You are about to sign the lease for your second café. At today’s costs, and with the customers you expect, the numbers work. But what if energy costs rise, commuting habits change, or new rules affect your takeaway packaging?
Even a well-run business can expand at the wrong time. Before making a commitment, you need to understand what could change around your business—and which decisions those changes could affect.
Start with a decision
Before you begin researching, complete this sentence:
“Over the next ___, we are deciding whether to ___ in ___ market or area.”
Then name one external development that could change your decision. Separate what you know from what you are assuming and what you still need to find out.
For example:
“We are considering opening a second café in our city within the next 12 months. Energy costs could affect our budget. Before deciding, we need comparable electricity quotes.”
You have already taken the first step towards a useful analysis.
What is PESTEL analysis?
is a framework for examining your business’s through six categories: Political, Economic, Social, Technological, Environmental and Legal factors.
You may also see it called PESTLE. It is the same framework; the last two letters appear in a different order.
These conditions develop outside your business, but they can affect your costs, customers, operations and decisions. The six categories help you look beyond the issues already on your mind. They do not predict the future or tell you, on their own, whether a business idea will succeed.
Six perspectives, one café decision
Imagine X Coffee, a fictional café considering a second location. The following is a teaching example, not a description of current conditions or laws in any particular city.
: Public policy and government decisions
Suppose the local council is considering making the street outside your proposed café pedestrian-only.
More people walking past could help sales. Restrictions on vehicle access could also make deliveries harder.
Which decision could change? Your choice of premises and delivery times.
Before choosing the site, check which streets the project covers, how far it has progressed and when it might happen. A proposal under discussion is not a confirmed decision.
: Costs, purchasing power and financing
Volatility in energy markets could mean higher electricity costs when your contract renews.
That could change the new café’s , its pricing or whether the equipment you plan to buy makes financial sense.
Which decision could change? The location’s budget, equipment choices or investment timing.
Compare quotes using the same consumption assumptions and contract terms. Then check whether your plan still works with higher costs.
: Habits, expectations and demographics
Suppose some tell you they now work from home more days each week.
Visits in an office district could fall, while demand in a residential neighbourhood could grow.
Which decision could change? The café’s location and opening hours.
A few conversations do not establish a market-wide trend. Treat them as a signal worth investigating, and compare foot traffic in the areas you are considering on different days and at different times.
: Changes in available technology
Suppose affordable pre-order systems become more widely available to cafés.
Customers could order ahead and collect without waiting. They might also begin expecting that convenience from other cafés.
Which decision could change? Whether to test pre-ordering or invest in a new system.
Start with a small . Assess whether the convenience for customers justifies the cost and additional work for staff.
: Natural conditions and resources
Suppose one of your two shortlisted premises is in an area that could be affected by flooding.
This possibility could influence site selection, insurance terms or how the business would operate during a disruption.
Which decision could change? Your choice of premises and preparations.
Check information specific to the location. Not having found evidence yet does not mean the risk is low.
: Applicable rules and obligations
Imagine a proposal to change takeaway-packaging rules. It could affect permitted materials or required records.
First check whether a relevant rule exists, whether it is proposed or adopted, whether it applies to your business and when it takes effect.
Which decision could change? Packaging choices, purchasing commitments and preparation deadlines.
Do not treat a proposal as a requirement already in force.
How do PESTEL, Porter’s Five Forces and SWOT differ?
Framework | Main question | Café example |
|---|---|---|
PESTEL | Which changes around our business could affect our decisions? | Examining energy conditions and commuting habits. |
How does competition in our industry affect our ability to earn a profit? | Examining rivals, suppliers, buyers, new entrants and substitutes. | |
What are our strengths and weaknesses, and which external opportunities and threats matter to us? | Considering the café’s capabilities alongside findings from external analysis. |
Porter focuses on industry structure. SWOT combines internal strengths and weaknesses with external opportunities and threats. The frameworks complement one another. For a closer look at competition, see our guide to Porter’s Five Forces.
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