Am I crazy?

[brinkjr]

Hey future fellow coffee shop owners,

I just left a six figure salary and bought an existing franchised coffee shop. ....that is just breaking even... meaning no more six figure income.

Why did I do such a thing... I am tired of working so hard for someone else and making them rich and not myself. I am excited about the possibilities of my new adventure, but would love some reassurance.

As a general census, are you happy owners or would you get out if given the opportunity? Also, would 20% of revenue be a good figure to count on for owners benefits?

Any advice is welecome.

 

[Muddycup]

crazy

with all do respect,

why would you buy a franchise that is breaking even?
did you get a good deal?
is there an upside potential?

The only way to get rich MAYBE in this business is multiple locations, the only on egetting rich in your situation is the franchise company.

I am sure with hard work you will do fine, but consider multiples.

Jim

 

[javahill]

A little less doom and gloom from me. Buy low, sell high.

Buying into a marginal franchise hopefully allowed you a favorable price. If not, well, there still might be room for a healthy financial upside. A lot depends on whether you are doing the right things.

Pay yourself a salary. That is an expense along with rent, etc. How do your expenses compare to your revenues? Are you getting enough traffic and enough revenue but your costs are high? Or do you need more customers to turn your business into a cash machine?

The place you get rich (I know several millionaire franchisees) is in the spread, not on your salary. The more locations you have, the more you can leverage overhead like finance and marketing. That certainly is true. To get to that point, you need to understand the ins and outs of what makes an individual unit operate well.

Concentrate on making your one location pop. Get the service experience right for your customers - that is huge. I hope you have a good location - at this point you don't have much control over that. From that point, sock away as much cash as you can either for your retirement or for your next acquisition. Don't eat your seed corn (or blow it on a fishing trip in the Yukon or a new car).

Best of luck.

 

[brinkjr]

Thanks for the feedback,

I purchased this business at literally half the cost of a new franchise. I felt this was a better option since it has a $325K customer base built in with a prime location. The business is 90% espresso and less than 10% food, so huge potential for growth in that aspect. Franchisor says should be a 60/40 split.

I guess I should maybe re-phrase my origianl post in saying that the store is breaking even. The origianl owner had no business savy and had signifiant liabilies to included back royality fees, rent, workers comp, and suppliers. If the business was run correctly there should be $65k in cash flow.

There has been absolutely NO advertising in two years and decor and sales points within store need some work. Needless to say I feel there is huge potential to get this to a $500K + store in a year then will go on to additional locations. My plan is to not take any salary for six months and put straight back into advertising and marketing.

Thanks folks for the feedback, it is nice to share my thoughts and get others opinions of things I may not have considered.

 

[Muddycup]

sounds good

sounds like you may be on the right track, 325k per years sales is not bad just on espresso, there should be a profit built into that. Not sure what the 60/40 means, most franchises charge a franchise fee of 4-7% of gross sales per month. This is for advice marketing and advertising which they should be paying for not you.

 

[brinkjr]

The 60/40 split meaing typical franchise should do 60% in espresso sales and 40% in food. This particular store does 90% espresso and less than 10% food. That is what I meant by huge potential for this store. Thanks for your comments.

 

[Muddycup]

sounds good

those sales with just espresso is great, low food costs, high margins on just espresso. your looking at 900+ gross aday, at that rate you should be making money you should be able to handle the customers with 2 fulltime empoyees. 27,000 permonth

example: rent 2500
30% food cost 8100
staff 2 fulltime 6000
utilities 1500 gross net should be $9000 per month


when you add more food your food costs will go up, make simple food or have it brought in so your labor cost doesn't increase above your new food sales.