your business so that it attracts the right customers.
To guide you through this process, we've outlined here the key steps in conducting thorough market research for a tea room.
Why carry out market research for a tea room?
Market research for a tea room has three main objectives:
- To make sure that the local market is not already saturated. The aim here is to assess whether there's a lack of tea rooms in the city or the area you want to set up your business. Ideally, the supply will indeed be lower than the demand, meaning the local market is big enough to support the arrival of your tea room. You may identify a specific customer segment that is underserved by the current supply or find that the area's general lack of eateries makes it attractive for budding entrepreneurs.
- Identify a concept that is likely to appeal to your target customer. If you're based in a residential area, for example, you'll need to come up with a menu that suits both adults and kids.
- Gather all the information needed to help you evaluate the revenue potential of your business. This part is crucial, as it will tell you whether your business is likely to have legs (i.e. be profitable in the long run) or if you need to wave goodbye to your dream altogether.
It's important to bear in mind that half of all businesses don't survive the 5-year mark. That's why it's crucial that you see market research for a tea room as an opportunity to ask yourself the right questions before launching your business, to reduce any obvious risks that could lead to its demise.
Trends in the UK tea room market
As with any other business, the market study of a tea room is based on an in-depth analysis of the tea room industry, customer expectations and the current regulations in force.
Checking up on the health of the tea room industry
The next crucial step in our guide on how to do market research for a tea room is casting your eyes over the local market. You need to familiarise yourself with the UK tea industry and how it's doing. Ask yourself:
- What is the current state of the sector: is it growing or shrinking? What are the reasons for this?
- Are more tea rooms opening or closing in your desired area of business and the UK overall?
- How is the turnover of tea rooms evolving and how much does each individual product (e.g. tea, scones, pastries) contribute to it?
- What concepts are working and which aren't so popular?
- Franchised or independently-owned tea rooms: which are better?
- What are the hot trends in the tea room market right now? Does your business align with them?
- What challenges are tea room owners currently facing?
Understanding the expectations of tea room customers
Once you've delved into the current state of the tea room market, it's time to understand the expectations and changing needs of consumers for your tea room's market research.
- What are the consumption habits of tea room customers today? Do they attend for breakfast, lunch, a coffee break, or a quick snack?
- What are the characteristics of a typical tea room customer? Are there significantly more families than young groups of friends?
- What is the average budget per customer?
- What are the most popular products sold? Exotic teas or scones and pastries?
To answer these questions thoroughly, we suggest you take some time out to talk to local tea room owners and the customers themselves to truly get into the heart of what draws people into tea rooms and keeps them coming back. The deeper you delve into the tea room industry, the more reliable and relevant your market research for a tea room will be.
The rules and regulations of operating a tea room
Doing market research for your tea room also provides an opportunity to familiarise yourself with the regulations related to operating a tea room.
- What are the current regulations in this area?
- Are they likely to change in the coming months or years at national level?
- Are there are qualifications that are legally required to run a tea room?
- Is any specific training needed before launching such a business?
Finding the most useful information on the tea room industry
You can rely on the following sources of information to help you conduct your market research on the tea room industry:
- Statistical institutes such as the Office for National Statistics (UK), Eurostat (EU), or the Census Bureau (US)
- Research institutes and specialized consulting firms
- The economic and specialized press
- The UK Health and Safety Executive and the FDA website's, in particular for all matters concerning health and safety regulations
- UK Tea & Infusions Association
- British Coffee Association
- UK Hospitality
You also can’t forget the main players in the game: the tea room owners themselves. Take some time out to grab a coffee with a tea room owner in your local area - as they could provide you with some valuable insider information about the sector.
Analysing the demand for tea rooms in your desired area
Checking out the local market
Now that you've looked at the major trends in the tea room sector, it's time to cast your eyes over the local market.
You can start by assessing its size: what is the population of the city or town and how many of them fall within your target group? You'll also want to make note of the profile of the population (from age and gender to job status and level of disposable income) as well as how often people visit the area in which you'd like to operate your tea room.
It's also important to identify, within the local market, specific locations that are likely to attract the most potential customers (whether it be a busy shopping street, near offices or beside the coast). It is undoubtedly near these locations that you'll be most drawn toward when deciding where to set up shop.
