Offering Several Tips Before You Buy Your Coffee Stand Business
There are many great ways to enter the retail coffee industry. After all, coffee businesses are as diverse as the people that drink coffee. You may be thinking about a variety of business concepts such a coffee bar, cafe, or setting up a coffee stand.
If you are leaning towards setting up a coffee stand, you will have two general options: start from scratch or buy an existing coffee stand business. Either way, you will probably have lots of questions.
For sure, buying an existing coffee stand business may be an affordable way to start building a successful business, if it's done right.
Depending on where you live, you may or may not have plenty of options options.
Consider doing a quick search on Craigslist.com for “coffee stand” for sale in your nearest city and you will certainly have your pick of what’s available in your area. However, make sure you read this before you buy on Craigslist.
Your Coffee Stand Business: While there may be some great coffee business opportunities, you should always be cautious of the wayside coffee stand business being sold on Craigslist.com. After all, there are many bad deals out there waiting for the unsuspecting investor and coffee stand owner.
To avoid a coffee stand business disaster, you should always do your “due diligence” when exploring coffee stands that are available. Nevertheless, despite our sincere word of caution, there may be a few diamonds out there. It's just a matter of weeding through them.
Hopefully, by doing your market research, knowing and understanding your vision, and understanding the market place, you'll be able to avoid common mistakes made when buying a coffee stand.
Your coffee stand business plan will play an essential role and provide you with relevant “guide posts” for selecting the best option for you.
Additionally, and perhaps most importantly, this guide post will collectively help you negotiate the terms of your business purchase. Remember, there are Pros and Cons to starting from scratch and/or buying an existing coffee stand business. And you will want to understand them.
Here are a couple of general things to keep in mind when buying a coffee stand business…
Before looking for any “turnkey” or nearly turnkey coffee businesses, you should be patient, diligent in your questions, and uncompromising when it comes to getting the answers you need to make the right decisions for your future.
Coffee stands come and go on the market, so again, be patient. The more deliberate you are with getting your answers, the ultimately more prepared you will be to use that data to move forward with opening a successful and profitable coffee stand business.
If you are going to be investing 15K, 25K, or even 100K into your coffee stand business, consider becoming knowledgeable and investing in one of our starter coffee business packages. (It will be the best way ever to spend your money). In fact, you may already know how to pull the perfect espresso shot, but if you are unfamiliar with the coffee business/management, you will need to invest in your knowledge-base.
Since, you may be shelling out $50,000 to buy, setup and launch your business, it makes sense to learn from other coffee business owners. We offer an affordable Coffee Business Start Up Package to help you, so be sure to check them out before you go out and purchase your coffee stand business.)
Your Coffee Stand Purchase: Passing Your “Viability” Test
Your Coffee Stand Business: What to know before you buy. We believe that your coffee stand business purchase should “stand up” to your personal viability test.
Now, if we consider a “passing the viability test” analogy in choosing your coffee business – you have to first “create a test”. Or at least create a series of questions that need to be answered correctly. Therefore it is critical that you look for a business by first understanding the questions you need to answers.
So, what should you look for when it comes to passing the viability test?
The quick answer is: everything.
Everything matters when it comes to making your business work. There is no use in sinking thousands of dollars (Possibly a good chunk of your savings) into a coffee stand structure, when really, the spending is just getting started.
Remember that a coffee business requires multiple parts – all of which need to be functioning before you pour your first coffee beverage. So, you want to have all those parts running smoothly. We've created a list of questions that you may consider the answer to before signing over your check.
Since each location and each coffee stand business is different, you will need to develop any further questions that pertain specifically to you and your situation and location.
Having the answer before signing a lease, choosing a vendor, or spending any significant money may require a little more thought, research, and planning, but it will help you save precious capital for the times you will need it most.
We know that emotions can play a big role on the decision to move forward and open a coffee drive thru stand (or any business). Your goal is to recognize this fact and then do all you can to avoid basing your decision on any emotions. We recommend that you obtain any hard data to analyze whether the coffee stand is worth your money, your time, and your emotional investment. The hard data helps remove the emotional factors that lead to future hardship and the loss of your money
A Coffee Stand Business For Sale
Understanding The Offer
When you find a promising coffee stand business for sale, you should have several important questions in mind right off the bat. For example, you may want to find out “what is for sale” exactly. Many ads featuring a coffee stand for sale may be posted with a variety of pictures and vague language.
The most common advertisement is the posting of a general price and location. Sometimes there may or may not be any mentioning of the coffee equipment and other important items, or the condition of the structure, plumbing, electrical work needed, current ownership, etc.
