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  • FIRST POST
    • gail.wls1
    • By gail.wls1 5th Oct 17, 9:30 AM
    • 5Posts
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    gail.wls1
    Taking Over Cafe Business...
    • #1
    • 5th Oct 17, 9:30 AM
    Taking Over Cafe Business... 5th Oct 17 at 9:30 AM
    Hello there,


    I'm new to the forum and am wanting some advice on taking over a small caf!. Hope someone can help?
    I have a small amount of money and have seen a caf! that I'd like to purchase as it would be fulfilling a dream.
    I have no business experience whatsoever but have been told, and read, that this is an ideal starter business.
    I have been volunteering in the caf! to gain experience and to get a feel of the place but really do need to know step by step, what I need to do and know before making an offer.
    The owner has been more than helpful by allowing me to work in there and give me advice herself but I need other peoples input as (perhaps cynically) she may just be telling me what I want to hear.
    Is there some sort of check list and dos and don'ts that you guys can make me aware of?
    ANY help/advice would be greatly appreciated.
    Many thanks,


    Gail
Page 1
    • ~Beanie~
    • By ~Beanie~ 5th Oct 17, 10:01 AM
    • 2,912 Posts
    • 2,093 Thanks
    ~Beanie~
    • #2
    • 5th Oct 17, 10:01 AM
    • #2
    • 5th Oct 17, 10:01 AM
    Have you seen the books/accounts, seen what kind of profit it makes (if any)? What is the current owners reason for selling?

    Why have people told you this this would be an ideal starter business? Would you be working here alone or employing staff?

    • gail.wls1
    • By gail.wls1 5th Oct 17, 10:13 AM
    • 5 Posts
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    gail.wls1
    • #3
    • 5th Oct 17, 10:13 AM
    • #3
    • 5th Oct 17, 10:13 AM
    I have seen the books/accounts but I honestly don't know what I am looking at. Am I allowed to take them to show to an accountant/solicitor?
    The reason for her selling is that she now wants to pursue other interests.
    The current owner works alone apart from a Saturday girl.


    Gail
    • Comms69
    • By Comms69 5th Oct 17, 10:18 AM
    • 1,315 Posts
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    Comms69
    • #4
    • 5th Oct 17, 10:18 AM
    • #4
    • 5th Oct 17, 10:18 AM
    I have seen the books/accounts but I honestly don't know what I am looking at. Am I allowed to take them to show to an accountant/solicitor?
    The reason for her selling is that she now wants to pursue other interests.
    The current owner works alone apart from a Saturday girl.


    Gail
    Originally posted by gail.wls1


    You're looking at the big number at the bottom that reads profit.


    I'd suggest if you cant read books you shouldn't run a business. How will you manage the day to day expenses, bills, planning?
    • seashore22
    • By seashore22 5th Oct 17, 10:25 AM
    • 742 Posts
    • 1,491 Thanks
    seashore22
    • #5
    • 5th Oct 17, 10:25 AM
    • #5
    • 5th Oct 17, 10:25 AM
    Any catering experience op?

    I would also say that 99% of the time someone selling something is going to tell the prospective buyer what they want to hear. I hope it wasn't the current owner who told you that it would be an ideal starter business.

    Restaurants and similar businesses are very hard to run successfully and make a decent living from. It would probably be my last choice for a beginner business venture, especially for someone with no experience at all.
    Last edited by seashore22; 05-10-2017 at 10:33 AM.
    • gail.wls1
    • By gail.wls1 5th Oct 17, 10:43 AM
    • 5 Posts
    • 0 Thanks
    gail.wls1
    • #6
    • 5th Oct 17, 10:43 AM
    • #6
    • 5th Oct 17, 10:43 AM
    Everyone has to start somewhere right? I just need someone, who isn't the seller, to explain it all to me.
    I have no experience in catering.


    Gail
    • seashore22
    • By seashore22 5th Oct 17, 10:46 AM
    • 742 Posts
    • 1,491 Thanks
    seashore22
    • #7
    • 5th Oct 17, 10:46 AM
    • #7
    • 5th Oct 17, 10:46 AM
    Sorry my previous reply was a bit negative. I would also love to run a cafe or b and b, but I don't do it because I'm realistic about the stress and sheer hard graft involved.
    ,
    If someone asked this question who had a head for business, knew a bit about the industry and was realistic about what it entailed, I would say go for it if it's what you really want to do. Obviously some cafes are successful and do make money.

