Percentage. For rent

[newtocoffeeworld]

Hi. I am opening a coffee/bar model cafe. I have a spot in middle of negotiating. I believe it is a amazing spot. Trying to do some sales forecasting for rent and Cogs, labor etc. Does anyone have any numbers they found work. Would love some help.

 

[John P]

All you can do is look at comps in your area, within X number of blocks and get an idea of what a fair rate is. Although many people will talk about percentage of rent, it's just part of your fixed costs, and the value of your location will determine the value of said rent. You ideally have to look about 3 years in, make your best guesstimate and do a well thought out assessment.

Example: Space A is 1000 sq ft at $1000 per month, and potentially will yield $10,000 per month revenue. Space B is 1000 sq ft at $2200 per month, and potentially will yield $16,000 per month revenue. Which is the better value? Location is not just about amount of traffic, etc. There are a lot of factors that go into choosing the right space. Size. Shape. Lease terms. Surrounding businesses. etc.

Be thoughtful. Don't make an emotional decision on a space you "love". Make a reasoned decision on a space that meets your criteria.

 

[John P]

Anyone telling you about specific numbers unless they are looking at your situation, in your city, with your menu, ingredients, staffe, etc. is just blowing smoke.
These are things you can only do for yourself, or pay someone to come, assess properly, and do it for you.

 

[expat]

Also if the space has been empty for awhile make an offer that will embarrass even yourself. You might be surprised.

 

[newtocoffeeworld]

Thank you so much for all the great information ..I am learning so much from leasing. It is very over whelming. Looking a a new build. Going to ask for them to pay for some per square foot tenant improvements. Not sure what to ask for 30-50$ per sq foot. I think I am going to try and get a tentant representative to help me negotiate. They are prob very expensive. If anyone has any thought would love to hear them. Thanks

 

[Musicphan]

Well... you can get a tenant rep real estate agent ... they represent you HOWEVER they are commission driven so they are deal driven... don't forget that. TI allowances are generally based on the rent per square foot / condition of location (is this a white box, grey box, etc)... and term of lease.

 

[newtocoffeeworld]

It is a vanilla shell. New build 2400 sq. Feet. 18 a sq foot plus 7 for common cost.the Radisson smaller country hotel is going up right behind. The owner of Radisson building a 8000 sq foot building in front of where we would be. They don't have any food or bar services at hotel. So we would compliment each other. Trying to get owners to pay for some improvmenta in negotiations. A lot to learn and know.

Thanks

 

[Bateh]

I am in negotiations as well to open a coffee shop in an office building. I estimated an P&L and it looks like I will do pretty well based on 200 cups per day.

Sales

 

[Bateh]

I am in negotiations as well to open a coffee shop in an office building. I estimated an P&L and it looks like I will do pretty well based on 200 cups per day.

monthly

sales - 15400
(includes 25% waste)

COGS - 3960

Gross margin - 11440
gross margin % - 74%

Expenses
payroll - 3640
rent- 1400
insurance - 208
payroll taxes - 707
credit card process - 443
misc fees - 250

total operating expense - 6648

profit before taxes - 4791
taxes incurred - 1437

net profit - 3354
net profit/sales - 21.78%

thoughts?

 

[John P]

If that's how it works out, the numbers seem good. Numbers on paper always look good. Sometimes reality is not so nice. There are peaks and valleys, an ebb and flow to people's buying and drinking patterns throughout the year. After the first 24 to 36 months is when you can have a more accurate idea of what to expect. And even then, it's always a moving target, which makes it challenging and fun.

Waste should be part of COGS, not sales. And if you actually hit 25%, you will go out of business.
I usually think 10% is a fair number.

Check out other coffee shops in office buildings in your area. If you see that your numbers are realistic, then keep moving forward.

Best to you.

 

[newtocoffeeworld]

I have been working on the restaurant industry for 20 years. So bringing that background in. I am trying to keep cogs at 28% of sales labour at 26% and rent should be 10, however with the new build will be 17%. I think trying to adjust to make sure you fall within ranges of percent is a good way to adjust as you move forward. What does anyone else think?