Drive-thru Espresso Shop Lease Rates

CodeRedCoffee

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Jul 3, 2006
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Hello. I'm new to this forum and the coffee business. I've completed my business plan and found a potenitial location to place my drive thru shop. I will own the building (128 Sq feet), but lease the ground underneath. It's appears to have decent traffic counts (25,000 vehicles per day) and located on the proper side of the street to capture inbound downtown traffic in Boise, Idaho.

Question: is there an industry standard, or rule of thumb, regarding how much should be paid to lease a small piece of property? It's not in the "high rent" district. Any guidance or advise would be greatly appreciated!

Jodi
 

cafemakers

New member
Nov 3, 2004
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There are no "industry standard" rules to value a piece of property, other than by comparison with comparable surrounding properties, so you will need to negotiate the best possible deal that you can.

It is, however, suggested that you will want to keep your projected occupancy to sales ratio (rent as a function of sales) to less than 10%, generally 7-9%.

Best of success,

Andrew
 
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CodeRedCoffee

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Jul 3, 2006
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Drive thru lease rates

Thanks so much for taking the time to reply. I appreciate it. My lease rate is in that suggested range, so I feel okay about it. Just to be sure though, that suggested range holds true when you’re leasing just the land and not the physical building, correct? Again, thanks so much for the guidance.

Jodi
 

FXAdam

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Jun 16, 2006
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Re: Drive thru lease rates

CodeRedCoffee said:
Thanks so much for taking the time to reply. I appreciate it. My lease rate is in that suggested range, so I feel okay about it. Just to be sure though, that suggested range holds true when you’re leasing just the land and not the physical building, correct? Again, thanks so much for the guidance.

Jodi


No reason it wouldn't. It is the total cost you need to worry about, not which part (the building or the land) that the cost is coming from.
 
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CodeRedCoffee

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Drive thru lease rates

I appreciate your input. Thanks for taking the time to reply.

My concern is that I still have to account for the cost of the building itself on another line as it is not included in my lease rate. When I'm striving to maintain that under 10% mark, do I consider the cost of the building? Am I splitting hairs here? Thanks!

Jodi
 

FXAdam

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Jun 16, 2006
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Does the cost of the building include any ongoing expenses? If you have some kind of monthly fee related to your building, then I would include it in you total lease cost.

If it is simply a one shot expense (ie: you have to pay to build the building, but that is it) then I wouldn't worry about it so much as that cost will get spread over the entire life of your business and eventually become a neglible monthly amount.
 

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