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

[coffeedog]

Musicphan, it sounds like you have some valuable insider knowledge. When you say you are a commercial roaster, I assume that means you sell coffee to coffee shops? What are some characteristics of successful small town coffee shops based on your observations?

 

[MntnMan62]

Did I somehow create the impression that I was an internet forum statement away from signing away my life savings? If so, that was not intended. I've been looking at getting into the hospitality business for 5 years now. I've looked and passed on several opportunities, some of which others have proceeded with and seem to be succeeding.

This particular building might not be good. But the town I'm considering has some advantages that I think are somewhat rare. It's on a major thoroughfare and there is no drive through of any kind in the town. It's kind of the last stop an hour before skiing destinations and a major mountain resort area. We have a major chain grocery store which is a reason for people to exit the freeway. Another thing we have is a fairly large retirement community and a small but consistent group of older dudes (I'm a younger sort of honorary member of that group) that hang out in the grocery store sbux everyday. I'm pretty sure I could capture that market.

Yes I'd like to talk myself into this, I won't hide that fact. But at the end of the day I'm pretty chicken when it comes to this kind of stuff. My research is in it's very early stages. And all those things you mention I appreciate and indeed will find them out before I put up any cash.

Don't assume that those who moved on the other opportunities you passed up are succeeding. Just because a business is opened and operating doesn't mean they are making a dime or aren't losing their shirt. There are lots of people out there with inherited money who go into businesses they know nothing about but feel as though they have to show their family members that they can actually succeed at doing things. I know because I spent 35 years working with ultra high net worth individuals and would sit with entire families talking about their lives and how they use the income, and sometimes principal, distributions from their trusts. One woman was buying individual condo apartments in NYC and renting the out. When we went over the number it turned out she was making 1% on her investment. And that was based upon a casual discussion about her expenses. I would not doubt that she was actually losing money because she probably was not forthcoming about other funds she had put into the units. And there are countless other conversations that were very similar. You get the point. Stick to your own business plan. It's good to know that you are being very careful and thorough in your review of each opportunity. When the right one comes along, you will know it. Until then, happy hunting. The process of looking is a learning experience in and of itself.

 

[Musicphan]

Musicphan, it sounds like you have some valuable insider knowledge. When you say you are a commercial roaster, I assume that means you sell coffee to coffee shops? What are some characteristics of successful small town coffee shops based on your observations?

Yes, I sell to individuals and supply several cafes in my market. I don't know if I have tons of wisdom... LOL... but I constantly talk to people starting up cafes/coffee shops. Those who really know their numbers, how many transactions they need to cover, etc. are generally more successful. I'm not saying a $8K rent can't make it... but man that's a lot of volume. When you get into high volume scenarios you also have limitations of equipments / staffing / throughput, etc. It's good your asking question and don't let it get discouraged. Make sure you know your customers - the only way to do that is to talk with them. Stand outside the proposed location and ask people their thoughts on coffee / price points / etc. Wake up at 5 am and do your own traffic count - when I'm serious about a location I sit for hours counting cars. It not only tells you how much traffic but what type of traffic and the flow of traffic. For example, I was approached by a developer that had the "PERFECT SPOT" for a coffee shop (I.E. all commercial real estate reps will tell you that at some point). When I really watched traffic it was mainly blue-collar workers on the clock leaving for jobs. I soon found out that the area was full of supply houses for plumbers / mechanical and that was driving traffic. I'm sure i could have picked up some of those people as clients, but a vast majority had timetables to meet. It just goes to show you its necessary to roll the sleeves back and dive into every aspect of the business.

 

[Rustlen]

I think that the question is very complex. Anyway, I've read here a lot of useful opinions.

 

[coffefund]

I really like this comment section. As a potential buyer (I'm saving money for that. I don't want to pay for the rent) I found some interesting information that could help me to make the right decision. I am seriously looking at these homes and hope to buy one of them one day.

 

[Ramiel]

It is an interesting question but you should take in consideration factors like, where is placed your coffee shop, how many clients you will have per day and other. I was in such a situation, but I decided to buy a place, not to rent it. I live in Mexico and playarealestategroup.com, Tulum Real Estate company has a lot of good variants that could be bought and used for giving them as a rent for the tourists. I had 100k$ and the rest of the money were from the credit I got. In 3 years I covered all the money I didn’t have at that time.

 

[BiJohn]

Not far from the mountains of North Carolina, my brother opened a small shop, there is rarely so bad weather that there are no buyers

 

[shadowygirl32155]

You should consider more than just the rent. That's just one component. What about utilities? Taxes? Employees? Workers Comp? Maintenance? There are a ton of small costs you need to think about. Look at the big picture, all these expenses, and then figure out how much you need to sell to make a profit.

 

[feeble]

Ah, business is a cruel thing. Very often, your personal desires interfere with a successful business. Think about it. Personally, from my experience, I can recommend you to open your own business in California. I remember once with my friends we rented a Sunnyvale condos for six months. We were happy, as the place is nice and there are a lot of people. There are also many tourists coming to California, which contributes to the development of business. And I think there you will definitely come out in a good passive income. And then you can easily go where you dreamed of going.
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[vomaxa]

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. FirstKey Homes would be a better option with a drive-through, but adding one might be possible. I estimate I could get this place ready for about $30K. However, the site might have double 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.

If you want more stability and lower risk, go with the second location with the lower rent and the potential to add a drive-through. It gives you flexibility and room to grow without the high rent pressure. However, if you're willing to take on more risk for potentially higher returns and more foot traffic, the first location with the drive-through could be the better option.

 

[froze]

Not sure where the location of the shop would be but you would need to sell at least 350 cups a day, and that will be impossible for at least the first 3 years for a small privately owned coffee shop. You can't start out charging as much as Starbucks, in fact you can never charge as much as Starbucks if you expect to get sales! Then you have to factor in a lot of other expenses like insurance, equipment, etc, do you get a loan for the equipment? if so that's another monthly payment. Then you have to have the cash to buy the coffee, creamer, etc.

Starbucks sells an average of 700 cups a day, you'll be lucky if you do 350. You can't expect to get some of that 700 cups over to you, people are foolishly dead set on going to Starbucks even though their coffee is watered down!

Being right next door to a Starbucks is not a good location, with that close of a proximity you'll be lucky to sell 150 cups a day!! That means you will sink.

The other location will only have 1/4 to 1/3 the traffic, so figure on 1/4 to 1/3 the number of cups of coffee you'll sell.

You need to get a realtor that knows about business traffic, and locations, and try to find a better location than the last one for as cheap a month as possible.

The other word of warning. Most commercial rental properties the owners will suck you in for a low monthly rent, then about 3 to 5 years go by and to renew the lease it goes up by at least double, why? Because they know they got you, they know that most people are not going to quit the location to go find another cheaper place and basically start all over again. A lot of businesses have gone bankrupt due to the rent going up too high and the business owner could not make enough income to pay the rent and all the other bills.

 

[JeffD]

I might have missed it but don't forget taxes.