A Guide To Coffee Shop Business

There are a few things to know when considering getting into the coffee shop business. You can enter this business by one of three ways- start your own coffee shop from scratch, buy an existing independent business, or purchase a franchise. Each type of business has its pros and cons. For instance startups have more risk associated with them than buying an existing business or franchise. In my opinion, buying an existing business, either independent or franchise, is the easiest route and the more popular way to get into the business. If you plan on buying an existing coffee shop you will need to do your research. Check out the location, the atmosphere, the menu and the financials.

Location

It's not a bad idea to visit the coffee shop business you are interested in. You can act like a private investigator, after all nobody knows who you are. This will allow you to watch the business and its employees in action. It will also give you a real feel for the amount of traffic going in and out of the shop. The most successful coffee establishments are easily accessible to foot traffic. Great locations produce greater revenues but come with a price. High traffic equals high rent. High rents can eat up profits. Monthly rent should not be more than 10-15% of gross sales. Look at the current lease agreement. See if it's possible to renegotiate the lease if the rent is too high. If the coffee shop is not accessible to foot traffic then more advertising dollars will need to be set aside in order to attract more customers.

Atmosphere

Check to see if the establishment has a pleasant atmosphere. What is the decor like? Redecorating can be expensive. Are the employees friendly? Customers will be more apt to spend time in an inviting and comfortable environment. Will you keep the current employees? These are important factors to consider when negotiating the purchase price.

Menu

During your visit to the coffee shop for sale check out the menu. Sample different types of coffee and ask questions. Some coffee businesses sell food items and some do not. Adding food to the menu can boost profits. Cost of goods sold should be around 28-32% of annual sales.

Financials

Once you have investigated the location, atmosphere and menu you will need to look at the financials. Pre-tax profits should be around 16-20 percent of annual sales.

If the shop is adhering to industry standards and everything else seems to be in order concerning the location, atmosphere, menu and financials then all that's left to do is close the deal.