Cybercafe.com By mixing two of today's hottest industries, you can give your finances a jolt.

By mixing two of today's hottest industries, you can giveyour finances a jolt.

What goes together better than coffee and computers? At firstglance, lots of things. But upon closer inspection, it's anatural mix of two of today's hottest industry trends:cappuccino and the Internet. Cyber cafes, where customers sipcoffee at computer terminals while they type a letter or surf theWorld Wide Web, have been so successful that, in some cases, ownersplan to open additional locations.

The traditional cafe experience began in Europe late lastcentury. Patrons would read their correspondence (now referred toby the computer cognoscenti as "snail mail"), enjoy musicor other entertainment, and chat with friends. In the modern cybercafe, the computer has become the entertainment; couples or groupslog on to participate in chat groups or surf the Web together.Customers can also send e-mail to friends across the world--thetechno-version of the 19th century cafe patron scribblingletters.

Among the earliest cyber cafes is Cyberia, in London, which hasopened several locations throughout the United Kingdom. Industrygiant Cybersmith, based in Cambridge, Massachusetts, boasts 50computer stations.

There are approximately 100 cyber cafes in America, and they areas different as any 100 restaurants. Some are cafes that addedcomputers--for example, The Grind, in St. Louis, started as a cafein 1993 and added a 486 PC in 1995. Hussain Chinoy, who developedThe Grind's Web site, says, "Essentially, the Internetconnectivity is a perk for our patrons, if you can excuse thepun."

Other cyber cafes are computer-consulting firms that servecoffee. Chicago's Interactive Bean evolved from GORP New Media,a company which creates electronic publications, designs Web pagesand CD-ROMs, and develops interactive presentations for businesses.Interactive Bean turned its reception area into a cyber cafe inDecember 1995 so coffee drinkers could see the firm's designwork. Most of the profits still come from the high-tech designside. "Our cafe is a stand-alone business," says co-ownerAndy Laing, "but it generates leads for our designbusiness."

Besides the basic excitement of owning your own business, saysPercy Wang, Laing's partner, it's fun to watch customerslearn how to enjoy the Net. "It's very rewarding whenpeople come in and find the Internet to be something useful insteadof just a fad."

Also, running a cyber cafe allows you to hang out, drink coffee,and play with computers all day. But before you run out and buy anespresso machine and a Pentium, here are some other things toconsider:

*How much does it cost? Costs vary, from The Grind's $1,500(to add a single computer) to Interactive Bean's reported$100,000 to $200,000 (to open an entire cafe with 15 computers).However, most cyber cafes have from one to six computerstations.

Another option is to buy used, reconditioned computers.According to a recent Carnegie Mellon University study, more than10 million PCs are discarded every year by businesses looking toupgrade. Many of these machines are purchased and reconditioned byvendors, who then resell them through a nationwide network ofretailers at an average cost of 40 percent off the retailprice--complete with full warranties.

Although it might be difficult to sell the cyber cafe idea to abank, you probably won't have trouble finding creative ways toraise capital. The Grind got its $1,500 from friends. InteractiveBean's capital, says Laing, consisted equally of personalsavings and a bank loan backed by the Small Business Administration(SBA). Another cyber cafe, alt.coffee (pronounced "alt dotcoffee") in New York City, spent $65,000. Co-owner John Scottsays the amount came in equal parts from credit cards, loans fromfriends and family, and financing from vendors.

*Hardware and software. You can save money in the short term bybuying so-called "dummy" terminals. These computers arenot PCs--you can't load Windows or any consumer software onthem--but they can access the Internet through yourserver.

If you do buy PCs, you may want to include software forcustomers who want to skip the Internet chat groups and just type areport or term paper.

Call your phone company to compare the cost of adding morebusiness lines versus the more expensive but faster ISDN, the muchfaster T1 line, or the very speedy T3 line. Few of your customershave that caliber of equipment at home or work. Alt.coffee'sScott recommends splurging for the T1: "Without that speed,most users will not be impressed."

Don't forget to call some Internet Service Providers (ISPs)and start negotiations with them. Jeff Gold, who owns Cup@Joe inRaleigh, North Carolina, looks for reliability and minimal downtimewhen searching for an ISP. Technical support is also apriority--you need an ISP that offers support during the busyevening and weekend hours. "My best experience so far has beenwith an ISP that has numerous individual customers and manybusiness customers," says Gold. "They were able toprovide good service by having personnel dedicated to servingbusiness clients."

*How much to charge. Most cyber cafes charge customers $6 to$10 an hour for using the computers. Do a cost analysis to see howmany of your computers have to be used and for how long in order topay back your start-up costs. Cup@Joe's Gold says that of thegross earnings his cyber cafe generates every month, only fourpercent of it is in computer time. "But the typical consumerbuys more than just computer time during a visit," headds.

