What to Consider When Buying a Cafe
There are a number of things that you should consider when buying a cafe. A Cafe is a popular choice for people looking for a career change or moving their family to a new location. Café’s don’t require the owners to have extensive experience, but it is definitely an asset if you want it to be successful! There are over 1,300 Café’s for sale on BSALE.
When it comes to buying a café, you have options from $30,000 to $400,000. Depending on location, size and set up of the business or franchise. There is a price point for most potential business buyers.
Franchised Cafes will give you support, training and marketing from the franchisor. Independent Cafes will give you the freedom to control all aspects of the business.
10 Things to consider when buying a café:
1. Do your Own Research
Spend some time in the café – make sure it’s at random times such as weekends, midweek lunch, breakfast etc. Do this numerous times. Roughly calculate how many customers visit, how much they spend, and what the business seems to be turning. Don’t just rely on the figures or current owners advice. Ask if you can work a couple of shifts before purchasing to see how the business operates. Be sure to look at the business online as well, see their social media and 3rd party reviews.
2. What is the profit margin?
It is imperative to review the café’s accounts. You want to know if it is turning a healthy profit or merely covering its expenses. When buying a café, you want to make sure it can run independently of the current owner. Will you be required to work 40+ hour weeks to earn a wage, or can you run the business under management? A good sign when buying a café, it that it's being effectively managed and there can be a seamless transition. Ask how many bags of coffee they are selling a week, it will give you an indication of customer flow.
3. Future Developments in the Area
Its important to know what is happening in the area. Is there a road change, a fast food restaurant, a new café opening? Sometimes new buyers solely look at the business without the environment and can miss important changes.
4. Potential Growth
Are there simple changes within the business that can be made to increase profits? Perhaps extending food lines, improving interior, staff changes etc. Seeing the room for growth from minimal investment may be the reason to buy one café over another.
5. Age of the Business
Studies have shown that almost 60 percent of small businesses fail during the first three years. Whilst a café may have a great fitout and vibe. Its important to consider the age of the café and its long term stability.
Will the staff be staying with you or was it a family run café and the chef, baristas etc will leave the business when you take over. The staff are an important part of a business and must be considered. You need to review your employee contracts.
Does the café have a good long term lease in place? If the lease is ending soon and you have to move the Café you may loose a lot of your customers. This decreases the value you should be paying for the business. If in a shopping centre, make sure the lease allows for new business owners.
Check that the Café has a good relationship with its suppliers. Did they pay their accounts regularly, will the suppliers be happy to continue dealing with you once you take over the business.
Check the equipment. You need to make sure when purchasing the Café what is the condition of the equipment (new or old. Under lease, being paid off or owned outright). It can greatly affect the value of the business if all the equipment is being leased rather then owned outright by the business.
10. Don’t go Solo
Even if you have years of experience running a café. Make sure you get your accountant and solicitor to look over the figures and contract. You want to be 100% certain you know what your buying and getting into. That the decision is made intelligently rather then emotionally.