Want to start a coffee drive thru stand? Here a several questions you should ask.
You’ve got your heart set on it: You want to open a coffee drive-thru stand.
This is great news. But… it’s a little scary, right? After all, how do you know you are going to make the right decisions? Let’s say that you have decided that instead of opening a new coffee stand, you will buy an existing stand with the help of Craigslist, or perhaps another business sales website, or even solicit the help of a broker. These are all valid options.
Let's say you settle on buying an existing stand. You then decide to look at several potential coffee stands online and visit a few of them “in person”.
Interestingly, in your search, you find that many coffee stands that you visit look mediocre and are overpriced. You practically feel like you would be throwing money away by investing in most of them. But you keep looking.
And after an extensive search, you come across a coffee stand business that looks promising… and you're feeling optimistic. This is great, right? Well, not so fast. You should take the time to examine the coffee stand thoroughly and see if it will work for you.
So, in this scenario, you decide to re-visit the coffee stand a second time. What do you do when you arrive at the coffee stand and meet the current business owner? What information should you get from him or her? What facts do you need to help you decide whether or not this coffee business is “the right coffee stand” for you to buy?
My recommendation is to be prepared before you visit any potential coffee stand you intend to buy. This is certainly not the time to “wing it” and simply come up with a few questions that may not be relevant to your ultimate decision making.
By asking a few important and relevant questions you could be saving yourself a whole lot of time, worry, heartaches – and money! The obvious recommendation then, is to come prepared and purposeful in your initial visit. Even if you are simply “dropping by” to check out the espresso stand for sale, you can learn a lot over the course of just a few visits, by asking the right questions.
Questions To Help You Avoid Financial Disaster With Your Coffee Stand Business
Asking the right questions and getting the right answers can help you avoid financial losses or even any damaging liability from the owner who is closing shop, leaving town, or simply looking to cash out.
You should never be shy to ask the essential questions to your current owner – or simply take them at their word. It’s not that you don’t trust them, it’s that you don’t know them… You need to see numbers, you need to see tax records, you need to see detailed data sheets, and you need to do your own data collection. Getting the facts, and having time to digest the information will help you make the best educated decision about your purchase.
While these questions are aimed at providing you a little help prior to buying an espresso drive-thru stand, many of them can apply to “brick and mortar” coffee business purchases as well. Like anything else, realizing your dreams can quickly turn into a nightmare, unless you do your homework.
We are confident that by reading this guide, as well as utilizing the other audio and digital resources included within our affordable Complete Coffee Shop Startup Kit, I am confident that you are taking steps to reduce your risks and improve your chances of success. While there is never any full-proof guarantee for any business venture success, I believe that you are moving in the right direction with obtaining the knowledge you need.
How to use this guide: Review the following questions and discussion sections. Print out the table at the end of the guide and take it with you as you interview the coffee business owner. The complete guide is bonus material found in our Coffee Shop Business Startup Kit.
Asking relevant questions will help you to identify any “red flags” or potential problems with the actual business that you want to buy and manage. However, you have to know what to look for. You should expect the current owner to be completely upfront and honest. However, you might not want to rely on their honesty alone. It's okay to ask questions and see their records. For example, start with asking them to see the last 12 months of receipts, the last two years of taxes, and the last two years of profit and loss statements.
Expect the owner to be helpful and accommodating to your requests. Be mindful of his/her body language when asking. For example, when you ask these questions, does the owner become agitated or perhaps answer you in vague responses? Is the owner avoiding answering your questions? Is he/she giving consistent answers with follow up questions?
While you shouldn’t necessarily interrogate them about the health of their business, you should be able to get direct and honest replies to the questions that will help you make the best decision that works for you. Ultimately, you need to answer this: Is this coffee business right for you?
Of course, your job as a prospective buyer, is to see whether or not the business can be profitable and whether there are any barriers to that profitability that is inherent within the business or market place – these would be considered “red flags” that should warn you about potential challenges or problems that you may want to avoid.
