Somewhere between $1.00 and $1,000,000.00 per month.
Just kidding. The question you asked is difficult to give you an answer with any degree of accuracy, but you aksed for it.
Coffee shops realistically range between the $100,000 per year and up to the $2,000,000 mark. Of course the upper range would be a super high volume location in a densely populated area, so let's drop it to a little more realistic $1,000,000 upper range. If you break that down to daily sales, you are looking at a range of say about $200 or $300 a day up to about $3,000 or more a day.
Now look at the location you are looking at. Is it high foot traffic? Next to a college? Thriving business district? Competition?
All these things add up to an "average" (if there is such a thing) coffee shop doing $1000 a day.
Hi JpsCoffee, I am currently creating my business plan for a coffee shop in the works to open in the next year. Getting a good realistic prediction is one of the tough parts! What you said sounds very logical, but how do you go about making predictions when you do not have the location yet? If I'm using my business plan to get the funding to look for a location, do I use assumption of the type of location? Or would it be better to offer multiple scenarios for a prediction?
Honestly, if you are looking to get a business loan strictly from your good looks :grin: , your business plan, and your sales predictions it may be tough. Bankers often don't care about anything except having collateral. Especially in the tought start up food arena.
Now, to answer your question. Yes, I would use the location for a traffic count and sales assumption. Location makes ALL the difference in the world.
Sometimes startup operations have a better chance of obtaining bank financing when combined with SBA guarantees. The business owner will have to do the paperwork and pay some fees. This is not a lock that a bank will do the deal but it could help in obtaining a loan. Banks know about the high failure rate of new food/beverage operations and will be cautious about extending credit to an unproven owner.
Sometimes taking out a 2nd mortgage on a home or using a home equity line of credit is a better choice. It may be less difficult than the SBA or traditional business credit approaches.
That's a misleading statement becaues there's more to it than that. Banks can make unsecured loans and secured loans to businesses. On a secured loan, banks will always look at the primary source of repayment as the basis for determining how risky a loan is. This would obviously be the income generated by the business. If the business plan is sound and assumptions used to create the proforma income statement are sensible and on the conservative side the bank will be more comfortable extending credit. Always list any assumptions used in creating your financial projections so the bank may know how you arrived at your figures.
The liquidation of equipment is a secondary form of repayment. Most banks don't want used restaurant equipment because it is difficult for them to resell. Thus, they will require larger equity from the borrower.
The third form of repayment would come from the personal guaranty of the borrowers themselves.
Strong borrowers generally get lower rates and "looser" credit terms.
Risky borrowers generally get higher rates and have to put up more collateral, inject more equity and provide personal guarantees.
Thanks for clarifying. You seem to know more about the subject than I do. What I learned came through my start-up, my relationship with my banker and subsequent business ventures. I am sure banks, bankers, and boards of directors vary as much from bank to bank as coffee quality does from shop to shop (excepting a lot more regualtion).