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

Comments & Replies: 2     Views: 3593     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. It s a business that needs to be owner occupied, because if it s 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 it s important to build a relationship with the proprietor. By being around the store you get to learn your customers 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. It s important to invest in Point of Sale system, so you can track to the bean of what sells and what doesn t. 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.

It s important when running a coffee house to ask yourself, what am I really selling to the consumer? Obviously, you are selling coffee and pastries, but you are also, in many instances selling to your customer a home away from home . 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 can t provide.

If you re going to have an independent store, then you might as well create an environment that s 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 that s 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
Lee Petsas, Business Broker: Southern California Area

Lee Petsas has been selling businesses with UBI Business Brokers in Southern CA since 1981. In 1999 he became the Owner and Broker for UBI. He has been approved multiple times by Courts as an Expert Witness in the area of Business Valuations.

William F. Ziprick, Attorney: Legal Services For Buyers And Sellers

Through creative problem solving, attention to detail, accessibility, & understanding that unnecessary delay is often a deal killer, I work closely with my clients and other professionals to consistently achieve a high rate of closings. Office: 909-255-8353, Cell: 509-951-7230.

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, Business Broker at 310-652-8353.

Peter Siegel, MBA: Business Purchase Financing Solutions

Niche business purchase financing advisory and loan placement services with SBA and Non-SBA Financing, Retirement Fund Rollover Solutions, Combo Financing Packages. To get professionally pre-qualified or more information on the ProBuy/ProSell Programs: 925-785-3118.

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.

Manjit Singh, Business Broker - SF Bay Area, Central Valley

Assistance in the SF Bay Area & Valley. Contact me about buying or selling a restaurant, liquor store, gas stations, markets, and c-store businesses. If you are looking to buy or sell a SF Bay Area, Central Valley liquor store, market, c-store, restaurant, etc phone me direct at 510-417-9429 Cell.

Helen Yoo, New Century Escrow - Escrow Services In Southern California

New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.

Janet Carrera: Escrow & Bulk Sale Service - SF Bay Area

Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.


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