Finally, assess local customer expectations. Is there a demand for a hot drink and snack outlet that currently isn't being met?
Weighing up the competition
Conducting proper market research also requires a thorough analysis of the competition at the local level.
Start by rounding up all the tea rooms and coffee shops (as well as cafes and restaurants that offer hot drinks) located near your business. You should look at their concept, the type of products and services they’re offering, as well as the prices charged, and their target clientele.
This information will help place you in the best position to stand out from what everyone else is offering, by serving up a different concept.
You should also check out how much space and seating capacity each of your competitors can offer customers. You'll want to know how many employees they have too, as well as the turnover for each place.
Bear in mind that if some of these tea rooms or cafes are operating within an established chain, their brand recognition and large marketing budgets will make them your fiercest competition.
Analysing the reputation of your competition will also prove very useful. Speak to local business owners and residents to gather solid opinions on each places quality or products and customer service. Put aside some time to google them, too, and look up online reviews.
The aim here is to understand what customers like and dislike, so researching both good and bad practices will help you draw inspiration for your own concept.
Examining how other tea rooms attract customers
Your marketing strategy is detrimental to the success of your business, so you have everything to gain by checking out the main ways in which your competitors attract and retain customers. Ask yourself:
- Through which channels do your competitors communicate (via email newsletter, social media platforms or newspaper advertising)?
- What is their strategy in terms of promotional offers?
- Do these offers seem to be effective?
- Does their marketing strategy seem relevant to you or do you think you can do better?
- How much money do you think you should spend on promoting your business and communicating with customers?
How to set yourself apart from the competition when doing market research for a tea room
Once you've gathered all the information above, you can consider your tea room market research done and it's time to put this data into use.
Perhaps, for example, your research led to the conclusion that the market is simply too small for a new tea room or the business idea you had in mind isn't in line with customer expectations.
Or (we're hoping, anyway) you may have found enough data that confirms the existence of a real business opportunity - enabling you to kickstart the process of launching your tea room.
In this case, begin by developing your concept. This will enable you to target a clearly-defined customer base and offer a service that meets their expectations in every respect, whilst ensuring you stand out from the competition.
Developing your concept will also help you define the ways in which you'll attract and retain customers. Collate these methods (and their costs) into a marketing plan that aligns with the objectives of your business and the desires of your target market.
By this stage, you've invested more time than you have the money into your business. Once the money is involved, it's a risky game. So before devoting chunks of your own or other people's cash into your business, test your concept out amongst potential customers by carrying out a quantitative study.
This test aims to accurately present your offer to a maximum of potential customers and to validate your concept, or to refine it even more if necessary. If you are present on social networks, you will be able to quickly measure this adhesion thanks to clear marks of interest: a like on your page or, better still, a subscription to your newsletter to be kept informed of the evolution of your project.
Writing up your tea room's business plan
Once you've completed the market research for your tea room, you're ready to move on to the next essential step in launching your business: the business plan.
The business plan of a tea room has two objectives:
- It allows you to assess the expected profitability of your business idea is (and make a few adjustments where necessary)
- It allows you to present your idea to lenders and potential investors to securing financing for it
It goes without saying, therefore, that the business plan is the hook upon which the success of your business hangs. It needs to be clear, concise and, most of all, convince the person reading it that your business is worth investing in.
If you've never written a business plan before, doing so can feel pretty overwhelming. To help you along the way, you can use online business software, a tool that will accompany you through each stage of the drafting process.
There are several advantages to using business plan software:
- You are guided through the writing process by detailed instructions and examples for each part of the plan.
- You can be inspired by already written business plan templates
- You can easily make your financial forecast by letting the software take care of the calculations for you.
- You get a professional document, formatted and ready to be sent to your bank.
If you are interested in this type of solution, you can try our software for free by signing up here.
We hope that this article has helped you better understand how to carry out market research for a tea room.
Looking for inspiration as to how you should structure your business plan? You can also check out our business plan template for a tea room.
If you’d like more advice on any of the points mentioned above or any other element related to the creation or takeover of a tea room, please don’t hesitate to get in touch.
Also on The Business Plan Shop:
- The complete guide to opening a tea room
- How to enhance the profitability of a tea room
- How to open a tea room without money
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