You should also ask some general information, such as: What about the signage? Commissary equipment. Inventory. What about the existing website and social media accounts? Additionally, you will want to find out if the business has any existing debt, that could come back to haunt you if you buy the business outright.
Coffee Stand Businesses: What’s The Lease Situation?
Many coffee stand businesses will find it convenient to leave after a few years in business when their lease is up (or coming due). Find out how much time is left on the actual lease, who owns the property, and are they willing to re-negotiate a lease that works for you. (Here’s a plug: You should consider investing in one of our coffee shop startup packages which has an audio feature on signing your property lease for your coffee business!)
Your property leases can either sink your business or make it easier for you to be profitable. Your lease contains many of the things that you can or cannot do at your site – including additional investments, remodels, or simple things – like posting a sign, lighting, outdoor chairs, etc.
Getting intimate with the terms of the existing lease will give you the best indication of what kind of experience your business will start off with. Ask questions to determine what will happen to the property. For example, while nothing may be written in paper, the existing business owners may know or have an understanding of what the existing property owner is planning to do with the property.
In their regular business relationship with the current owner, property owners may have mentioned that they are interested in selling, raising the rent, etc. You will need to have conversations with the property owner to confirm any information and get your “guarantees” in writing.
Coffee Business Question: What are the terms of your rent?
The topic of your rent coincides with your lease. While the monthly rent (lease) is important to your monthly budget, you should know how the leasing terms will develop or unfold over time. For example, your rent may be $1000 a month and increase to $1250 a month the second year, and $1700 a month the third year, and so on. Will this be sustainable for you?
While this may not be your specific situation, the fact is that you need to know the conditions and terms of existing lease that is currently in use. Many times, the lease may not be re-negotiated until the lease actually expires. So if you purchase a coffee stand business, you will have to live and operate under the terms of a previous property lease negotiation.
When looking at the terms of your property lease, you will want to review everything that is allowed, not stated, or explicitly stated. For example, some property owners will restrict certain food or beverages from being served or restrict your outdoor signs or sitting areas. This could be detrimental to your coffee stand business.
Additionally, basic questions should be understood beforehand. Things like will you be responsible for the the food waste and recycling? Are their any restriction with remodeling the pre-existing facility or structure? Are there extra charges for security or pest control within a specific business district or property?
While some of these may not be specifically a part of the lease, you may still need to adhere to a business district ‘s jurisdiction and subsequent regulations.
Your Coffee Stand Commissary
Every coffee stand needs a commissary. We’re not aware of one municipal or zoning area in the United States that does not require a commissary (or something like a commissary) to meet the health department’s codes. In fact, speaking of the health department, many coffee stands have a hard time getting the permits required to open because of some structural or spacial challenges (including a commissary).
So, if you are buying a “stand alone” coffee business structure from somebody who currently has it in storage, make sure you have enough space, plumbing, etc. to install the equipment you are required to have to properly serve your coffee and beverages. (Highly Recommended: Most of our coffee business packages also include a detailed discussion with a health department representative which is valuable for any new coffee business owner to hear.)
Where will the commissary be located? Will that be a part of the lease or will you have to have a second lease with the same property owner or a different one?
Your Vendor or Service Contracts
This may sound obvious, but your coffee stand business requires you to sell items to your customers to generate revenue.
Unless you plan to make everything “in-house”, you will need to decide on vendors to work with. Many coffee stand owners wait for the last minute to decide on which vendors to choose from.
The vendors you work with will be important partners in your coffee stand's success. Overall, your relationships with them will impact your product and services – and thus your reputation. Perhaps, more importantly, the vendors that you work with impact your bottom line. So looking into what you'll be getting yourself into is critical.
While most vendor and service contracts are flexible or reasonable, some may not be. And you don’t want to get, well… screwed with carry-over contracts that put limits on your vision or business. So, find out (and get proof in writing) that there are no outstanding vendor or service contracts tied to the existing coffee stand business.
For example, are you responsible for paying interest or payments on any equipment that is tied to current vendor contracts or obligations? Are you tied to serving a particular coffee roast or ordering a particular amount of product per week or month? Do you own any back money (or taxes).
Take away points:
- Do your own research with potential vendors first
- Understand which contracts will transfer over (and their details)
- Assess whether existing contracts fit with your business concept
The Coffee Stand Business: City, County, & State Permits:
When buying a coffee stand, you need to make sure what status the permits are in. Are they transferable in your area? Have there been any infractions or issues regarding the permitting of this particular business?
From our interviews, navigating the multitude of agencies can be cumbersome but not impossible. It's important to have a checklist of those agencies you will need to work with in your specific locale – and get to know them!
