Page 1 of 2 1 2 LastLast
Results 1 to 10 of 18
  1. #1
    Junior Member
    Join Date
    Feb 2020
    Posts
    7

    How much do I need to sell to pay $8K/month rent?

    I'm looking to open a coffee shop in the mountains of Northern California. I am looking at a site with a drive through. The rent is high, $8000/month. I could probably have it ready to open for about $20K in equipment and updates. It used to be a fast food place. I estimated that I would need to sell 200 cups of coffee per day to make a go of it. There is a Sbux in a grocery store right next door that does $10K/week on a good week, sometimes up to 12. However, when there is severe weather revenue there has fallen at times to $1K/week. I suspect this would be pretty rare, maybe a monthly gross of $10K a couple of times per winter.

    There is a second site that I think I could rent for less than $1K. No drive through but it might be possible to add one. I think I could get this place ready for about $30K. The site probably would have 1/4-1/3 the traffic of the one mentioned above.

    What are some ideas/measures I can use to choose the right place? I would also consider buying a shop that is up and running if I could find one in an area where I want to live.

    I'd be happy with a net income of $3000/month, as I have other passive income.

  2. #2
    Senior Member
    Join Date
    Nov 2019
    Location
    New Jersey
    Posts
    253
    You just need to sit down and add up all of your costs. That means your investment costs which can be amortized over time. So if you invest $20,000 in equipment and updates, amortize that amount over say 5 years which works out to $333 per month. And then add up your ongoing operating expenses. Besides rent you have insurance, salaries of employees, utilities if they aren't included in your rent, any maintenance and upkeep expenses that you would be responsible for such as landscaping, snow removal, etc. And make sure there aren't other hidden costs in the lease such as percentage rent or real estate tax increases. Lastly, you need to figure what your cost of goods sold is and other normal supplies such as cups, straws, napkins, the actual coffee, milk, etc. Let's just say that number is another $5,000 a month. So for arguments sake, let's say all your operating costs are $12,000 per month (rent and all the rest), add your amortized investment costs plus your cost of goods sold and your break even point is now $17,333 per month. Add in your desired income of $3,000 and you need to clear $20,333 per month to achieve your desired level of income. I have no idea what the numbers should actually be. This was just to give you an idea of how to go about factoring in everything to determine if the deal makes sense.

    Good luck. Starting a new business is exciting.
    Absurdity is the only reality - FZ

  3. #3
    Senior Member
    Join Date
    Nov 2008
    Location
    Canada
    Posts
    468
    Wow...........that is pretty steep rent. 10k a week is $43,333 a month is sales. Your rent would be 18.6% of gross sales if you could match Starbucks' sales of $10,000

    If it were me, I would be looking at 4k rent or need 20k a week in sales

  4. #4
    Junior Member
    Join Date
    Feb 2020
    Posts
    7
    Quote Originally Posted by wmark View Post
    Wow...........that is pretty steep rent. 10k a week is $43,333 a month is sales. Your rent would be 18.6% of gross sales if you could match Starbucks' sales of $10,000

    If it were me, I would be looking at 4k rent or need 20k a week in sales
    Thank you. That's the sort of rule of thumb I was looking for. So you're saying 43k/month sales could support a rent of 4k/month. Is that to say that a rough guide is that sales should be in the neighborhood of 10x rent for a coffee shop?

  5. #5
    Junior Member
    Join Date
    Feb 2020
    Posts
    7
    Quote Originally Posted by IFixJura View Post
    Isn't $15/hour minimum wage in CA now? With that rate, $*43,680‬/year is minimum wage. I don't see any sense to run your own business if that can only provide you less than minimum...
    Wouldn't $15/hr be 30k/year? 50 weeks (2 weeks vacation) of work @40 hours per week = 2000 working hours per year. 2000x$15=$30000. What's wrong with my math? Or does your $44K include benefits?

    And, honestly, I'd probably be happy if I made minimum wage. I am ending one career and will have passive income from that as I start a new part time career. It doesn't take up enough of my time though. I need something to do with my excess time.

  6. #6
    Senior Member
    Join Date
    Nov 2019
    Location
    New Jersey
    Posts
    253
    Rules of thumb are fairly general and don't really take local factors into account. When considering any potential business investment it is much more important to break down and estimate the anticipated revenues and expenses as close to what they actually will be than to rely upon generalizations.
    Absurdity is the only reality - FZ

  7. #7
    Senior Member
    Join Date
    May 2014
    Location
    Kansas City
    Posts
    1,320
    I'm not trying to sound like a stick in the mud, but it sounds like you need to be doing a lot more research before diving into either location. You should have good estimates of all your variable and fixed costs and see if that works for your sales projections. There is no magic button - you have to simply start documenting all your costs. And, It's difficult at best to give you information that is accurate without living your scenario/town/traffic / etc.

    But let's just start with the big expenses - your rent $8K a month is PRETTY high. Labor will be your next highest cost - assuming you have a minimum of two people (one taking orders / one prepping orders) - at 40 hours a week / $20 an hour x 2 people = $1600/week ~ $7K a month. Yes, you won't necessarily be paying $20 an hour but you have taxes/payroll services/taxes / etc. I would imagine your landed cost will actually be above $20/hr. You're easily going to pay $500-1000 for utilities / internet / misc services. So right there your about $16K/month. At $4 a cup and let's say you're making $2.50 (roughly 1/3 cost) a cup, you will need to sell 6400 cups a month to break even / 213 cups a day. That's a big number, and realistically I don't know if two people could even handle the production of drinks. You have to keep in mind there will be an hour or two rush that will generate a big chunk of your sales. If your customers weight - they will walk.