Again, you should expect the coffee owner to be:
- Up front with you
- Comfortable in answering questions
- Willing to show you the books
Recommendation: As we mentioned, consider printing out the section towards the end of this guide and bring it with you to your interview/inspection.
When you sell any business, you open yourself to be questioned about the health and other specific details of your business from a prospective buyer. This is true if you sell a car, a house, or/and item on Ebay.
Business owners know that certain questions need to be answered when they put their business up for sale. If they are not willing to answer basic questions about their business, you may want to adhere to your gut instincts, by simply moving on and letting someone else take on the potential burden.
So, what questions should you ask a current coffee stand owner anyway?
There is no “right list” of questions that you should ask when you buy a coffee stand. Each coffee stand that comes on the market is different – and each has its own potential unique benefits and liabilities. However, with that said, there may be a few general questions that you should have the answers to, before you even get close to taking out your checkbook.
Have you ever learned something the hard way? Perhaps the “hard way” actually cost you a lot of money, heartache, or worse … the costs can lead to being emotionally, physically, or financially injured.
Could the expensive lesson have been avoided by asking a simple question or a series of questions?
In many cases, the answers you need to succeed are all around us.
The problem is that we never ask the question that could give us the answers we need. Asking the right questions until you are satisfied will help you avoid potentially devastating business losses.
So, here are a few questions that you will want to know when buying an existing coffee stand or café. (However, the questions listed are not based on any particular order!):
1. How old is your coffee business?
It’s important to get to know the history behind the coffee stand business that you are interested in taking over. While you might get an exact date the business opened, you might be able to garner more information that would otherwise be left “on the table.” A business should come with relevant amount of history (and accompanying financial data) to help you make the decision on whether you should buy the business or not.
2. When did you take over your coffee business?
It’s quite possible that the person you buy a coffee stand business from had actually bought the coffee business from a previous owner. Let us say, that while a coffee stand business might be seven years old, the current owner may have actually owned and operated the place for just a couple of years.
It is common for coffee stand owners to buy a stand and realize that they are “in over their heads.” They may quickly try to recoup their investment and sell it. Knowing how long they have operated this coffee stand business can help you determine their state of mind, their motivation for selling, and help you look at the viability of the business itself.
3. What’s it like to do business at this location?
Assuming that you intend to keep the coffee stand at the same place, it’s important to determine what it's actually like to do business at the specific location. What qualitative factors are there that may impact your decision to buy the coffee stand at this location? What’s the surrounding community like? What are the customers like? How are other factors like foot traffic, crime, and competition going to impact your day-to-day operations and your bottom line?
You should ask the owner (and baristas) these questions, but you should also check it out yourself by visiting the location during a variety of times during the day – including when the business is closed. I encourage you to step out of your car and walk around the coffee stand business – and see what the neighborhood “feels” like. Do your observations and gut instincts fit in with what the owner and baristas are telling you? When it comes to retail, location is everything. Take some time to study and incorporate your knowledge of the area before making any decisions.
4. What’s the landlord (or property owner) like?
When you buy a coffee stand, often times, you will be buying the physical stand, equipment, inventory, branding, and the goodwill. Additionally, you will often be buying the existing terms of the lease, which may be transferred to you (unless otherwise stated).
It is critically important to get the honest perspective from the current business owner of what the landlord or property manager is like. What’s it like to do business with him/her? What kind of personality does he/she have? You should do this in addition to reading the existing lease. Are there any grudges, misunderstanding, personality issues, or in-fighting going on?
The current coffee stand owner may want to provide a positive outlook or perspective on the property owner/manager, even if things aren't so rosy. Remember, the current owner may have an incentive to paint a good picture of a bad situation, so try to get as much information as possible to make an objective opinion.
In addition, to getting the owner’s perspective of the property owner, keep in mind that you will need to meet the property owner yourself. Why? Because a property owner can really impact your business – negatively or positively. Having a professional but very positive relationship with your property owner/manager will lead to your business stability, potential growth, and value (if you were to eventually sell).
