my first venture into buying a cafe/coffee shop

meow2

Morning
I am in the process of looking to buy a cafe. initially I will be meeting the owners to discuss their business, turnover, footfall ect...
are there any other questions I should be asking before making a decision on whether to buy the business or research I should carry out

Many thanks

HatAndScarf

meow2 wrote: »

Morning
I am in the process of looking to buy a cafe. initially I will be meeting the owners to discuss their business, turnover, footfall ect...
are there any other questions I should be asking before making a decision on whether to buy the business or research I should carry out

Many thanks

No, I think you've got it more or less covered.

Don't forget your cheque book & pen ... and your pinny

What time are you planning on staying open 'til tonight? I might drop in for a celebratory cuppa from you if I can squeeze you in.

Good luck!

PlutoinCapricorn

Find out why they are selling.

Ask whether any of the staff have been TUPE-ed out: I think I remember someone on here bought a coffee shop then had to pay a lot of redundancy money to a staff member who had been there for ages.

PlutoinCapricorn

"I arrange a lot of business fiance and my experience is that MOST people in catering get it wrong. They lack the requsite attention to detail.

Usually it's down to a combination of factors, but could be sumarised as the owner bascially lacks attention to detail, for example the loo isn't 100% spotless / the lighting is too bright / the staff serve incorrectly / music too loud / walls not scrubbed every morning / light fittings have cobwebs / unmatching surfaces throughout the property / unmatching fittings for example brass door handles yet silver window handles / food the wrong temperature / cold plates / rust and dirt marks on the cieling - often I notice this / staff don't write down every request customers make so they forget things etc.

Unless you have an unswerving dedication and attention to detail you'll probably fail"

https://forums.moneysavingexpert.com/discussion/3730189

motorguy

meow2 wrote: »

Morning
I am in the process of looking to buy a cafe. initially I will be meeting the owners to discuss their business, turnover, footfall ect...
are there any other questions I should be asking before making a decision on whether to buy the business or research I should carry out

Many thanks

One thing i would be asking is, how long have they had the business. The typical "get out" time when people know it is not making money / losing money is 2 years, so if they are getting out at that point of before, i'd tread very carefully no matter what other reason they are giving you. Very few people sell a goose thats laying golden eggs.

Likewise, if they've been doing it for five years or more, then they've likely been able to at least draw a "living wage" out of it over that timeframe.

Again, just "rule of thumb" ideas, but when you look closely its interesting as to how many businesses are resold within 2 years.

Also, look at when the lease is up for renewal. Short lease could mean a hike is on the horizon.

Any new shopping centres / cafes planned or just opened in the area? Check with planning. My dad nearly bought what appeared to be a fantastic small supermarket that was going for top dollar but worth it - found out almost by chance that Tescos had got planning permission down the road.

Sellers are ruthless. They will happily sell you a pup at full market value and leave you to lose a fortune rather than have to accept a loss themselves.

Pennywise

Be very wary. A lot of people buy this kind of business for far too much and end up being a busy fool, earning little, and in a rush to sell it on to the next mug.

"Some" cafes are little gold mines, but you have to be able to sort the wheat from the chaff. Watch out for the usual excuses for poor sales/profits, such as they could earn more if they opened longer, had a wider range, etc - usual excuses are that the owners are busy with their own kids, infirm relative, etc so that they can't develop it properly themselves. Then there's the others who say (with a wink) that there are a lot of cash sales straight into their pocket that don't show in the books - they're lying to make a failed business look better!

Due diligence is your answer. Get the last 3 years of accounts - insist on them being prepared and signed off by a qualified accountant. Get copies of the last 3 years of quarterly VAT returns to look for any pattern of decreasing sales. Sit outside for many hours at various times of day to see how busy it really is and whether there is really scope for longer hours or different products (i.e. how many people are passing by and don't go in!). Take whatever the current owner says with a pinch of salt. Check for any ongoing liabilities, such as TUPE as mentioned above, but also find out what equipment is leased/hired and what contracts there are (alarms, refuse collection, etc). Make sure you understand all the costs (wastage, utilities, insurance, credit card/bank charges, maintenance, etc.)

