Should I do it?

DJinArizona

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Aug 28, 2009
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I am a newbie to the forum and have read nearly every post on here. Thank you so much for all your feedback. While I know you can't have too much money when opening a business, any business, my question is more related to taking over another location. My wife was a barista for about 4 years many moons ago. She flew to Seattle every year and really enjoyed her training. That was 13 years ago so yeah, she'll probably need a refresher course or two. Where we live there is a %$^&bucks in a grocery store about 2 miles away and a dunkin' donuts about 1/4 mile away. Other than that, we're surrounded by residential with one main road in/out of town. The location is on that main road heading out of town (but doesn't actually face it). There was another coffee shop set up in there with a drive through and counters, etc. No machinery anymore, but set up to comply with health codes (sinks, bathrooms, etc.). It's decorated as far as paint, flooring, lighting, etc.

We're working on our business plan but the rent is $3K a month, 1,200 sq.ft. We're not wanting to branch out too far from coffee based drinks. Maybe incorporate smoothies. We don't want sandwiches and all, mainly stuff people can eat in their car easily (muffins, bagels, etc.) The previous tenant moved out in Feb, filed a BK. Canot find any other info on it. I saw one posting on the www that said they grossed 98K, no references given. The shopping center is growing, there are a few small eaterys in there (mexican, asian, pizza, etc.) Nothing really anywhere around for over 15 miles where you can sit and chill, listen to music, relax, etc.

To the question, we are able to have her work during the morning/early afternoon and me at night. This will allow me to keep my full time job. That's the nuts and bolts of it. The question is (finally, i know) without knowing how/why the other business failed, knowing there really isn't much competition around (except the donut shop), in a prime location for drive through traffic, but not actually facing the main street, and also including that the community is only about 10 years old and there is a growing community interest in supporting local business instead of the chains, what would you do?

I know, I know, there are a lot of variables (marketing, $$, time commitment, etc.) My wife and I are not wanting to hire employees for at least the first year to avoid the taxe headaches and to ensure we can do enough business to warrant it. Ideally, I would like to make enough for her and me to work, quitting my job.

Lastly, I know: a lot of variables, you don't want to be too optimistic and paint an unrealistic picture, etc. But is it worth the risk knowing that it failed and not knowing why? Last piece of my question: If we waited 6 months, a year, even 2 and the economy gets a little better, I don't want to kick myself when someone else snatches the idea up. Sure, the economy could still slide, but I don't want to be the one who had the idea, the plan and hesitated and watched my opportunity pass me by. Given that it's such a new community and growing by leaps and bounds, I am fearful to miss the boat, so to speak.

Your input is appreciated. Thanks!
 

ElPugDiablo

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Jul 16, 2004
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Hartford and New Haven, CT
DJinArizona said:
Given that it's such a new community and growing by leaps and bounds, I am fearful to miss the boat, so to speak.
Ah the old fear and greed syndrome. I think you better investigate this place and investigate it a lot. For one thing, grossing 98K is ridiculously low. That is less than 300 a day, and you are out 100 a day for rent which leave you next to nothing for anything else. I would think your rent should be about 10% of your revenue, that means you should have a revenue of 360K. You need to find out a bit about the first owner and why the first owner failed; and you better be sure you have the ability to increase the revenue substantially. Once you know about the first owner and his or her mistake and you still think you can do so much better, then proceed with extreme caution otherwise save yourself the headache and hassle.
 
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DJinArizona

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Aug 28, 2009
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I found out some info about the previous tenant, it was a Bear Creek Coffee franchise. From my research online, a lot of people are not very happy with this company. The website that "reported" the 98K had no information on the financials nor does it explain where the figured came from. Thanks for the input so far. Keep it coming. :)
 

wmark

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Nov 12, 2008
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Canada
I always do things this way.

What are your bare bones fixed costs ?
How many cups of coffee do you have to sell in order to cover these costs ?
 

AZ Espresso

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Sep 3, 2009
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Hi DJ,
Much good advice here, but all the planning in the world won't assure success. However you MUST write a business plan to see if the concept is viable in your location. Typically drive thru planning is based on traffic counts (not sure where you are, but traffic counts are available for most major metro areas online). Sit down cafes are based on foot traffic which should be available from the shopping center you are considering.