    However your post says to me that you aren't that person. How old are you?
    • motorguy
    • By motorguy 5th Oct 17, 10:50 AM
    • 15,825 Posts
    • 9,121 Thanks
    motorguy
    • #8
    • 5th Oct 17, 10:50 AM
    • #8
    • 5th Oct 17, 10:50 AM
    Hello there,


    I'm new to the forum and am wanting some advice on taking over a small caf!. Hope someone can help?
    I have a small amount of money and have seen a caf! that I'd like to purchase as it would be fulfilling a dream.
    I have no business experience whatsoever but have been told, and read, that this is an ideal starter business.
    I have been volunteering in the caf! to gain experience and to get a feel of the place but really do need to know step by step, what I need to do and know before making an offer.
    The owner has been more than helpful by allowing me to work in there and give me advice herself but I need other peoples input as (perhaps cynically) she may just be telling me what I want to hear.
    Is there some sort of check list and dos and don'ts that you guys can make me aware of?
    ANY help/advice would be greatly appreciated.
    Many thanks,


    Gail
    Originally posted by gail.wls1
    You need to get an accountant to look at the accounts ASAP.

    I'm assuming its leasehold, so how long is the lease remaining as you will be liable for it even if you cease trading until you find another victim tenant.

    aking on a business with no previous experience can be a fantastic way to make a small fortune - out of a large one. Tread with extreme caution. T

    How long has the previous owner been operating the Cafe? Invariably even in a business making no money / losing money people stick it for a couple of years. If she has been running it for less than say 3 years, alarm bells need to be ringing with you as to WHY shes getting out. Leaving to "pursue other interests" could translate to "its losing money hand over fist and i want out".

    Very few people sell a goose thats laying golden eggs, so if shes getting out, you need to know the real reason why

    How much is she charging you for this "investment"?
    You are not special. You are not a beautiful and unique snowflake.
    • seashore22
    • By seashore22 5th Oct 17, 10:50 AM
    • 742 Posts
    • 1,491 Thanks
    seashore22
    • #9
    • 5th Oct 17, 10:50 AM
    • #9
    • 5th Oct 17, 10:50 AM
    I have to say that, in the nicest possible way, if you have to come on to MSE and ask for advice then you're probably not ready to take this on.

    We don't know you, don't know the business, don't know where this is and it's all too vague.
    • motorguy
    • By motorguy 5th Oct 17, 10:54 AM
    • 15,825 Posts
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    motorguy
    Everyone has to start somewhere right? I just need someone, who isn't the seller, to explain it all to me.
    I have no experience in catering.


    Gail
    Originally posted by gail.wls1
    Gail, whilst i admire your optimism, there is a very real chance you are being sold a pup by the owner in terms of presenting it as a viable business when really its making no money or making a loss. You need to make sure you arent. Dont underestimate how ruthless people will be if they see an opportunity to offload something thats a pup on to some poor victim.

    Having customers in through the door does not mean shes making money. Turnover doesnt mean anything either. You need to see hard evidence its making money - if you cant then walk run away.
    You are not special. You are not a beautiful and unique snowflake.
    • motorguy
    • By motorguy 5th Oct 17, 10:56 AM
    • 15,825 Posts
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    motorguy
    Some basic questions :-

    Whats the turnover for the last 3 years?
    Whats the rent?
    Whats the lease term?
    When is the lease up for a rent review?
    How much are you being charged for buying the business?
    You are not special. You are not a beautiful and unique snowflake.
    • steampowered
    • By steampowered 5th Oct 17, 11:05 AM
    • 1,957 Posts
    • 1,828 Thanks
    steampowered
    Op, you've got some very cynical answers from people who don't know what they are talking about. Take it with a pinch of salt. Speak to a professional.

    Moving back to the real world, people buy and sell businesses all the time. It is a very common and normal thing to do. It does not mean the business is a lemon.

    But if you are spending a significant sum of money you do need to go into this with your eyes open.

    Unless you are prepared to take a punt on losing your investment, you need to budget for professional fees on top of the cost of the business.

    The first thing you need to do is speak to an accountant who specialists in the acquisition of small businesses. There are plenty. You should get the accountant's advice on what is in the accounts and how much the business is worth based on the accounts. You should also ask the accountant to do due diligence to confirm that the accounts are correct.

    The next thing you should do is speak to a solicitor who specialises in business acquisitions. Again there are plenty but make sure you get a specialist. You will need the solicitor to do legal due diligence to confirm what you are buying - for example taking a quick look at the lease.

    You will also need the solicitor to draw up a sale and purchase agreement under which the owner will give certain promises (known as warranties) about the business. The most important warranties are that the seller owns the business being sold and that the accounts are accurate.
    Last edited by steampowered; 05-10-2017 at 11:11 AM.
    • TBagpuss
    • By TBagpuss 5th Oct 17, 11:46 AM
    • 6,084 Posts
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    TBagpuss
    As others have said, you do need t be clear about what you would be taking on.