Don't believe a single word that you're told until you see evidence for it yourself and you won't go far wrong. Don't buy the first one you see - you have to kiss a lot of frogs to find a prince. Do your research, look into other similar businesses for sale even if you're not interested in buying them - it's a good learning process for you to see comparable businesses.

motorguy

PlutoinCapricorn wrote: »

"I arrange a lot of business fiance and my experience is that MOST people in catering get it wrong. They lack the requsite attention to detail.

Usually it's down to a combination of factors, but could be sumarised as the owner bascially lacks attention to detail, for example the loo isn't 100% spotless / the lighting is too bright / the staff serve incorrectly / music too loud / walls not scrubbed every morning / light fittings have cobwebs / unmatching surfaces throughout the property / unmatching fittings for example brass door handles yet silver window handles / food the wrong temperature / cold plates / rust and dirt marks on the cieling - often I notice this / staff don't write down every request customers make so they forget things etc.

Unless you have an unswerving dedication and attention to detail you'll probably fail"

https://forums.moneysavingexpert.com/discussion/3730189

An interesting comment, but very easy for someone to say "oh i wouldnt be like that" and think they can make a success where someone else has failed.

There are various reasons why a cafe may not be making money, of which the above only makeup a small part.

motorguy

Pennywise wrote: »

Be very wary. A lot of people buy this kind of business for far too much and end up being a busy fool, earning little, and in a rush to sell it on to the next mug.

"Some" cafes are little gold mines, but you have to be able to sort the wheat from the chaff. Watch out for the usual excuses for poor sales/profits, such as they could earn more if they opened longer, had a wider range, etc - usual excuses are that the owners are busy with their own kids, infirm relative, etc so that they can't develop it properly themselves. Then there's the others who say (with a wink) that there are a lot of cash sales straight into their pocket that don't show in the books - they're lying to make a failed business look better!

Due diligence is your answer. Get the last 3 years of accounts - insist on them being prepared and signed off by a qualified accountant. Get copies of the last 3 years of quarterly VAT returns to look for any pattern of decreasing sales. Sit outside for many hours at various times of day to see how busy it really is and whether there is really scope for longer hours or different products (i.e. how many people are passing by and don't go in!). Take whatever the current owner says with a pinch of salt. Check for any ongoing liabilities, such as TUPE as mentioned above, but also find out what equipment is leased/hired and what contracts there are (alarms, refuse collection, etc). Make sure you understand all the costs (wastage, utilities, insurance, credit card/bank charges, maintenance, etc.)

Don't believe a single word that you're told until you see evidence for it yourself and you won't go far wrong. Don't buy the first one you see - you have to kiss a lot of frogs to find a prince. Do your research, look into other similar businesses for sale even if you're not interested in buying them - it's a good learning process for you to see comparable businesses.

Totally agree. Cafes require very long hours and as you say, you could be working massive hours and making next to no money (or losing money)

Its a common pipe dream that people have - "to own a cafe / coffee shop" and a lot of people seem to think they can go in with absolutely no experience in the field whatsoever - perhaps never even having worked in one - and make a success of it.

Be very careful, O/P!

Pennywise

PlutoinCapricorn wrote: »

Usually it's down to a combination of factors, but could be sumarised as the owner bascially lacks attention to detail, for example the loo isn't 100% spotless / the lighting is too bright / the staff serve incorrectly / music too loud / walls not scrubbed every morning / light fittings have cobwebs / unmatching surfaces throughout the property / unmatching fittings for example brass door handles yet silver window handles / food the wrong temperature / cold plates / rust and dirt marks on the cieling - often I notice this / staff don't write down every request customers make so they forget things etc.

Excellent points, but it depends on the "type" of cafe. If it's somewhere were there'll be regular repeat business or where there is lots of competition, such as a town centre, then you need all that to be right. But if it's a "one off" kind of cafe, i.e. at a day-trip tourist spot where you won't expect customers to keep returning, then a lot of that is irrelevant - you'd just need to keep to the basic standards of health & hygiene. We've been to loads of very busy cafes to find quite horrendous loos, poor decor, etc.

Mistral001

Pennywise wrote: »

Due diligence is your answer. Get the last 3 years of accounts - insist on them being prepared and signed off by a qualified accountant.
.

Good advice. Also I would add that you perhaps should show them to your own accountant. Remember as far as I know accounts are only based on what information the business owner provides to the accountant.

trailingspouse

And when you've done all of that you will need to be brave.

Either brave enough to say, yes we can make it work, or brave enough to say no, it's not for us. And walk away.