Your cost of goods sold should run between 25-28% and your overhead should be as low as you can possible get it. The advice for 10% rent is good, but it will take awhile to achieve that. Working it yourself is essential because labor would be your single largest overhead cost. I just closed a drive thru in Tucson two weeks ago after 18 months and the single biggest mistake made was trying to do it with hired help.

Put away plenty of $$ for promotion of the business the first year...traditional advertising is costly and not very effective, especially in a residential area. Guerilla marketing is the way to go...door hangers, community outreach, events for local organizations...get to know your neighors any way you can.
 
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DJinArizona

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I did a little more digging (the internet is sooo useful). I located all the info I needed about the previous owners. Got their phone number and talked to them for about 30 minutes. They were open for 5 months and were broken into 4 times. The company they were using to open their franchise took their 75K and did nothing except deliver the cabinets. they did 25K in rennovations before opening, the owner did not re-pay them. They were 100K in the hold before opening their doors. They also had to buy all their equipment, supplies, signage, etc. Slow days they did less than $200, good days a little over $450. Rent was more than 4K. All things point to great morning commuter traffic but not much else. Think I'll have to pass on this location at least. Thanks for the great input. We still want to do it, but will find a better location, maybe one that faces the major street. For now, the dream is on hold. I'll keep reading all these posts as there is great info here. Thanks to all you pro's out there for taking time to help us newbies!
 

John P

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Jan 5, 2007
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Salt Lake City
DJ,

One very important point that many new business owners overlook is the sense of being "fully invested". This, is most cases, means that you do need to quit whatever else you are doing. From a practical standpoint it sounds good to continue to have a steady income, or to have something to fall back on. But you need to be cautious with this approach. It really comes down to the psychology behind everything regarding the starting and running of a small business. I can't tell you how many businesses I have seen fail for this simple reason.

Having a safety net is great for, "What if it doesn't work?" Your safety net should start with saving enough money to start and run your business. Once you have even the smallest bit of "What if it doesn't work?" in your mind, it alters the decisions you make, it alters your sense of urgency to succeed. Entrepreneurship, for the vast majority who don't have $2 mil sitting around to play with, is about taking calculated risks, but there has to be a bit of, "If we fail, we're on the street" rather than, "If we fail, we can continue what we were doing."

If you were my friend, I'd counsel you to save enough money first, and quit your job. The most critical part is to first have enough capital. Think of it as the most you could possibly need based on your numbers, and add 15 to 20%. But from a been there - done that standpoint, do what ever you can to create a TRUE sense of urgency. The decisions one makes and the drive one has often revolves around the psychology surrounding this sense of urgency. Create a situation where you HAVE to succeed, and the chances of success are much greater.

The greater the risk, the more it means to you on a day to day basis to succeed.
Make decisions now that will lead to you having a long-term successful business, and if that means waiting for another space, another opportunity, then wait. Plan. Save. Create. Succeed.

My two cents.
 

Tophie2

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Jul 6, 2008
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St Augustine Fl
Remember to remind yourself that people that are optimistic and have everything they want DOES NOT COUNT. Now that being said, I would kill for a 450.00 day average. I have an unbelieveable location, voted best coffee in town, and losing my ass. I have no employees, my cogs are at 32%, What I thought was a realistic rent is basically another mortagage payment. FPL has the monopoly on my power requirements. My water bill which was very reasonable in the begining, has tripled becuase of FOG. Insure you have LOTS OF MONEY, I MEAN ALOT!
 

John P

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Jan 5, 2007
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Salt Lake City
Tophie2,

At 32%, your COGS are too high-- or simply put, raise your prices. If you have the best coffee in town, and have been recognized for it, you need to capitalize on it. Buy better ingredients and raise prices even more. Also, really look at waste and see if you can eliminate milk waste, coffee waste, electrical waste by installing low voltage lighting, etc.

Keep at it.
 

Tophie2

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Jul 6, 2008
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St Augustine Fl
Not to hijack his thread. I can raise the price to a million dollars a cup, but if no one is coming through the door it dosesn't matter. COGS were at 61%
 

John P

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Jan 5, 2007
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Salt Lake City
Tophie2,

If your product commands "a million" a cup, people will seek it out.

For most small shops, there will always be periods of slowness, but with that, it's critical to not just make the best drinks in the area, but to make the best drinks they've ever had. Each drink has to be much more important than the sale. Each drink is a representation of your entire business, your philosophy, and how much it means to you to bring the customer in front of you something truly special.

