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

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Comments & Replies: 2     Views: 3137     Posted By: Joe Ranieri  Joe Ranieri, Business Broker: LA, Orange County Areas



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
Brad Steinberg, Broker - Laundromat Specialists

PWS is the leading laundromat broker in California. Since 1968 PWS has brokered over 2,500 laundromat sales. With over 90 employees dedicated to the coin laundry industry, PWS has 18 licensed agents, a 3 person in-house finance department, 10 service technicians and a 20 person parts department.

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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

Mike Brewer: Liquor License Brokers, ABC Consulting Services

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I have Engineering and Law, JD degree, with over 30 years of experience in all phases of entrepreneurship. During the past 15 years my concentration has been in business of mergers and consulting. I have owned and operated over 33 businesses each having one to 30 branches.

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.

Rick Carlson, Business Broker - Southern California

You Will Never Feel Lost In The Shuffle. Many Brokers Simply Send Out An NDA And That's The End Of Communication. All Buyers Receive A Personal Meeting With An Ace Acquisition Specialist So They Can Recommend The Perfect Business For You. Phone Rick direct at 800-985-4939.

Lee Petsas, Business Broker - Orange, San Diego Counties, Inland Empire

UBI Business Brokers has been successfully selling businesses in Southern California since 1965. Our Agents have over 100 years of experience in selling small to medium size businesses throughout Southern California. We service Orange County, Inland Empire, San Diego. Phone Lee at 714-363-0440.

Ryan Clark, Business Broker, Southern California

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Joe Ranieri Orange County Business Broker
Michael Brewer, ABC License Consultant
Steve Erlinger Laundromat Broker
Larry Larsen Laundromat Broker
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