Value of Drive Thru Coffee Shop

[coffeedog]

I found a drive thru coffee shop in my town that's nearly exactly what I want. I talked to the owner and found that he is willing to sell. He has owned it since 2008. He told me he would sell the business, including inventory and equipment for 120k. He would lease me the current building and lot for $700/month. I can buy the real estate plus the business for 300k.

As I understand it, the shop is not doing too well. It appears to have a fairly bad reputation in my small town. The owner concedes that he is getting too old. Town's folk see him as grumpy. I went there today with my friend and indeed saw evidence of this. My friend went to the wrong window. When he went to the one as directed the owner refused to sell him a cup of coffee.

I realize that this negative will, to the extent it exists, should affect the value of the shop. On the other hand, it is less than a mile from my house. In my mind the fact that it is up and running makes it worth a lot more than a shop that is vacant.

Although I think the price for the business alone is high, I'm tempted to pay it because it checks some boxes that are difficult to check. If I offer closer to what I think it's worth, I'm worried that he will cease to negotiate with me.

I do believe he would show me the books and allow me to do due diligence however.

Lookin for input from the coffeeforums brain trust.

 

[Musicphan]

I would get solid details as to what the $120K includes.... seems high IMO as well but no way to tell without knowing what's included. With the bad reputation I would rent vs. buy ... $8400 a year is CHEAP and it would take you 40 years to break even.

 

[coffeedog]

Thanks for the reply. I agree with you on every point. I also thought $700/month seemed cheap. A couple other issues are that I would want to pave the lot and I would like to change the theme of the business. This will be something along the lines of a bikini coffee shop, although baristas will be wearing more clothes.

Beyond whatever issues I will face with the city and community, in the event that I do indeed rent, is it foreseeable that the owner might try to dictate to me about things he doesn't like regarding the way I run my business? I suppose that's why I would have a contract/lease agreement. But contracts can be broken.

 

[coffeedog]

I met with the owner today. The sale includes the business, equipment and inventory. No building. Modifications to the building not allowed. The owner wants 120 for the business plus 50k deposit. If the business is running in 3 years the deposit would be returned.

Doesn't sound too good to me. However, it turns out he has a second location that is much nicer. It already has a paved driveway and a few tables inside. He wants 105k for this business. He does not own the property. The lease is $1250 per month. It's in a much busier area. Lots of room for improvement in my opinion. While there for 15 minutes today I saw 3 customers drive through. There are other shops in the area for competition too.