We averaged squat our first six months .... less than $200.00 per day. We've never offered drip, or relied on huge customer counts. Know exactly who and what you are and be the best at that.

Look at your situation with fresh eyes. I know it's easier said than done, but remove the personal emotion and attachment from the situation and diagnose it as if you were paid by a colleague to assess the situation. Remember: You are still there. Ask yourself = "What do I need to do to be the best?" Improve at least one thing daily until you reach your goal. It sounds awfully cheesy, but honestly, if you improve your espresso, your external marketing, your niche marketing, your milk steaming techniques, your internal marketing, your value, your customer service, etc... it will pay huge dividends. One step at a time is enough, but standing still won't get you there.
 

ElPugDiablo

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Jul 16, 2004
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Hartford and New Haven, CT
Tophie2, you have been in business more than 6 months now? If you are not averaging $450, you need to reevaluate your business. You need to figure out how to increase your business volume. If you have a good location, then why aren't folks coming in?
 

Tophie2

New member
Jul 6, 2008
157
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St Augustine Fl
Believe me Pug, If I knew I wouldn't be bitching. You tell me. I do need to realvaluate. I should have never said yes when I mean no. I do have people say this is the best coffee they have ever had. I have european customers that tell me I have the best coffee in the United States. I have a doctors office that comes in for breakfast and does not understand why I am not slammed. I also have every other business owner tell me that they are hurting also, so it is not just me although it dosen't make me feel better. To say I'm a little discouraged is an understatement. I'm this close to robbing a bank cause then at least either way, I would be set for life. Once again I don't want to hijack this thread, but I am open for suggestions.

As I sit here and type,I have not had 1 customer in 2 hrs. NOT 1!!!!!!!!!!! I have 188.24 on my x tape and have been here since 7am.

Then again Lisa from Payless shoes told me that they have not sold 1 pair of shoes in 3 days.

Do you know the kind of restraint it takes when the customers I do have ask me how business is? Smile and say well it's a little slow.... when underneath I am screaming IT F#$%^ING SUCKS! MY HOUSE IS IN FORECLOSURE AND MY CAR IS ABOUT TO GET REPOSSESED AND I CAN'T AFFORD THE RENT AT THE SHOP!!!!!!!!!!!

Location? I am in a shopping plaza with Publix, Micheals, Pier 1, Crispers, Firehouse subs, Five guys burgers and fries, Ross, Payless shoes, Game stop, Matteress firm, Sprint, Advance Hearing, Woody's BBQ, Merle Norman, Kays, Sonic, Petco, Boaters world, CiCis pizza, Sallys beauty supply, Bealls,Arbys, Happy nails,Bed bath and Beyond,Oreck, Leather by Design, Great Clips, Hair Cuttery,Broudys Liquor,Firestone,...................And the employees come here for coffee.

I guess I'm just not smart enough to figure it out. Maybe instead of coffee i need to sell crack.

I got my whole life in this thing so the emotion can not be taken out.

What really burns me up is the reason I pursued this endevor was the original location. Inside a outlet mall, center court, on a Saturday there were 5 people tripping over each other trying to make drinks.
41 days to close, mall managment says, sorry we found another coffee shop. The seller asks me what I'm gonna do w/o a lease, I told him I was dead in the water w/o a lease wtf was i gonna do sell coffee out of my garage? He cussed me up one side and down the other, saying I should have had other contingencies. I told him he should have had also. We were screaming at each other in the middle of the mall and I should have dropped the deal then and just lost my 5k deposit. To make a long story longer, after securing a lease at the current location, the original location comes to my store and says hey, why don't you come back?
Well I already spent the money setting this up. They didn't get another coffee shop (because they wanted Starsucks) so now they have no coffee and I have no business. A lose/lose situation.
So then we go to a Chamber of Commerece business expo, meet this guy that says he is a financial expert and says there has to be a way to get back out at the mall, yeah for 50k I can do anything, this joker comes back in my shop and says, I have been thinking about the mall deal and if you can't do it, I will. So this SOB sets up a kiosk exactly where I was, and is about to open up. The only good thing is,
They have a temporary lease and if a brand name coffee shop i.e. Starsucks wants in, they have 7 days to get out.




I mean Hooters closed down WTF does that tell ya?
 
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