Looking over a coffee shop to buy... what to look for?

[Twitch]

So there's a coffee shop in my area that is for sale. Reasonable price, currenly owned by a partnership that is completely hands off. I get the feeling they are running this thing into the ground and want to dump before it gets all the way under.

I'm looking at the books tomorrow. Basic P and L as far as I know. I'm wondering if it's even worth it trying to turn something like this around, here's what I'm looking for.

High Labor
Leased equipment - not paying for a business that doesn't own it's own equipment.
downward trend overall


What am I missing for the books?

 

[cafemakers]

Reasonable price

Hmmm... you might want to be careful about that assessment until you have a full picture from the P/L (going back as many years if possible). Even if the price were $1, it could be too much for a badly structured business with labor problems, deep in debt with a negative brand association.

You may want to refer back to this post with comments on a similar situation: http://www.coffeeforums.com/viewtopic.php?t=2322

I suggest that you get a copy of those books to your accountant first and calculate if the problems that you will need to fix are worth the potential reward.

 

[Twitch]

Looking at the books tonight.

And the price is reasonable to _me_. Some might scoff at, while others would think it's way to low I'm sure.

I'll be looking at the books tonight. Guess I'll have to find an attourney and an acountant. I've been doing all my financial analysis myself, but you're right, I don't want to make a $100,000 mistake.

 

[Twitch]

Well, the books were a HUGE dissapointment. Only showing expenditures in the grosses way. Payroll is very high ($4500/month) and they are spending a huge amount of money in categories that I was unable to understand.

Income is pretty consistant at around $500/day. But no hourly breakdown, no labor breakdown,

Fixed expenses seemed reasonable, but they were also leasing some equipment (dishwasher and a few other things).

I am going to look a bit closer at things, try to speak with the owners, but I think, at this point, I'm more inclined to take a pass....

 

[cafemakers]

Sounds like a smart move!

 

[Twitch]

Is it unreasonable to expect to make 60-70k per year from a coffee shop?

 

[cafemakers]

Is it unreasonable to expect to make 60-70k per year from a coffee shop?

From my relative position this does not seem unreasonable; however, this too will depend on the effectiness of the management and earning potential of a location.

Most coffee shop operators that we work with earn in this range or higher, though I'm not certain if this represents the "average" coffee shop or just the "average" coffee shop that hires us; there may be layers of the market well above and below these figues with whom we have no contact. Hard to say if our experiences represent the norm.

 

[ElPugDiablo]

Is it unreasonable to expect to make 60-70k per year from a coffee shop?

you'll need more than $500 revenues (assuming when you wrote income, you mean revenue) per day