The Grind has a different way to make money. "We're acyber cafe of a different sort," says Chinoy. "Wedon't charge for access, though we do require that our patronsactually purchase a beverage or something."

Coffee is a low-ticket item. To generate more revenue andincrease traffic, some cyber cafes offer seminars, or videoconferencing (the ability to share data and communicate using livevideo). Other cyber cafes design Web sites for individuals andbusinesses.

You can charge anywhere from $50 to several hundred dollars forthese services (depending on how complicated your customers'needs are), but you may want to hire a high-tech expert. Althoughinstructors who can teach a class on how to use the Internet ordesign a Web site might not want to work at a cafe for $6 an hour,you can still find good people willing to work at a reasonablerate. You can find knowledgeable student employees to fill thecomputer positions, Gold says, adding, "It is also possible tofind qualified people who work with computers at a day job and areinterested in a second, part-time job."

*It helps to have a computer and/or coffee background."There are two businesses here: running a restaurant andrunning a computer system," says Scott. "Make sure youhave competent people in both departments."

At Cup@Joe, Gold and partner David Sullivan owned a specialtycoffee house for five years, where they also sold whole-beancoffee, freshly roasted on the premises. Gold was an assistantchairman of chemistry at Duke University, where he supervised thedepartment's computer operations.

Interactive Bean's five employees are not necessarilytrained in computers or coffee. "When we hire people,the most important thing is a customer-service background,"says Laing. "We are prone to hiring people who have worked inrestaurants before."

*Don't want to do it all yourself? Even for a new businesslike a cyber cafe, there are consultants willing to help. Pasadena,California-based CyberDiner offers what it calls the "Turn-keyPublic Internet Access System." They install and configure thecomputer system in your cafe, then offer technical support for amonthly fee.

Packages range from around $2,400 for one basic Internet Station(a 586 DX4 PC), to the $3,500 Power Workstation (which features apowerful Intel Pentium 133 MHz computer with a 8x CD-ROM drive, andother extras). In addition, you'll have to pay a one-time feefor the Internet connection. Your total set-up costs will be muchhigher after you add printers, scanners, a server, networkinstallation (so the computers in your system communicate with eachother and with the server, which is usually located behind yourcounter), and the monthly support fee.

CyberDiner helped set up Espresso Biega in Rolling HillsEstates, California, and the Almost Paradise Cafe in Long Beach,California. "If they had to have a techie on the job,"says Bob Vickers, vice president of marketing for CyberDiner,"they'd have to pay him $20 to $25 an hour."

You can also look into buying a franchise, but not all existingcyber cafes are interested in becoming franchised. Cybersmith, forexample, accepts serious inquiries from potential franchisees viae-mail, but has yet to announce definite plans to franchise.

*Target market. There are several types of people who willpatronize your cyber cafe. People who do not have access to theInternet at work or at home (and there are still plenty of them!)will use your services. Couples or groups go to cyber cafes tolearn (from your in-house experts, or from each other) how tobrowse the Web, or how to download software. Students will stop into work on reports if their school's computer labs are toocrowded.

*Location. As with any retail establishment, location iscrucial. You may not want to locate too close to other high-techbusinesses, yet you want to attract as customers people who arefamiliar with computers. People line up to get into Cybersmith, inthe back yard of MIT and Harvard, but other markets may not be soreceptive--so do your research!

*Research. There's no book on how to start a cyber cafe,but there is an International Association of Cyber Cafes. TheAssociation has a Web site (see "Online Help," pg. 63,for address) that lists cyber cafes and typical questions (andanswers) for potential owners, such as "Where do I go to buycoffee?" and "What are some good ideas for seminars I canhost at my site?"

Since most Web pages end with the e-mail address of theirsubjects, you can send e-mail to owners. As always when seekingstart-up advice, avoid asking questions that are too general, like,"How do I start a cyber cafe?" You'll get betterinformation if you ask specific questions, such as, "Can Ibarter with an ISP--say, offer publicity for them at my locationwhile they give us a reduced rate for access?" (The answer, bythe way, is yes--some local providers are willing tonegotiate.) The better prepared you are, the easier it will be tokeep your customers coming back for another refill.

Denver freelancer Nora Carrera has written about business forthe past three years.

Contact Sources

Cup@Joe, 2109-142 Avent Ferry Rd., Raleigh, NC 27606,(919) 828-9886.

CyberDiner, 999 N. Hill Ave., Pasadena, CA 91104, (818)352-6703.

Cybersmith Inc., 955 Massachusetts Ave., #3D, Cambridge,MA 02139-3180, (617) 547-8588.

Interactive Bean, 1137 W. Belmont, Chicago, IL 60657,(312) 528-2996.

The Grind, P.O. Box 28703, St.Louis, MO 63146, (314)454-0202.

alt.coffee, 139 Ave. A, New York, NY 10003, (212)529-2233.