The humans at these agencies are well, just people. And about 99% of them want to help you succeed! So the best thing you can do is simply get to know them, build a relationship with them, and solicit their wisdom. Each city and county have their own rules, regulations, taxes, level of enforcement, and procedures, so they will become partners as you begin to take over the coffee stand business. My recommendations is that you make a few phone calls before you actually buy an existing coffee stand.
Some of the things that you can find out is whether the current owner has had any challenges with compliance. Or whether there are upcoming changes to a business district or new rules that can impact your taxes, your signs, or any other business activity.
Show Me The Money! Your Profit & Loss Statements
If your business negotiation is transparent the seller should be willing to share the last year (or two) of P&Ls (Profit or Loss Statements). These basically tell the reader how much is being spent, how much is being made, and the difference between the two. Getting accurate P&L statements is essential – but it is often forgotten.
If your business is costing you $6K to maintain and operate per month, but your P&Ls are showing only a $500 profit ($6,500), then is this purchase going to be worth it to you? Will you be able to cover your personal labor expenses and pay off any interest tied to the business.
Again, we recommend that you:
- Take a look at the hard receipts for a given period of time
- Analyze existing financials
- Count customers for at least three business days to ensure you have a decent customer base.
Coffee Business Basics: Always, Always, Always Count Customers before you buy your coffee stand:
While P&Ls (Profit & Loss Statements) are important to see and analyze, you should not merely depend on them. In fact, you should also consider counting customers. Counting customers are essential in your “due diligence” process. We offer resources on the best practices of counting customers in our Coffee Shop Startups blog.
Counting customers allows you to see (and quantify) first hand, what your sales outlook entails. In addition to providing you with good and hard information, you will be able to look at who your customers will be, what they are interested in buying, and how long they stay. Counting customers can help you determine if you have a viable coffee stand business. Read this article for more information on counting customers.
Check Out Surrounding Area (Do Your Market Research):
Okay, so things look great so far. But as you drive away from your coffee stand, you notice a “Proposed Land Action” near the location. You stop and read the proposed notice and it reads that the area will be turned into a freeway. How will this impact your business?
Additionally, consider that the sign may state that a big box store or nearby strip mall will be turned into a condo project. How would that impact your sales – before, during, and after the construction is completed?
Construction and changes in nearby business can impact your business too. Checking out the area of where you plan to invest is critical for any business, but especially coffee businesses who are sensitive to the conditions of the community they are in.
Take time to get to know your potential neighbors and customers by talking to local businesses, researching any demographic data, and other large organizations (such as churches, schools, etc.)
What do others think of the coffee business in question?
Many coffee stand postings on Craigslist.com do not like to leave their business names – for fear of notifying employees or for some other reason. Often times, this makes the research of a coffee business challenging before approaching the owner of the coffee stand.
My recommendation is that you call first, get the name of the business and check out the Yelp reviews, etc., before visiting the place for yourself. What is being said about them? Do they have a loyal following? Are there negative reviews? Will you have to climb out of a dark hole when it comes to the existing reputation of the coffee stand?
Don't be mistaken: there is a lot of value in an existing business' good name or good will within a community. A damaged reputation (even if a very slight) can have an impact on your bottom line. In fact, “good will” is often a value-factor in a business negation. Perhaps, being a customer before meeting with the owner and determining the customer service for yourself.
Why is the coffee stand owner selling in the first place?
This is a good question and needs to be understood thoroughly. Beware of coffee shop owners who have just opened up the place only to sell within a year or two, simply because the “lost interest” or they are “suddenly retiring.”
Retirement is something that can be seen from a decade or so down the road, so getting into a coffee stand business only to retire after 18 months may not present a full story. Are they leaving because the business isn't making a profit? Are they leaving because of health code violations? Or are they simply moving on to a different chapter of their lives (which is normal)?
Determining why someone is leaving their business and why they are looking for someone to replace them is very essential.
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Your Money Matters, So Get The Knowledge You Need
Your Coffee Stand Business Success: There are many more things to consider when starting your coffee business. Certainly, opening a coffee stand business can be a worthwhile and profitable venture IF it fits into your vision of what you want to make. Looking at all aspects of the business will help ensure that you don’t lose your shirt over the deal. Get all the information you need before taking the plunge.
While nothing is 100% fool-proof, taking steps to minimize your exposure to risk will help you in the long run. That is why we believe that regardless if you feel confident in your upcoming purchase, you should consider listening to the experts and coffee veterans in our coffee shop startup guide. It will not only increase your knowledge-base, but help you review many of the important aspects of a coffee drive-thru stand that should not be overlooked.
