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What Are Things I Need To Consider When Buying A Coffee House?

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Comments & Replies: 2     Views: 1703     Posted By: Joe Ranieri  



Topics: Buying A Business     Tags: buying a business



Call it what you will, cup of joe, java, or morning brew, one thing is for certain, Americans like their coffee. According to the Specialty Coffee Association of America, "the retail value of the U.S. coffee market is estimated at 30-32 billion dollars a year." A survey conducted by Zagat found that 43% of coffee drinkers make theirs at home, while 26% buy it at a large national chain, 22% from a small/independent, and 9% from other. The same survey found that coffee drinkers consume about 2.1 cups a day.

One of the first things you need to consider is location. Large national chains can afford high rent/high profile locations, but there are there are many consumers who enjoy small local coffeehouses and will seek them out. Large national chains can be found on practically every street corner, making it a convenience for everyday consumers, but they also have their drawbacks. Try not to compete with the high rent/high profile model, and figure out a way to attract those who are drawn to a more intimate/less corporate environment. When operating a small independent store, one must ask themselves, "what can I do so customers go the extra mile and come to my store?" Ideally, you want to look for something near universities, hospitals, apartment complexes, or anywhere near heavy traffic flow. If you find a place with a captive audience, for instance a location in the lobby of a high-rise building, ask the property manager what is the occupancy level? Your rent should not exceed 10-15%.

When buying a coffee house, you need to decide whether you are going to go for a true independent or franchise store. I recently sold a coffee house where the buyer could get out of the franchise agreement and save the 6% royalty fee, allowing them to redirect that money back into the business.

It's important to remember that running a coffee house includes early mornings, while mid-day going to the restaurant supply store and stocking up on inventory, and then later going back to the store. Itís a business that needs to be owner occupied, because if itís absentee, one runs the risk of the staff giving free coffee to their friends, and eating into profit margins. One of the most important aspects of running an independent coffee house is customer service. Yes, you could walk into any chain store from Orange County, California to New York, New York and order a Venti Mocha whatever, and the experience will almost certainly be identical, but for a lot of people who frequent the same place every day itís important to build a relationship with the proprietor. By being around the store you get to learn your customersí names, drink preferences, and things they enjoy.

When investigating the business, find out how much business they do in straight drinks vs. pastries, etc. Selling just drinks, you will have a much lower food cost, but pastries and other treats will run up your food costs, because they can spoil and end up getting thrown out. Itís important to invest in Point of Sale system, so you can track to the bean of what sells and what doesnít. I have seen people who sell just drinks have a food cost of 15-20%, while those who sell (and throw out) a lot of pastries have food cost be around 30-35% When you buy the business make sure you get proper training, about to two weeks, so you can learn to make the drinks, and also communicate to the staff that you plan on keeping all of them on.

Itís important when running a coffee house to ask yourself, ďwhat am I really selling to the consumer?Ē Obviously, you are selling coffee and pastries, but you are also, in many instances selling to your customer ďa home away from homeĒ. Try to safeguard yourself, just in case a large national chain builds a drive-thru coffee house around the corner, because your customers not only come to you for the coffee, but also for the experience that corporate stores canít provide.

If youíre going to have an independent store, then you might as well create an environment thatís warm and personable. A great way to make people feel welcome in addition to have tables and chairs, is also have a couple of couches where people can sit back and relax, and of course a free wi-fi signal is a must! Another idea to build a relationship with your customers is to put up a corkboard where people can post for sale items, room for rent, etc. Also, once a week, maybe have music night where local musicians can play their guitar and sing or have a poetry night.

In addition to coffee, many business owners have increased sales by offering items like boba drinks and other tea based drinks commonly not found at large national chain stores. By creating an environment thatís a second home to the customers, it encourages them to frequent it multiple times a day, once in morning on their way to work, and later at night so they can relax and catch up with friends.


  Helpful Resources To Assist In Selling And Buying California Businesses

Bob Baumgarten, Business Broker: Orange, LA Counties

National Business Brokerage is a full service brokerage company that has been serving buyers and sellers of Southern California businesses since 1994. We are dedicated to providing the highest standards of professional service for our clients. Phone Bob direct at 949-588-8727.

Joe Ranieri, Business Broker, Orange County Area

Having owned retail/restaurant businesses for over 20 years, my interest turned to listing and selling businesses rather than owning them. I specialize tend to specialize in Orange County high volume restaurants, fast food independents and chains, bars and liquor stores. Call 714-292-5448.

Ryan Clark, Business Broker, Southern California

The Veld Group provides a refreshing approach to Business Brokerage, Mergers & Acquisitions and Business Consulting and Valuations. From Your Street to Wall Street, we cater to Main Street Businesses as well as more complex Strategic Firms and Start-Ups. Phone Ryan at 310-652-8353.

Jeff Sacher, Business Broker - North Bay Restaurant, Retail Specialist

Jeff is a leader in business brokering in the North Bay. Since joining Santa Rosa Business And Commercial in 1999 he has assisted Buyers and Sellers in over 200 business sales and acquisitions. Jeff provides other services for his clients as well. Reach Jeff and his team at 707-888-4972.

Chris Seaman, Business Broker - San Diego County Area

Founded in 1994, First Choice Business Brokers has accelerated to become one of the most successful Business Sales Organizations in the world. Our team of agents have gone through extensive training to become experts in the field of business brokerage. Call Chris at 858-578-4111 for more info.

Mani Singh, Business Broker, Southern California

I have successfully represented clients sell & acquire multitude of businesses ranging from Gas Stations, Liquor Stores, Markets, Super Markets, Smoke Shops, Postal Stores, Restaurants, General Retail, Auto and Construction related. Phone me for assistance with selling or buying at 951-296-7646 Cell

Timothy Cunha, J.D., Business Broker, Northern California

Having managed and sold several businesses of his own, Tim offers business sellers extensive personal experience and professional expertise in building business value, planning a successful exit strategy, "packaging" and promoting the sale, and coordinating a successful sale. 844-237-6487 Toll Free.

Raj Parikh, Business Broker - Inland Empire

Raj has spent the past 15 years as a Business Broker, Owner & Developer. He has extensive experience and deep knowledge in many different industries. He specializes in brokering Business Opportunities across many industries all across Southern California.


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