  8. #8
    Junior Member
    Join Date
    Feb 2020
    Posts
    7
    Quote Originally Posted by Musicphan View Post
    I'm not trying to sound like a stick in the mud, but it sounds like you need to be doing a lot more research before diving into either location.
    I thought that's what I was doing by posting here?

    Quote Originally Posted by Musicphan View Post
    You should have good estimates of all your variable and fixed costs and see if that works for your sales projections. There is no magic button - you have to simply start documenting all your costs. And, It's difficult at best to give you information that is accurate without living your scenario/town/traffic / etc.

    But let's just start with the big expenses - your rent $8K a month is PRETTY high. Labor will be your next highest cost - assuming you have a minimum of two people (one taking orders / one prepping orders) - at 40 hours a week / $20 an hour x 2 people = $1600/week ~ $7K a month. Yes, you won't necessarily be paying $20 an hour but you have taxes/payroll services/taxes / etc. I would imagine your landed cost will actually be above $20/hr. You're easily going to pay $500-1000 for utilities / internet / misc services. So right there your about $16K/month. At $4 a cup and let's say you're making $2.50 (roughly 1/3 cost) a cup, you will need to sell 6400 cups a month to break even / 213 cups a day. That's a big number, and realistically I don't know if two people could even handle the production of drinks. You have to keep in mind there will be an hour or two rush that will generate a big chunk of your sales. If your customers weight - they will walk.
    The 213 you came up with is interesting because I did some calculations in my head on my morning bike ride a few days ago and came up with a figure of 200 cups/day. I was able to talk to the manager of the Sbux next door in the grocery store. She didn't know how many cups/day. She thought in terms of gross weekly revenue, which is where I got the 10k/week.

    So using her 10k/week and your $4/cup, that's 2500 cups per week, or 357 cups per day average over 7 days. I'm hoping to meet with her again to get a yearly gross sales estimate. She rarely has 3 people working. Most often 2 and only 1 at times. I would like to think that I could get at least 50% of Sbux current business and add another 25%. So if I could do 75% of 357 that would be 267 cups/day.

    Other factors are that I wouldn't be selling all the food items that they sell. Maybe some pastries and rolls that are easy to handle. I also considered having self serve froyo but I don't know if that's getting too diversified.

    The owner of the building asked me to submit a proposal to him, suggesting that he would accept less than the 8k.

  9. #9
    Senior Member
    Join Date
    Nov 2019
    Location
    New Jersey
    Posts
    253
    Quote Originally Posted by coffeedog View Post
    I thought that's what I was doing by posting here?



    The 213 you came up with is interesting because I did some calculations in my head on my morning bike ride a few days ago and came up with a figure of 200 cups/day. I was able to talk to the manager of the Sbux next door in the grocery store. She didn't know how many cups/day. She thought in terms of gross weekly revenue, which is where I got the 10k/week.

    So using her 10k/week and your $4/cup, that's 2500 cups per week, or 357 cups per day average over 7 days. I'm hoping to meet with her again to get a yearly gross sales estimate. She rarely has 3 people working. Most often 2 and only 1 at times. I would like to think that I could get at least 50% of Sbux current business and add another 25%. So if I could do 75% of 357 that would be 267 cups/day.

    Other factors are that I wouldn't be selling all the food items that they sell. Maybe some pastries and rolls that are easy to handle. I also considered having self serve froyo but I don't know if that's getting too diversified.

    The owner of the building asked me to submit a proposal to him, suggesting that he would accept less than the 8k.
    Asking prices are always negotiable. In fact, everything in real estate is negotiable. Always keep that in mind.
    Absurdity is the only reality - FZ

  10. #10
    Senior Member
    Join Date
    May 2014
    Location
    Kansas City
    Posts
    1,320
    When I say you need to do your research... I was implying you should know what rates for real estate are in your area / what your wages will be / taxes / insurance / food costs/drink costs / professional services... all those things. Asking questions will give you feedback but even then you have to know this stuff for your location. When I see a number liked 20K for equipment, that's simply not realistic, especially for the volume you need to make this location work. You probably could spend close to that just on your espresso rig for that volume... The last cafe I looked at the building was $160K w/o equipment. Just trying to prevent you from going bankrupt... I've seen it so many times being a commercial roaster.

    Comparing yourself to SBUX is comparing apples & oranges... yes they are selling the same core product but drastically diff. SBUX makes as much money in food/merch as they do coffee - that's why they have an extensive selection of food items. And are you SURE they run with that few of people? It was SBUX policy to never have less than 2 people (for safety reasons)... mine near my shop typically has 6-8 people during peak rush.

    If your still set on this location, get a good real estate rep and have them pull comp rates / etc.
    Last edited by Musicphan; 02-23-2020 at 11:28 AM.

 

 
Page 1 of 2 1 2 LastLast

Remove Ads

Sponsored Links

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •  

Similar Threads

  1. Percentage. For rent
    By newtocoffeeworld in forum Coffee Table
    Replies: 10
    Last Post: 03-14-2016, 07:46 AM
  2. Drive through 4-Sale $100.00 month rent!
    By shopgirlsw in forum Business to Business B2B
    Replies: 13
    Last Post: 05-08-2007, 10:09 AM
  3. Rent %
    By Coffee_Boy in forum Coffee Shops, Espresso Bars & Cafes
    Replies: 3
    Last Post: 09-18-2005, 07:59 PM
  4. Does Anyone Ever RENT a Roaster?
    By Aliciajane in forum Coffee Shops, Espresso Bars & Cafes
    Replies: 6
    Last Post: 10-27-2004, 02:10 PM
  5. Drive through 4-Sale $100.00 month rent!
    By shopgirlsw in forum Coffee Industry Forum
    Replies: 1
    Last Post: 12-31-1969, 06:00 PM