Recommendation: Pinch Yourself IF you start Seeing Stars!
Okay, so everything is looking dreamy. The coffee stand is “perfect”, the location is “perfect”, the financing looks “perfect”. Don't empty your bank account just yet.
This is our recommendation: Have someone who cares about you – who really cares about you, pinch you! Take a step back, breath, and revisit your business plan.
Go through it with someone. Ask your friend to play devil’s advocate and then sleep on it for a few days. If you've heard the “other side” and have had a few days to get over your infatuation state of mind, and you still feel positive about it, then it may be a good time to step forward.
Don’t Respond to Pressure Tactics
Starting a coffee business can be a life-changing venture. It can also be very costly too. (The more time you spend planning and understanding your core business – the more you will save, prosper, and profit, in the long run). So, don’t respond to added pressure by the business owner to buy the business. Every good business owner will know that you will need time to review the information you have collected and really crunch the numbers.
Again, don’t respond to pressure tactics! Simply because the new owner wants to “retire” by a particular date or “leave the country” by this coming Sunday, doesn’t mean that you need to rush into making a purchase.
A common tactic used is telling you (or a perspective buyer) that they have other serious people waiting. They will tell you, that you need to make your decision by 6 pm tonight or they will decide to go with another buyer. If you haven’t had a reasonable time period to review the business and documentations, then simply skip this “great opportunity”. You will be glad you did!
A Look at a Few Coffee Businesses For Sale
Now that we have discussed a few of the things you should be considering when buying and starting a coffee business from Craigslist, let’s take a look at a few recent coffee business posts.
The following were taken from public Craiglist postings.
Your Coffee Stand Business: This coffee business advertisement post (above) has a lot of things wrong with it. For one, it’s very vague. “Lost Interest” means that it probably didn’t make money. It doesn’t mention anything about the leasing options. Beware.
Whoa! Okay, so there are a lot of questions here. The price for this stand is a significantly higher than average (75K) – and that doesn’t include the lease. This is a bikini stand, so you will have to do additional research here. If you are interested in opening a bikini barista stand consider reading the following article, The Pros and Cons of Starting a Bikini Barista Stand.
Here are some other general questions you will want answered: Where are you customers coming from? What permitting is required? High traffic may not translate to profits if you have to buy the equipment and rent the space as well. Is the facility plumbed? Where is the commissary? In our coffee shop business kit, we offer a convenient list of questions, you will want to ask.
Purchasing the Coffee Stand By Itself?
Many businesses or coffee stand owners may be selling only the coffee stand itself. They might be storing the coffee stand in the warehouse or in their backyard. The only thing that is for sale is the shell of the business. Now, remember, you still need to find a permanent location, equipment, inventory, and negotiate storage until you do so.
Consider all of these points before spending thousands on the “shell” of the business. Examine the physical integrity of the coffee stand, does the stand need to have plumbing installed? Does it need painting, insulation, or other work to be done on it? Does it meet the building code standards for your state?
This is critical because you could buy a stand for $10,000 coffee stand, only for it to fail to meet the basic requirements of your state or county building code! Before making the purchase, check with your local building department. (Make a phone call or pay a visit to your building department before you purchase the coffee stand).
Start a Coffee Shop Business: Keep Looking, Keep Researching, and Keep Learning
The ultimate lesson here is to continue to develop your business plan, continue learning from others, and researching. Take your time and really investigate what opportunities you have before writing out those checks.
Even while you are out looking for your coffee stand business, we strongly recommend that you start writing your business plan and researching everything you can about the retail coffee business. Interviewing current and past coffee shop owners can provide invaluable opportunities for you to start your coffee business. Our Coffee Shop Business Startup Kit is a good start for you to educate yourself with the expertise and wisdom from coffee shop owners.
THE FINAL WORD: Be Safe, Do Your Research, and Take Your Time
Craigslist can be useful, but there are can also be sketchy people looking to scam unsuspecting entrepreneurs. When meeting anyone on Craigslist, go with a friend, a relative, or potential business partner – but go with someone.
By taking some common sense precautions, you'll feel better, you'll be safer, and you will be able to get the opinion of your friend – all of which can be invaluable.
Finally, be prepared. Understand what you want for your business rather than simply buying someone else's concept and management skills. With a coffee business, such as a coffee stand, you have an opportunity to create and develop something that can be profitable but a fun place to work.
By being prepared, you will be in a better position to understand not simply what you want, but what you need from a coffee stand business operation. We feel confident that our Coffee Shop Business Startup Kit will provide you with a great foundation to learn as much as you can from experienced experts.
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