Your monthly lease payment amount?

[CFGuru]

Hi Everyone,

I''m new to the forum and I''m sure that you will be seeing a lot of me.

I''m in the early stages of planning to open a coffee shop. I will most likely be hiring a consultant to do the heavy lifting for me. In the mean time, I have a question that I was hoping you could help me with.

The space I''m looking to lease is an excellent space with a good location. My cost will run $4,000.00 a month for the lease. Its 2,000 SQ ft next to a river area in the middle of a town with my space being attached to the only parking. Development is happening that will further make the space exceptional.

I would very much like to hear what your cost is each month for the space that you lease? I''m trying to get an idea if $4,000.00 is low, average or above average in terms of what a coffee shop typically pays out each month for lease?

Obviously, the amount varies with square footage, etc. But for right now I''m mainly curious as to a total dollar amount that you pay each month for your lease payment only.

Thanks!

 

[fredk]

Following the 10% rule, do you think you can generate $40,000/month in sales at that location?

 

[CFGuru]

Following the 10% rule, do you think you can generate $40,000/month in sales at that location?

I don't know. I'm too early in the planning stages to answer that question.

For now, I'm just wondering what the average lease range seems to be for coffee shops in general.

 

[John P]

It sounds high, but it's all relative.
If you are in a Busy coffee-centric city, it would be ok. Chicago, some sections of Boston, maybe New York, Seattle, Portland not too much else. Otherwise, too much space, too much rent

 

[cherylann324]

Hi CFGuru,

You are already looking at lease options and don't have a sales estimate for your intended location? That should come first. What are your demographics for this location? DOT? Other businesses? Your success will depend heavily on how many customers have access to this location on a daily basis. Have you done a personal traffic count?

Every location is different and lease prices corresondingly. You should be able to support $40,000 a month in sales to be able to lease this property or it is not the best location for YOUR business. The averages are 10% of gross sales, you should abide by that or take a higher risk factor into account when choosing your location. A higher risk may pay off, or it may not, and for a new business that is terribly important. That is what fredK is saying.

No one can tell you if your lease is too high or good enough. Your sales projections will tell you that. A high lease price (this is high) should mean that high coffee sales will follow. Some locations justify that, some do not.

Sales projections based on adequate demographic counts have to be done for every location you are evaluating. New locations away from any comparable businesses should include DOT counts and any similar businesses nearby. That means sitting in their parking lots and counting their customers! Perhaps you could also do some sort of survey?

Good Luck and let us know how it goes!

Cheryl Ann

 

[CFGuru]

Hi Cheryl,

Thanks for sharing your thoughts. There is indeed a lot to be done if I decide to move forward.

I don't plan to draw any conclusions from my potential lease rate versus that of others. From what I have gleaned on this site it appears most people are leasing for under $3K and frquently under $2K. I thought it might be helpful to conduct a crude straw pole and just get an idea of where people are in terms of their lease rates. Sort of an industry average, if you will, though this site doesn't represent the entire industry so again the numbers have to be looked at in context. But it would be helpful to know, for example, if a non-franchise somewhere in the U.S. is paying $5k or $6K for a lease and they are making money. Because that indicates that with the right location anything is possible. So far, I've not read about anyone here paying over about $3k for their lease.

 

[cherylann324]

Hi CFGuru,

I see what you are saying. Buy franchises are really not a part of this forum. And franchises can afford to take a loss and even eventually close. That is part of their risk factor and taken into account when they lease a location. Can you afford that?

Obviously, risk is an important factor. Each business has a different risk factor, depending on financing and other factors. But in this forum you will find mostly independent coffee shop operators and they will respond as if you are an independent coffee shop. That is mainly our focus, but I may be wrong in that.

I do think $4,000 per month for rent is somewhat high. But if you can support that in sales, it would be just fine. Just do that part of your projections before you move forward.

Do you plan on financing your business yourself or privately? If so, less will be required of you to defend your figures. But if you are looking for any other financing, they will be looking for figures that will let them at least know this is do-able.

You will probably not get any franchise figures here, they really aren't applicable to the members of this forum.

Could be wrong in this, someone else may respond to differ on my opinion. At any rate, keep us posted. I would love to see what happens and what you decide. Many people watch a post to gather information that do not respond. Please let us know what you decide and why!

Cheryl Ann

 

[CFGuru]

Hi Cheryl,

I may be in a little different position than some in that I can afford to buy the equipment and pay the first 5 years lease or more in cash up front. Not that I'm going to do that. But financing isn't an issue other than I may use financing and not risk my money.

I also have no intentions to look at a franchise.

Honestly...all I'd like to know is what, in general, people are typically paying on their monthly lease.

 

[cherylann324]

Hi CFGuru,

Being able to pay the lease for five years does not really make any coffee shop business sense. No matter how you look at it (a franchise that is able to lose money) or a real small local business, the facts will be the same.

Are you willing to lose yours or somebody else's money? Even if there is somebody somewhere paying more than $4,000 a month doesn't really mean anything to you and your location. The bottom line is will your sales support this amount of lease? That is the bottom line. You must do the legwork, all the demographic counts and everything that comes with the demographic counts.

I think you are in a real good position to start a great coffee shop if that is what you really want to do. You have the finiancial position to do that. But paying $5 or $6 k a month in a lease is not what you are going to find in this forum. Do not expect to get any or very many shops responding to that question, probably none on this forum pay that much.

Instead spend your time investing in demographic counts and researching possible other locations. You have much work to do, the price of the lease is, in your case, not really the issue. The SALES are the issue. Work them up, then let us know where you are.

Cheryl Ann

 

[cherylann324]

BTW the space may be entirely too large at 2,000 sq. ft. to support a profit-making coffee shop. Research suggests a 1,200 sq. ft. space to be the ultimate size. Do more research and see what you can find, I may be completely wrong. And 2,000 sq. ft. would be great if you can find the sales to support it. Industry standards can be proven wrong with an outstanding location and management!

Parking and other factors do not seem to be a major issue with coffee shop patrons, but your individual survey of prospective customers may be entirely different!

Cheryl Ann

 

[CFGuru]

Hi Cheryl,

Thanks, again. I am aware of the things you mentioned. I have read every post in the forum and I have a great deal of business experience.

Back to the survey...I am interested in hearing what people are typically paying for their monthly lease. Those of of you who care to share, please post a little about your lease amount and perhaps the size of your shop!

Thanks.

 

[CFGuru]

Cheryl,

I reread my post this morning and I must apologize. I sounded rather harsh and that was not my intent! I'm sorry that I worded it so poorly.

I'm going to ask the moderator to delete this thread. I would like to have my question answered and this thread has gone so far off-topic that I think we should start over.

Thank you so much for your help!

 

[morrisn]

To answer your question we pay $ 1000 for $ 1500 square feet and quite often could use more space. It depends how much food if any you are going to do and also if you are going to have lots of etertainment.

 

[John P]

We pay $1700 for 1100 sq ft plus an outdoor patio that seats 13.
While 10% is a great figure for the bank, reality is closer to 14-17%

Lease rates are all relative. At the airport here a 400 sq foot shop will cost about $12000 or better per month, but they're also making $100K plus per month. Compare that to a 1500 sq foot shop downtown paying $2000 per month that is making $20K per month. Who's coming out ahead?


Only you have the ability to study your area well. Trust yourself, make tough decisions, and bounce a few ideas here from time to time.