The information on this page is here to help you through the process of setting up an internet cafe, from initial planning through to daily operation.  We had to laugh when someone asked us why we were revealing these "trade secrets"... To us these aren't trade secrets - they are all common sense, logical tips.  What we regard as trade secrets are on a much deeper and technical level, which we keep for our growing family of paying clients and customers.

Disclaimer

The information on this page is NOT to be used in place of independent expert advice from your legal or financial advisor.  Don't be afraid to seek professional advice. We would rather see you start up and be successful than see you disillusioned and regretful.  Every business opportunity has different pros and cons to different operators depending on their particular financial situations

Introduction

Almost everywhere you go overseas you are bound to see them: coin operated internet kiosks or internet cafes, most often found in transport hubs, hotels or cafes. Australia lags behind the global market in this area, but this presents a fantastic opportunity to anyone interested in establishing a public internet access sytem in Australia.

It looks like an easy way to make money, and at first glance it appears to be a case of "why not let the machines do the work, and all I'll have to do is collect the money!!"  That's almost true, but like just about everything else in this world it's not quite that easy.

The information below should help anyone interested in entering into the internet cafe business, but please remember there are many reputable companies interested in helping you establish yourself in a well-founded manner. This article is intended to help you by pointing out some of the problems others have experienced when starting off an internet cafe. If you adopt the right approach then you will definitely succeed.

Ask yourself - why do you want to open an Internet Cafe?

The first thing you need to do before you choose which business you want to do is to figure out why you want to start it. Is the idea of opening an internet cafe one of passion, or of one of business sense?  Ideally it should be both.  If you are passionate about opening an internet cafe then you are more likely to add energy and longevity to the project, but you also need to have the flexibility of mind to find the location and setup that makes the most business sense.

Most people want to start a business in order to earn more money, to be able to fire their boss, or to stay at home and raise their kids. Everyone has their own reason but you have to know what this is before you start. One thing that most people don't realize is that when you don't have a clearly defined reason for starting a business, you are setting yourself up for failure from the start. Otherwise, what is going to keep you motivated to help you make your business a success?

Before you go any further ask yourself these questions:

• Are you willing to work long hours, day or night, and at weekends, mostly on short notice, if required.

• Can you handle money matters efficiently (both your own and other's)?

• Do you have access to sufficient capital to setup and grow your business?

• Do you have sufficient IT knowledge or know someone who does?

• Can you organize yourself and stick to a schedule?

• Do you remain calm when things go wrong?

• Can you "handle people"?

We are very fortunate at Arinda to be a business-to-business supplier, as it gives us the opportunity to meet with so many small business operators.  From this experience, it is our strong belief that the people who really succeed in business are those with a positive outlook, a "can-do" attitude, and above all, a commitment to serve their customers.

Do you have the skills?

A word of caution

Many internet kiosk manufacturers market their terminals with phrases like "passive income", "work when you want", "business in a box", and more generally as "investments".  Don't be fooled! Owning an internet kiosk or internet cafe means you own and operate a business, and like all other businesses it needs a professional and business-like approach.  A business will only succeed if you can supply a quality product or service which is in demand by customers.  To achieve this requires careful thought and positive action. The financial reward your business makes will be in direct proportion to the energy and attention you put into it. 

Look out for inflated profit projections. There are few reputable statistics available in Australia on internet cafe revenues, so you should thoroughly check out the basis of any figures given.  Yes, it is true that a top internet cafe site can earn you $5000 a week, but a poor site can also cost you lots of money.

The facts are that a computer which runs 24/7 will eventually need attention and maintenance; eventually some user will attempt to 'hack' your system; eventually some user will damage your equipment, whether intentionally or accidentally.  Markets change, and a location or site which is highly profitable now may not stay that way without your continued input into the day to day operations.

Automated and unmanaged internet cafes can work well and be a profit gold mine, but you need to stay on your toes, monitor your business, and be prepared to attend to the site at short notice should it need attention.