    Also - why are you volunteering? I would suggest that getting a paid job in a similar business would be a sensible starting point, rather than buying with no experience.

    As others have said, basics you need to think about:

    - What is the length of the lease, and how much is the rent. When are the break and rent review clauses? Commercial leases are more rigid than residential ones, they are longer (10-15 years, with 5 year break clauses is quite common) and unlike residential leases the tenant will often be responsible for some kinds of repairs and upkeep?

    - What do the accounts show about the viability of the business? What is the net profit for each of the past 3 years? Bear in mind that net profit for the income = gross income for you, so you need to account for your personal tax & NI.

    - You say that he current owner runs the place with one Saturday girl. For a cafe, that sounds like a very low level of staffing to me, it would raise flags about how busy the cafe is.

    - Does she bake / cook the goods she sells? If so, when? What sort of hours does she work? How does it work out with her being the only member of staff?

    - What equipment is there? What type of food would you plan to sell, and is the kitchen appropriately equipped for that?

    - Are you familiar with the Health & Safety issues and responsibilities you'd have?

    - Have you checked out what food safety and other regulations you would have to comply with? Are you familiar with them?

    - What is the current owner asking for business? How would you propose to raise the money and have you factored in the cost of any loan repayment when looking as the cash returns? How has the price been calculated? It's worth you bearing in mind that if the business is not doing well, or of the owner wants to give up, passing the business onto someone else would save her money compared to simply closing the doors, as it lets her pass on the responsibility of paying the rent and rates until the lease ends, removing equipment or redecorating (depending on the terms of the lease) and paying redundancy to any employee who might qualify, so even selling at a low price means you would be taking on those actual and potential costs.

    If you are planning to run a cafe I would suggest that getting some basic qualifications in food handling / food safety would be appropriate.

    I would definitely be suspicious of someone telling you they want to sell up and 'pursue other interests'. If the business were successful, it would potentially make more sense for her to install (and pay) a manager, and to continue to draw a profit from the business. Of course people do retire or want to go travelling or whatever, but it would make me very wary.

    I would suggest that rather than planning to buy this particular cafe and take it on, that you take some time to get some appropriate qualification and experience and start to make plans to start or buy your own business in another year or so. I guarantee that you that there will be other cafes on the market.

    The other thing I'd say is that if this is all on the level and the business is a good deal, the owner should not have any issue at all with you raising the questions about the accounts, lease etc. If she is unwilling to share information with you, be wary.

    speak to an accountant with experiences of buying small businesses and be ready to pay for the cost of getting them to review the accounts for you.

    But given you have no business experience and no catering experience, I would say take things slowly and make absolutely sure that you fully understand what you would be taking on.
    Last edited by TBagpuss; 05-10-2017 at 11:51 AM.
    • spadoosh
    • By spadoosh 5th Oct 17, 12:19 PM
    • 4,694 Posts
    • 6,162 Thanks
    spadoosh
    Disagree with most and would say anyone can run a business.

    My education was business and my work is business. I could tell you how to manage more or less any business but could i? Nope, no drive.

    Business managers need a wide range of skills. You dont need to be the accountant, the marketer, the staff, the sales person or the cleaner, you just need to make sure thyere doing their job.

    First place to start will be the HMRC and .gov sites. Theres an incredible amount of information, from accounts and tax to legallities within an industry.

    The basic concept will be pretty simple with a cafe. You take supplies add a bit of value with staff and sell for a profit. Ideally youll have high footfall (ie a good spot) a menu that makes you stand out and a service that makes people come back. Cater to your customers. So if your near construction sites/warehouses poached egg on avocado baguels probably wont sell as well as a spam butty.

    Theres thousands of independent cafe's across the country that manage perfectly well and provide solid incomes to their owners, otherwise there wouldnt be as many cafes. Unlikely youll see incomes of £30k+ but thats because its a cafe not amstrad. And if a cafe owner needs to have the skills made out in this thread i would think they would be better running the multi million pound business they would be capable of running instead of slogging to earn a pretty average income.

    After youve got some reasearch (the local market, selling prices, trends, legalities and costs) its time to number crunch. Before going anywhere near with an offer. Use the current accounts to run the numbers. The key thing is a cash flow forecast. You dont want to be runnin gout of money so always worth planning for times when the money might not be flowing (if you do hot food, summer might be quieter with people buying salads, if you sell lots of ice cream winter could be quieter, you could be susceptible to tourism and fluctuation in seasons) try and account for everything, in fact dont try do account for everything and see how much wiggle room there is for contingencies.

