How To Buy A Coffee Shop - Lessons From An Owner

Posted on April 14, 2008
Contributed by

J. Valenta who is selling a coffee shop on BizBen is an expert on all things coffee so while selling his coffee shop I asked him what he thought was important when buying a coffee shop and what to look for when doing so. This is what he wrote:

How to Buy a Coffee Shop

By J. Valenta
 
Ahh...the American dream.  It is amazing to me, after starting up my own coffee shop, that the American Dream is alive and well.  Inspections, taxes, fees, more taxes, more inspections, insurance premiums, connection fees.  First time entrepreneurs are often surprised at just how much work, time and money it takes to start a business, and this is doubly true in food service.

And yet, every year a growing number of people strike out on their own, hoping to capture that little piece of the American dream.  And quite a few of them want to open a quiet little café or coffee shop.  As somebody who has been around the industry a long time, and who has opened my own brand-spanking-new coffee shop, let me save you some time, money, and heartache.

Buy used.
 
I have often heard it repeated that it is better to start your own coffee shop than to buy someone else's failure.  I'm not sure where these pundits come from, perhaps the restaurant world where things are a little different.  But I can tell you I have seen plenty of run down shops get quickly turned around into thriving businesses.  I have also seen plenty of colleagues armed with good coffee and brand new T. I.s go out of business in less time than it took them to get open.
 
Below, I cover several reasons why it is better to buy an existing coffee shop (I know I will for my next location!) followed by things to look for when you are shopping for one.
 
Save time.  And time is money.  Many optimistic entrepreneurs believe they can turn a vanilla shell into a custom, cozy café in less than six months.  While the actual time may vary wildly depending on your local government, where I am in California, it simply cannot be done by the lone entrepreneur.  The best thing to do is stop by a dozen or so food service shops in the area you plan on opening in and ask them how long it took them.  You may be shocked.  It took us 10 months to open our shop.  We had to pay rent during 7 of those.  Total cost?  Over $18,000.

Save money.  Costs can vary for construction as well.  Again, here in California, prices are on the high end.  Even though we ended up saving some money by doing a lot of things ourselves, sometimes it was a trade off with time.  In the end, you can expect to pay a pretty penny for that shop of your dreams.  Total cost?  STARTS at about $100,000.

Momentum.  What is the main reason most shops close?  They usually run out of money.  It takes time to get a business up and running and to build a customer base, and they may even have been doing a good job.  As many times as people hear it takes a business 3 years to reach success, many have as little as 6 months of expenses saved up.  Not only can you make their loss be your gain in time and cost savings, but you can reach profitability sooner by capitalizing on the progress they have already made.  Cost savings in advertising, working capitol, and rent?  Incalculable.
 
So hopefully you are sold on the idea of buying an existing shop.  So what to look for?  How can you find that coffee shop gem that is doing things right?  And what are you paying for? 
 
In the wake of the Big Green Machine, the coffee world is going through a lot of changes.  In order to compete, independent shops are taking coffee to higher and higher levels, adding touches borrowed from wine and the culinary arts.  I highly recommend aligning yourself with this trend in order to compete with the mega-chains.  Here are some things to look for as you scan your potential purchase.
 
Top of the line equipment.  A good chunk of the sales price you are paying for is equipment; so make sure it's in tip-top condition.  Look for quality brands, or at least brand new equipment.  There is no point spending all that money on a business and then having to go out and purchase new equipment six months later.

The brand of espresso machine can be very telling.  The absolute best coffee shops in the world tend to carry either La Marzocco or Synesso machines.  These machines are workhorses and will last many years if properly maintained.  Other common brands are Faema, La Spaziale, La Cimbali and Astoria.  These machines are decent, but make sure they are no more than a few years old.  This is an important assessment, because it goes beyond the machine.  How the owner feels about the one key piece of equipment in their shop will tell you how they view everything.  A good espresso machine is a prerequisite for great coffee.

Plumbing.  What is the one thing other than coffee in all those drinks?  Water.  Make sure the pipes, floor sinks and drains look good.  They should be regularly cleaned and free from debris.  If coffee grounds are going down there, ask the owner if they flush coffee cleaner down the drains on a regular basis.  Also...very important here...look for a filter system.  In areas where water is particularly hard, look for a very expensive water filtration system.  Why?  Because beyond making much better coffee, it saves wear and tear on you equipment.  What's the most expensive thing to replace on that espresso machine?  The boiler.  What kills the boiler?  Scale buildup.  What stops scale buildup?  Yep, the filter.  Your ice machine, coffee brewer, and customers will thank you too.

Ambiance.  Keep in mind that if everything isn't just right, you can change it.  Many times you will need to.  Why else would you buy a place if you didn't think you could do a better job?  But it is a good idea to make many small changes slowly over time, so as not to scare off customers and employees, who after all, largely come to the shop because it makes them feel welcome.  So in the meantime, does the shop feel warm?  Does it make you want to sink into the couch with a cup of coffee and read?

Of course there are many other things to consider.  The biggest one is experience.  If you have none, then talk to the owners about training.  A small amount of time (like a day or two) to show you the ropes is often standard and part of the sale.  You may also want to  ask the sellers if they provide additional training, support or consulting.  Many do for a reasonable price.  Again, if you lack the experience, it will be money well spent.  Do not make the mistake of thinking you don't need any training or skills to work in coffee.  The people I usually meet with that attitude are the same ones who are out of business in six months.