Know your potential customers

Give serious consideration to your potential customers. Here is a list of typical internet cafe users, in order of their typical spend at an internet cafe:

• backpackers

• tourists and travellers

• business folk, particularly travelling business people

• school children, young kids and teenagers

• local residents without a home PC

• employees on their lunch break

• other local residents

There is little reliable statistical information on typical internet cafe user demographics in Australia.  However, survey results indicate the following:

• users are predominantly aged between 15 and 55

• the highest usage is by 19 to 25 year olds

• most internet cafe users have broadband internet at home

• a large proportion of internet cafe users are students, travellers or unemployed

• most internet cafe users are one-off or irregular users

• the top 3 reasons for using an internet cafe are: 1) email, 2) surfing the internet, 3) chat,

• a large majority of users indicate that internet cafe services such as printing, burning CDs, accessing their digital camera, and accessing USB memory sticks are highly desirable

Know what your customers want and need

Each of the different customer types listed above have different wants and needs.  Therefore you either need to cater broadly for all of them, or specifically for the market in your area.

• Backpackers, tourists and travellers and the highest spenders in internet cafes.  Usually they just want to send emails home, or plan the next leg of their trip.  The more advanced users in this group will upload photos from their digital camera, and make phone calls through Skype or other VoIP products.  This market segment will usually use the closest internet access point to their accommodation, and are not overly price sensitive, but they will want to be comfortable because they also spend more time at the terminals per session than any other customer group.

• Business people will expect to use a business centre type setup, with word processing, file transfers, spreadsheets and printing.  If this is your primary market segment then you should also consider a coin-operated photo-copier, a scanner, and a CD/DVD burner.  These customers want a reliable system with minimal fuss - they won't accept excuses.  This means they are also the most fussiest and difficult of all customers, but they will pay top dollar for a quality service.

• School children, young kids and teenagers will want games, and are unlikely to spend very much, but will stay for hours if they can afford it. Many parents use internet cafes and internet kiosks as a form of baby-sitting or child-minding, and this gives an angle you can use to your advantage.

Where will you locate your internet cafe or kiosk?

The key to success in the internet cafe business is the same as a real estate success: Location... Location... Location...

Start your research broadly, and look for the best region in which to location yourself.  Then narrow down your search to a specific location.  Look for surrounding tourist destinations, accommodation houses, schools, transport hubs, and more importantly, the competition.

For internet kiosks, some companies offer for sale "Prime Locations" to investors. However, usually assistance with locating 'prime' sites ends once an establishment has been found that is willing to have an internet kiosk on its premises. Poor sites are not only unprofitable but invite vandalism, and the reality is that you will be paying a premium for a site that is unproven. This is why most reputable internet kiosk manufacturers or importers do not offer to 'locate' or 'site' machines for operators.  Ask yourself, if the "Prime Location" for sale is so fantastic, then why hasn't the supplier installed an internet kiosk of their own there?

Restricted areas and exclusive territories

You have probably seen these advertised in many industries - a "guaranteed exclusive territory" for which you pay a premium price.  Be very careful.  Legally, many of these "exclusive territory" arrangements have been contested in courts of law and failed, because, in general, the law does not allow a contract to restrict the trade of another party. Also, from a practical point of view, it is not possible for companies to offer sole "Restricted Areas" to investors because they are not the only suppliers or operators in any particular geographical area. You might purchase an exclusive area from supplier "X", but supplier "Y" sells the same area to another operator. Thus the payment of a premium for a restricted area can become nothing more than a donation to the supplier.

You also need to think deeply about the products being offered.  If you're supplier believes you need an "exclusive territory" then you really need to look closely at the products you're being offered as it suggests they are inferior to the competition.  After-all, the only reason to ever be afraid of competition is if you have an inferior product or service.

What premises will you occupy?

You have a lot of options when it comes to securing and negotiating a location for your internet cafe or kiosks.  You can lease a site and have control over your own premises, or you can co-locate with an existing business, either on a lease basis, profit share, or in return for providing the internet connection.  If you enter in to a lease be very careful to lock in any future rent rises to be specific values, rather than being linked to CPI or subject to renegotiation.  Also negotiate a rent-free fit-out period.  You should always seek qualified legal and financial advice before entering into any lease agreement. Many highly successful businesses have end in bankruptcy due to poorly negotiated lease agreements.

What other products and services can you offer?

