Opinions Needed ASAP

davidwhatley

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Oct 9, 2007
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DFW
OK, I have an opportunity, (tonuge in cheek) to take over an existing,(sorta) Coffee House
So here is the deal.
New Shop, 150K+ in build out, new top of the line equipt
Owner gets sick and leaves 2 months after opening so the landlord is stuck
Landlord wants someone to take over the lease, 3K month 4 years, also to lease the equipt at 500 month and put up 10K to start.

To me that deal as structured SUCKS. No drive thru, 27K traffic count.

So, what kind of deal do YOU think would be fair?

Here is my thoughts, IU will put up 5K fro staff and inventory for a couple weeks, run the thing, market, etc.
I take no salary for 6 months and any profit retires the 32K he wants for equip. At the end of 6 months we re-evalute aqnd if things look good, I own the equip. Sign a 4 year lease and he owns 10% of the shop.

YOUR ideas?
 

davidsbiscotti

New member
Oct 4, 2007
338
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The landlord owns the equipment?
Is he offering the option to buy the equipment with 10K down?
Then $500 per month until the 32K is paid in full?
Is the equipment purchase your only investment?
For what sounds like a turnkey operation, the sick owner must want something for his investment.
You sound excited, as I would be too, but I'm not getting who owns the equipment and who gets 10% of your business in the end.
 
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davidwhatley

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Oct 9, 2007
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DFW
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Thanks

David, the 10K is for the deposit and the first and last months rent. Of course all this is negoiatable.
The landlord now ownes the equpitment, and wants to see it for 32K and let that be paid at 500 a month. I wil not pay new price for used equip.

I havent been inside yet, but the location is good, signage is awful, and the rent is too high for the traffic count. 27K a day, so if I can get .5% it would be ok, but I believe that .5% is too high. What do you think?
 

MrBeans

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Dec 13, 2007
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You need to be more clear in

where is that place located, is it village area, a big town, a small town with no opportunity for growth?

The lease price is way too expensive.

The landlord is in mercy of someone to keep it going so the plaza looks good, not only for the money.

Lease should not exceed Only $900.00 for the first year, then you take it from there.

Do not forget about Electric bill, it can be way too high specially if you are in a very hot climate, and you have to pay it.

The traffic count is way too small to depend on.

Don''t forget in few months you might need to replace or maintain equipment, it happens all the time.
 

davidsbiscotti

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Oct 4, 2007
338
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Well, David..........
I don't know the formula for traffic count, sorry.
But as for rent, you'd have to factor what space goes for in your area, it's probably based on square footage. Ask around, people can be pretty open about what they pay for rent, I only pay $650 per month, but it's a production facility and only about 1200 sf. That's actually not bad for my area.
As far as the equipment goes, if you have a little time, jot down the specifics of the equipment, brand name, model, approx. age and serial numbers if possible and call a used equipment dealer to get an idea of the value of the equipment.
If the landlord is open to negotiation, you could offer an up front cash price, somewhere in the low to mid 20's. I don't know how your credit is, but you could try & acquire one of those 4% cash advance deals from one of your credit cards or even pull equity from any property you might have. Get family backing if it's not a bother to them. He'd be happy with a lump sum and you'd probably pay less interest in the end if you juggle your finances properly. The equipment would be all yours and you wouldn't be tied to the landlord for five years.
Others in this forum could definitely give advice on what to expect as far as traffic count, location and signage.
Let me know what you think.
P.S. - Try to get out of the thing where he gets a percentage of your business, that could haunt you for years to come. It doesn't sit well with me is all.
 

John P

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Jan 5, 2007
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Salt Lake City
If the location can't support the rent and be profitable, forget it completely.

Otherwise,

Your lease should be for less (say $2500) than the original. New lease, new negotiation, the old lease has nothing to do with you.

Equipment: Top of the line by who's standards? Is this equipment YOU would purchase? If not, it is of little value to you... think about that part of it for a bit. Does the landlord own the equipment? Or did he seize it from the former tenant? If so, did he legally seize it?

What is the market price for this equipment?
Lease means the landlord will replace/repair all equipment at his cost if there is any breakdown... otherwise it's a "rent to own" situation, which in my opinion would be foolish.

I would only consider paying a $10K buy in if the landlord puts that $10K toward rent, otherwise I would ask for the first six months rent free... and settle on three.

I really don't like the equipment deal.

Good Luck.
 

CCafe

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Aug 11, 2004
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Des Moines, Iowa
I think it sounds fishy. Who knows maybe the owner wanted to get sick because the operation was tanking after 2 months and needed a way out. I would definitely want a third party to go over all books since the store opened to see if that was the case.
 

davidsbiscotti

New member
Oct 4, 2007
338
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CCafe is skeptical and just made two excellent points.
JohnP also made a good point about the value and history of the equipment.

If you decide to go forward, don't forget the tax benefits of buying into a business.
I would say, buy the equipment, don't "lease" it.
If you have a corporation or will start one, the money you fork out for the equipment could be reimbursed to you directly and tax free by the corporation. You could even charge the corporation interest (this part would be taxable personal income, but a tax deductible business expense for your corporation).
As a sole proprietor, I think you could write it off incrementally as a business expense. So, make sure it's in writing that whatever dollar amount that you pay the landlord is all going towards equipment purchase.

Ask an accountant about the tax advantages of buying equipment versus leasing.

Just something to stay on top of.
 
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davidwhatley

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Oct 9, 2007
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DFW
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More info

PK Guys, here is some more info, and the equipment list. Most of it is what I would buy, with the exception I wouldnt have done the ice cream.
Now I hear today form a shop about 4 miles away, which is also for sale, that the landlord wanted a coffee shop so bad that he was the one that put it in. It is a good area, but, and the devil is always in the butts: My concerns are of course traffic, signage, and "my" largest, no drive thru. here is the equiptment:

1 Manitoc under counter ice maker
2 Cold Tech under counter small (dorm size) refrigerators
1 Cirqua water softener system (Model No. CMCU150T)
1 Fetco grinder (duplex) Model GR2.2
1 Fetco brewer Model CBS2031E 1 Grindmaster grinder Model 810
2 Mazzer Luigi grinders (Models Mini Timer & Super Jolly Timer)
1 LA Marzocco Espresso machine (double) Model LINEA2EE
1 ice cream dipping freezer case 1 pastry combo case
2 built in small stainless steel hand sinks
1 Sharp counter top microwave oven
1 Otis Spunkmeyer counter top cookie oven
1 black widemouth 4-slot kitchen toaster
--------------------------------------------------------------------------------
6 stainless steel coffee thermos dispensers
1 countertop acrylic pastry keeper box
1 white bathroom scale 7 glass canisters with coffee beans
1 POS credit card machine Model Star TSP600
1 US Micro CPU hard drive with cash register monitor, keyboard & mouse 1 empty cash drawer
1 VTech cordless telephone
2 LinkSys wireless routers
Miscellaneous disposable cups, lids, syrups and coffee paks 6 plastic trash cans

there is a lot more, such as tables, chairs, shelfs etc.
 
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