    Do your research, go in with a level head with a bit of healthy skepticism. Be conservative with the numbers and plan. The rest is pretty much down to hard work and luck. Normally the harder you work the luckier you get but its no guarantee.
    Don't be angry!
    • motorguy
    • By motorguy 5th Oct 17, 12:29 PM
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    • 9,121 Thanks
    motorguy

    Op, you've got some very cynical answers from people who don't know what they are talking about. Take it with a pinch of salt. Speak to a professional.
    Originally posted by steampowered
    I dont think anyone on here has asked anything or given any answers that arent valid to be expressing.


    Moving back to the real world, people buy and sell businesses all the time. It is a very common and normal thing to do. It does not mean the business is a lemon.
    Originally posted by steampowered
    Likewise, whilst people do buy and sell businesses all the time, its worth trying to get to the bottom of WHY - particularly IF the seller is moving a business on again quite quickly.


    But if you are spending a significant sum of money you do need to go into this with your eyes open.

    Unless you are prepared to take a punt on losing your investment, you need to budget for professional fees on top of the cost of the business.

    The first thing you need to do is speak to an accountant who specialists in the acquisition of small businesses. There are plenty. You should get the accountant's advice on what is in the accounts and how much the business is worth based on the accounts. You should also ask the accountant to do due diligence to confirm that the accounts are correct.

    The next thing you should do is speak to a solicitor who specialises in business acquisitions. Again there are plenty but make sure you get a specialist. You will need the solicitor to do legal due diligence to confirm what you are buying - for example taking a quick look at the lease.

    You will also need the solicitor to draw up a sale and purchase agreement under which the owner will give certain promises (known as warranties) about the business. The most important warranties are that the seller owns the business being sold and that the accounts are accurate.
    Originally posted by steampowered
    So basically what everyone else is saying already then?
    You are not special. You are not a beautiful and unique snowflake.
    • Pennywise
    • By Pennywise 5th Oct 17, 1:48 PM
    • 9,428 Posts
    • 17,152 Thanks
    Pennywise
    Everyone has to start somewhere right? I just need someone, who isn't the seller, to explain it all to me.
    I have no experience in catering.


    Gail
    Originally posted by gail.wls1
    You need to consult both an accountant and solicitor. This is bread and butter work to them and they'll guide you through the various stages.
    • Pennywise
    • By Pennywise 5th Oct 17, 1:54 PM
    • 9,428 Posts
    • 17,152 Thanks
    Pennywise
    A cafe is indeed an ideal "first" business for someone and an ideal business for someone to learn all about business. Not quite as good as a burger van, but close! It's one of the simplest business models, i.e. buy something, cook/prepare it, and sell it. Very low barriers to entry as usually quite cheap to buy/rent and the only "qualification" is food hygiene. And very high potential earnings IF you do your homework, choose the right location, pay the right price and offer the right goods, ie. what the punters want to buy and at times they want to buy it.

    Get a few professionals around you and you'll be fine. BUT, you really have to choose the right people to help and you have to choose the right business to buy.

    Lots of little cafes are worthless because they don't make anywhere near enough money to survive - turnover is vanity, profit is sanity. Lots of new owners have wholly unrealistic ideas about what people want to buy, i.e. they project their own ideas onto the potential customers, but to be successful you need to give them what they want - if that's bacon buns rather than tofu salad, that's what you need to offer them! A little bakery/cafe near me changed hands and the new owners decided to turn it into a "deli" selling olives, cheese, etc - a complete disaster - sold again and new owners turned it into a bacon bun/burger bar and it's now heaving with passing lorry drivers and tradespeople and making a very handsome profit. Don't try to force your business idea into the wrong location/area.

    "Some" little cafes are goldmines, others are money pits - you have to do your homework and be realistic to ensure yours will be the former rather than the latter.
    Last edited by Pennywise; 05-10-2017 at 1:57 PM.
    • motorguy
    • By motorguy 5th Oct 17, 2:31 PM
    • 15,825 Posts
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    motorguy
    A cafe is indeed an ideal "first" business for someone and an ideal business for someone to learn all about business. Not quite as good as a burger van, but close! It's one of the simplest business models, i.e. buy something, cook/prepare it, and sell it. Very low barriers to entry as usually quite cheap to buy/rent and the only "qualification" is food hygiene. And very high potential earnings IF you do your homework, choose the right location, pay the right price and offer the right goods, ie. what the punters want to buy and at times they want to buy it.

    Get a few professionals around you and you'll be fine. BUT, you really have to choose the right people to help and you have to choose the right business to buy.