If you are going to go to the trouble and expense of getting customers into your business, you may as well get as much revenue from them as you can.  So give serious thought to what additional products and services you can offer your customers.  Secondary products and services you can offer include:

• vending machines

• soft drinks

• snacks and meals

• printing

• wireless internet access

• games

• CD/DVD burner

• sell computer parts, disks, etc

• scanning

• ATM

• photocopying services

• change machine (encourages users to spend more)

Choosing a supplier

Choosing the supplier of your internet cafe components can be a critical determining factor in the success or failure of your business.  You need to find a supplier who is genuinely interest in the industry and in helping your business succeed.

Treat the search for your internet cafe products as a job interview of suppliers.  What we mean is, don't just look at the products they are selling, but look closely at the supplier themselves.  How quickly do they respond to your sales inquiry?  What sort of support is available on their website?  Do they offer ongoing support?  How long have their clients remained their clients?

Remember that a good supplier will have years of experience in the industry.  There is no doubt they would have seen enough businesses succeed and fail to know exactly what is required to achieve success, so ask them plenty of questions.  Look for a supplier who will provide you with training.   Check with machinery manufacturers or their agents, suppliers and larger local distributors, they are always a good source of experienced assistance. Approach relevant industry associations or trade groups for it is part of their charter to "promote and assist" their industries. As a general rule, no genuine company or individual will object to you making a few enquiries about them, from other users of their product, for example or from Trade and Business Associations.

Also ensure that your supplier permits you to obtain your supplies from any source.  Quite often lately, some suppliers are requiring their clients obtain products only from them, otherwise they will not provide support, training or assistance. Part of the reason for this is that the company you have invested with may have a deal negotiated with a supplier that will pay them a percentage of your purchases, and another reason is that they are trying to lock you in as a "loyal" customer.  Of course, we believe that customer loyalty comes naturally, and therefore we allow our customers to source products from any supplier they choose, and naturally we find that most choose to purchase all their hardware and software direct from us anyway.

At Arinda our entire philosophy is built on customer service and support.  We are still in regular contact with our original clients back from 2002.

What computer equipment should you use?

The old cliche "What you pay, is what you get" holds true in this area.

When comparing hardware from different suppliers you should check to see how the equipment will hold its value.  Go on Ebay or in the Trading Post and see if any second hand units are for sale.  If so, why are they being sold?  And how much are they being sold for?  At Arinda we have a lot of inquiries from people wanting to buy our internet kiosks second hand, but we never have second hand internet kiosks to sell because EVERY single client who has ever purchased an internet kiosk, wireless hotspot or in-room broadband system from us is still running it - NO ONE WANTS TO SELL!

As far as the exact computer systems themselves, remember that users will want and expect what they are used to using at home or in the office.  Standard PC terminals are always coming down in price, and standard equipment is easily replaced.  Small-form-factor PCs are great for tight spaces, but they usually suffer from overheating and can be expensive to get repaired.

Stick with a known and proven brand, such as Dell, HP, and Compaq, because they have the most reliable components, the components are built for compatibility, and most importantly, drivers are always readily available.  "Corner shop" computers from unknown manufacturers often have inferior parts, and drivers can be near impossible to find when needed.  We highly recommend Dell for their consistent high quality, reasonable pricing, and fantastic warranty.

You can get away with second-hand equipment, but the risk is that without knowing the full history of the machine it is hard to predict reliability or anticipate repair costs.  However, it is possible to purchase a warranty for second hand Dell computers.  If you buy second hand PCs make sure that a valid Windows licence is included (there should be a COA or Certificate of Authenticity).

What system specifications should you look for?

Avoid Celeron and AMD Sempron CPUs.  Although cheap, there is a marked and noticeable speed difference which the user will find frustrating when they are paying for their time on the system.  Remember your goal - to attract and retain customers.

Consider your target market.  Are you building gaming machines? A business centre?  Or just an internet browsing terminal?  Your target market helps you determine the type of software you will need to run, and hence the type of hardware you will need to use.

Make sure you get enough "bang for the buck" to future proof your hardware.  There is no point buying hardware today that will not run software released a few years from now, otherwise you will only end up having to upgrade your hardware. You need to find that balance between price and performance.  At present, we feel this balance currently lies in a basic Core 2 Duo with 1GB RAM.

