Buying A Coffee Shop Out Of A Lease...?

tamproom

New member
May 8, 2014
1
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I have been reading through the threads here about buying existing coffee shops. Most were helpful but I am still looking for a little more insight. I have been working full-time in the coffee business going on four years now. A year and a half ago I transitioned to the shop I am currently at where it is just the owner and myself splitting up the hours. Within the past month or two he has mentioned wanting to sell the business and has known from the start that my goal was to own my own coffee shop. This past week he began talking numbers and based on what I know about the business, seems a little high.

Here is a little background -- his wife wanted to own a coffee shop and originally him and her split up the hours. She also does taxes so when tax season was coming up in December '12, I was hired. From the day I started it was evident that he was only in this business because his wife wanted it, he had no passion for coffee (if there is one thing I have learned, its that you have to be passionate about coffee to make it worth doing day in and day out.) Within a few months customers were telling me that they would only come in if they saw my car because they didn't want to pay three or four dollars for a bad latte. He started noticing that our totals were dropping and instead of fixing the problem he decided that food would fill the void in the totals. We started out with turkey clubs, b.l.t.'s, etc but a year later and we are a coffee shop that sells BBQ, hot dogs, and shrimp (yes, in a coffee shop.) Then, last week our espresso machine stopped working. Rather than fixing it, he is making pour overs with espresso beans and considers it "high quality espresso." On top of that he is inconsistent in how he charges people. Low and behold, we are not turning much profit. On top of that he is being worn thin, he does catering, he is in the real estate business, he is working on opening a sandwich shop, and working full time hours with me at the shop. He told me that he had no doubt that the shop would double, if not triple, their profits if he put me in charge but he couldn't afford to have me in there more often. Despite all of this, our customers are still very loyal. It's a somewhat small town, so they know us and are more understanding than I would be.

My vision, goal, plan, whatever you want to call it is to take over the lease, buy a handful of things from him (grinders, ice machine, blender, coffee brewer, steaming pitchers), then change the layout, change the name, completely rebrand the place. From what I have read it is not a good idea to buy a shop thats not turning a profit. But I know we have a loyal customer base and I've been paying attention to what they ask for, suggest, or comment on not liking so that I truly believe I can turn it around. I want the focus to be on coffee. And to do it exceptionally. I've always been told "it's better to do one thing great than a lot of things okay." If I do food it will be small, quick sandwiches that don't take away from the coffee. Both shops I have worked at believed that the answer to their problem was food, and it wasn't. It ended up creating more waste and took away from what their business was built around -- coffee. I will expand our hours, currently we are open M-F 7am-5pm Sat. 8am-4pm and closed Sunday (yet he isn't consistent with showing up on time either). I know that even after I turn a profit (which realistically will take a while) I am going to have to remain extremely devoted and it is going to take a lot of my time, but after being in this business for four years I know I want this and am more than willing to devote all of my time to this.

He said what they are wanting is to sell it as a place where the buyer can go in next day and be open and running. But there is a good bit of work that needs to be done, some framework needs to be repaired, some electrical work, and of course a working espresso machine (which I already have). I know everything is always negotiable and I was wondering if there was a way to come up with a fair counter-offer. Somebody mentioned in one thread that you should only pay them 2x the net profit plus the price of equipment and inventory. I looked at some local government small business websites to get a better idea of how to find the value in a business, but its hard to find the value in a business that isn't turning much profit.

tl;dr: I have been in the coffee business for four years, the shop I am currently working at isn't turning much profit and the owner is wanting to sell. How do I come up with a fair counter-offer for just buying the lease and a handful of his equipment?
 

CoffeeJunky

New member
Dec 7, 2012
1,802
0
Michigan, US
There are several ways you can approach this.
It really also depends on type of relationship you have with the owner.

For a quick responds, pm me your phone number and I can give you some very interesting way to approach this situation.

CJ
 

PinkRose

Super Moderator
Staff member
Feb 28, 2008
5,219
6
Near Philadelphia, PA
Hello "tamproom"

Welcome to the Coffee Forums!

I see that Coffeejunky has offered to make a couple of suggestions. He's a great resource and he can be very creative when it comes to business matters.

I had to laugh when I read your tl;dr notation and summary at the end of your post. It was very considerate of you to add that.

By the way, for those who are wondering:

tl;dr means too long; didn’t read. Used to indicate that one did not read a (long) text, or to mark a short summary of an overly long text.


Rose
 

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