    Lots of little cafes are worthless because they don't make anywhere near enough money to survive - turnover is vanity, profit is sanity. Lots of new owners have wholly unrealistic ideas about what people want to buy, i.e. they project their own ideas onto the potential customers, but to be successful you need to give them what they want - if that's bacon buns rather than tofu salad, that's what you need to offer them! A little bakery/cafe near me changed hands and the new owners decided to turn it into a "deli" selling olives, cheese, etc - a complete disaster - sold again and new owners turned it into a bacon bun/burger bar and it's now heaving with passing lorry drivers and tradespeople and making a very handsome profit. Don't try to force your business idea into the wrong location/area.

    "Some" little cafes are goldmines, others are money pits - you have to do your homework and be realistic to ensure yours will be the former rather than the latter.
    Originally posted by Pennywise
    +1

    Wholly agree.

    There are alarm bells ringing all over the place with this one for me though.
    You are not special. You are not a beautiful and unique snowflake.
    • TELLIT01
    • By TELLIT01 5th Oct 17, 2:57 PM
    • 4,262 Posts
    • 4,441 Thanks
    TELLIT01
    Some years ago my sister-in-law was in a very similar position to the OP, but although broadly in the same trade area it wasn't a cafe more a bakers and sandwich shop. The owner of the business was a friend and she had worked for her for a number of years. Friend said she was finding running two location too much and was looking to sell. S-i-L thought it would be ideal. Friend said it was a great little business making a good profit and S-i-L took her at her word and purchased the business from her.
    She very soon found it wasn't a great money maker, worse that a convenience store was shortly to open literally two doors away and would undercut all her prices.
    Cut a long story short the business failed within 18 months leaving her with a mountain of debt. Moral of the story is to take nothing on trust no matter how nice the person is, or seems to be. Their interest is in selling up and getting the best price they can, not in helping you along. As others have said, if you have no business or catering experience you are taking a huge risk.
    As a first step you definitely need to get an accountant to look over the books, and that probably won't be cheap. If the owner hesitates about allowing that to happen don't walk away - run as fast as you can.
    I was watching a programme recently which featured a couple who were running their own cafe. They said it had always been their dream and they had the money behind them to back it. They admitted it would never support them financially as an income, but they enjoyed doing it and it didn't lose money.
    Can you afford to work on that basis?
    • motorguy
    • By motorguy 5th Oct 17, 3:14 PM
    • 15,825 Posts
    • 9,121 Thanks
    motorguy
    Some years ago my sister-in-law was in a very similar position to the OP, but although broadly in the same trade area it wasn't a cafe more a bakers and sandwich shop. The owner of the business was a friend and she had worked for her for a number of years. Friend said she was finding running two location too much and was looking to sell. S-i-L thought it would be ideal. Friend said it was a great little business making a good profit and S-i-L took her at her word and purchased the business from her.
    She very soon found it wasn't a great money maker, worse that a convenience store was shortly to open literally two doors away and would undercut all her prices.
    Cut a long story short the business failed within 18 months leaving her with a mountain of debt. Moral of the story is to take nothing on trust no matter how nice the person is, or seems to be. Their interest is in selling up and getting the best price they can, not in helping you along. As others have said, if you have no business or catering experience you are taking a huge risk.
    As a first step you definitely need to get an accountant to look over the books, and that probably won't be cheap. If the owner hesitates about allowing that to happen don't walk away - run as fast as you can.
    I was watching a programme recently which featured a couple who were running their own cafe. They said it had always been their dream and they had the money behind them to back it. They admitted it would never support them financially as an income, but they enjoyed doing it and it didn't lose money.
    Can you afford to work on that basis?
    Originally posted by TELLIT01
    Thats exactly the sort of thing that would concern me.

    People are genuinely ruthless about getting shot of something thats losing money, but presenting it to others as a great opportunity.

    My dad, some years ago looked into buying a business and the amount of times that when you did your due diligence properly, there was something lurking that made it all not as it seemed, was plainly frightening.

    It basically fell in to 4 camps :-
    • Business wasnt making money, owner getting out (invariably within 2 years)
    • Business was making money, owner knew something you didnt and was jumping ship
    • Business was making money, then ultimately they kept it and put a manager in it or sold it / gave it to a relative to own or run
    • Business was making money, owner looking a fortune for it

    That covered 95% of the scenarios. The difficulty becomes sifting out the good 5% of businesses for sale that are sensibly priced, making money and there are viable medium to long term.

    Yes, there are lots of viable businesses sold daily, however the confectionery shop / coffee shop / corner shop / small supermarket / cafe / sandwich shop / chippy market is a minefield.
    You are not special. You are not a beautiful and unique snowflake.
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