Samples of different Internet Cafe Network Structures

What network equipment should I use

For network equipment stick with Netgear, Cisco, or Netcomm - these are the best suppliers for commercial grade equipment.  Avoid equipment that is only designed for personal residential use, as the life expectancy in a high traffic site can not be assured.

Avoid wireless networks as much as possible - ethernet or fibre networks are much faster, cheaper, and more reliable than wireless networks.  Gigabit-speed network equipment is now quite cheap, and provides the fastest network environment available.  When buying a network hub or switch, always factor in growth and buy a device with enough ports to have some spare capacity.

Check the warranty

Pay close attention to the warranty.  A manufacturer's warranty is worth far more than a third party or retail warranty extension.  Ideally find a next-business day on-site warranty, such as that offered by Dell.  An on-site warranty means that a qualified technician will come to your premises and repair your machine on-site.  The result is less down-time, and far less fuss than a back-to-base warranty that requires you to physically return the PC to the manufacturer before they repair it, and collect it afterwards.

A warranty does cost extra, but it is worth its weight in gold.

What internet cafe software should you use?

Ours of course!!!

At the end of the day, system useability will determine the long term success or failure of your business.  And you get what you pay for.

There are many free and cheap software products out there for internet cafes.  But you have to realise that there is a reason why they are free.  Even the most charitable organisation, with the best of intentions, must collect revenues in some form in order to cover costs associated with development, marketing and support.

An example:  We quoted a gentleman on providing our software for a new internet cafe being setup with 30 terminals in the heart of Sydney.  A few weeks later we heard back from him saying that he had found some free software on the internet and was using that instead.  No problems - each to their own.  About 6 months after he opened he called us again and said that he now wanted to go ahead and install our software because he was seriously unhappy with the free software he had been running.  This gentleman had spent $100,000 on setting up his internet cafe, but then short-changed himself on the software and ending up paying the price of unnecessary stress, and had lost customers in the process.  Today, with our software now running his internet cafe, he is able to look back and laugh at it, but it still proves to be a valid lesson for others.

You wouldn't buy a new Ferrari and put a cheap 4 cylinder engine in it, so avoid making the same mistake with your internet cafe software selection.

We've read a lot of poor advice on the net recommending internet cafes run Linux, Citrix dummy terminals, and other variations along these themes.  They emphasise the perspective of the internet cafe operator, and disregard the user experience. The end result is that users come once and never return because they are not familiar with the environment and feel that they have just spent their cash and time having to learn a new system.

The more familiar the environment is to the user, and the more they can do on the terminal, the more comfortable they will feel and the longer they will spend on your terminals.

Therefore our advice is to stick with Windows, and use internet cafe software that simply controls access to the Windows Desktop, rather than a program that replaces the Windows Desktop.  Not only is this more familiar to the user, but it is also opens up more programs and software for the users.

Our Surf Easy Desktop Edition handles all the security protections, billing, accounts and networking communications.  Click here for further details on our Internet Cafe Software.

Other software you should install for users

Again, consider your target market to help you decide the software you need. Free third-party software which you should definitely install includes:

All logos and software titles listed above are trade marks of their respective manufacturers

Remote Access Software

Seriously consider purchasing and installing remote access software. Remote access software gives you the ability to log into your internet cafe terminals over the internet from anywhere in the world.  You can take complete control of the terminals - which is great if you need to perform updates, diagnose problems, support users, change settings, or simply to monitor your terminals.

There is a a free version, but the LogMeIn IT Reach product is simply amazing. You can do more through this remote management software than you can actually sitting in front of the PC itself. We can supply LogMeIn IT Reach at discount prices to customers who purchase our software.

The small annual fee for the remote access software is more than offset by greater system uptime, and the improved level of customer support, not to mention the savings from avoiding the travel costs of site visits.

The Internet Connection

For internet access you have many options.  Arinda is a broadband internet service provider.  Click here for our plans.

For speed you can generally get away with 256kbs ADSL for 1 to 2 terminals, 512 for 2 or 3, 1500 for 4 or 5, and then something like 8MBs for up to 10. If its available in your area then definitely go with ADSL2. ADSL2 speeds are up to 24MBs, but speed decreases quickly with your distance from your telephone exchange.

If you have 20 or more machines then you may want to consider 2 ADSL internet connections.  If you install a second phone line then you can have 2 internet connections for faster and more reliable internet. Install a load balancer so that the 2 connections get shared across all the computers, and also to stop any one user from hogging the bandwidth. Then have each internet connection provided by a different upstream provider, so that if one goes offline you have a redundant connection still running.

Cable internet also offers high speeds at reasonable prices, but the speeds can vary over the course of a day depending on the ISP's usage rate.  Some cable modems can also be very difficult to configure for shared or networked internet access, so if you are using a cable connection then make sure you get a suitable modem which allows the connection to be shared between multiple PCs.

As far as downloads and traffic goes, the typical terminal will use between 3 to 5 GB of traffic each month depending on customer usage and demographics.

Fixtures, Fitout and Fittings

As far as fixtures and fittings, pay close attention to local council requirements. For example, Internet cafes in Sydney City now have to provide customers with lockers or other secure storage space for users to store  their personal belongings to help reduce snatch and grabs. The police will not approve your site in the Sydney CBD unless you provide this.

Also, you will probably have to provide at least one wheel-chair friendly terminal. But all of that depends on your particular council, so it is best to consult them earlier in your planning.

Pay close attention to security. Bolt everything down, and attach security cables to your monitors and PCs (even if they are bolted down).  Make sure that your PC housing / pedastal is well ventilated, which is best achieved by installing ventilation grids and electric fans.

Good surge protection is essential.

What's all this going to cost?

Brand new standalone internet kiosks start from $4000 per terminal including GST, and go up to $12,000 per terminal for a fully secure and optioned top-of-the-line system.  A small internet cafe (say 10 terminals) will cost a minimum of $40,000 including fitout.  A medium internet cafe (around 30 terminals) will cost around $100,000 including fitout.

How much money will you make?

This all depends on your market, your operating expenses, the effectiveness of your advertising, your pricing, your local competition, and even the time of year and weather.  We have created an Investment Projections chart to help you estimate the returns you may experience. 

What is the minimum daily foot-traffic or number of tables in a cafe or rooms in a hotel necessary to justify an internet kiosk or internet cafe? This will vary depending upon many factors, including the type of business and the demographics of your area.  We have internet kiosks in small hotels of less than 15 rooms that earn more money than other internet kiosks in large hotels of more than 100 rooms.  You should understand your likely customer base, and use the information above on typical internet cafe users to determine your likely usage rates.

Promoting your internet cafe

We can assist with signage, printing and online advertising.

The first thing to get is prominent signage outside your premises.  Most internet cafe users are customers of convenience, meaning they use whichever internet cafe is the closest and most convenient.  Therefore you want to let passers-by know that you exist.  And the most effective signage is usually also the simplest - nice, clear, high-contrast text that immediately identifies your products and services at a first glance. In most areas you will need council approval for any signage that appears on the outside of your premises.  You may also need approval from your landlord or body corporate.

Something that works very effectively is to get a heap of DL size flyers printed and hand them out at surrounding schools, colleges, universities, apartment blocks, houses and businesses.

The next most important promotional avenue is the internet, and the key element there is to have a decent website that is itself well promoted. Your website should include:

• your exact location

• a map (very handy for tourists and out-of-towners)

• your hours of operation

• your products and services

• your rates

• overview of your hardware specifications

• your internet connection speed

• any terms and conditions on the use of your services

Make sure you promote your website.  There is no point spending money on a website if no one knows it exists. 

Here are some other sites at which you can promote your internet cafe:

• http://gnomon.com.au/publications/netaccess/

• http://www.cybercafe.com/

• http://directory.google.com/Top/Computers/Internet/Cybercafes/Australia/

• http://www.truelocal.com.au/listMyBusiness.do

• http://www.aussieweb.com.au/directory/category.aspx?cid=1715

• http://www.travellersclub.com.au/cafe/auslist.htm

• http://www.ecef.com.au/recreation/internetcafe/

• Google Maps Australia (create an account then go to Local Business Centre)

And lastly, make sure you get a listing in your local telephone directory.