Meeting him or her may not fully tell you the “whole story” or predict your professional relationship – but you can at least get an impression of the type of person you will be working with. At the very least, it will give you a more well-rounded view of him or her.
5. Do you like working in this location?
Similar to an earlier question, this one is a bit more specific. By asking if the owner likes working here, you will be able to garner a few of the positives with the actual location. In addition, you may be able to garner a few negative attributes and perhaps gain some valuable advice on how to cope/deal with any negatives currently bothering the owner or something that may be coming up on the horizon.
Consider asking a few of the baristas and customers this question as well. It may seem rather forward to ask this question of baristas or customers, but we are talking about the future success of your business here. It's not the time for you to be shy. For example, customers may not like the parking situation, neighboring businesses, or baristas may wish to have more street and alley lighting for their safety, etc. These are important factors that should be taken into account.
6. Why are you selling the business?
It is important for you to understand why the current owner is selling their coffee business in the first place. It could be that he or she is off to retire in the Caribbean or they are trying to jump off a sinking ship. Either way you will want to know the truth, right? Could it be because the taxes are too high in the specific area? Or perhaps, they realize that their property lease is ending and the rent will go up considerably?
Remember, you will want to do your “due diligence” and check out each avenue of concern for yourself. You don’t want to make any decisions on buying a coffee stand with any vague notion of the reason it is being sold in the first. Get a firm understanding of why the espresso stand is being sold before you write any checks – and confirm this on your own.
7. How many employees do you have?
This seemingly innocent question can answer a tremendous amount of information. For example, it can help you determine how many employees (baristas) you will need to hire (or fire). It may give you an indication of the level of traffic (or sales) being generated. For example, it is very common for busy coffee drive-thru stands to have two or three baristas working at the same time, especially during your early morning rush hour.
Depending on your hours, you may have 2 or 3 different part-time work shifts every day. It can be common for a single coffee stand to employ up to 10 part-time baristas. Now, of course, you will need to review the current hours of operation and analyze them with the average sales and variable costs to determine whether or not your coffee business warrants an increase or decrease in hiring employees. In the end, you will have to meet with each of these baristas and determine who stays, who wants to stay, and which ones you may have to let go – either for financial or performance reasons.
8. Do your employees know that you are selling the business?
Many coffee business owners don’t like the idea of their baristas knowing that they intend to sell the coffee stand business. This information can obviously increase the baristas’ levels of anxiety, performance, and dedication to the coffee business. While you interact with staff, it may also be beneficial for them not to know that you are interested in buying the coffee business – as they can be more candid, relaxed, and natural with their customer service as you observe them. Baristas can reveal a lot of information about the state of the business. Often, this is not because of any negative feelings towards the business owner or the business itself.
It simply might have to do with the barista’s unique perspective or point of view. In some cases, the baristas are the ones that spend most of the time in the business during operating hours – and can have a deep understanding of what is going right and wrong. However, you should respect the owner’s wishes to keep the pending transaction under wraps. Nevertheless, building a good rapport with the baristas, asking questions in a non-aggressive manner, and being genuine, can allow you to learn quite a bit about a specific coffee business.
9. How many customers do you have in a day?
Your coffee drive-thru will depend on the number of customers you have. While you should ask to see any “profit and sales reports”, as well as “count customers” on your own, you should also simply just ask how many customer visits the business averages per day. This may give you a ballpark figure on the level of business you will be working with.
Additionally, this seemingly open-ended question can provide you with valuable information, such as the owner’s own perspective on the “ebb and flow” of customer numbers. You will, of course, be checking this with your own data from counting customers.
Be aware that the owner may give you a specific number and quickly follow it up with recommendation for improvement, such as saying, “Well, if you do this….or if you do that…you will increase your customer visits. I just haven't had the time…” Some owners I have spoken specific numbers of customers have told me that I should only plan on a 10% uptick, at most, from customer sales at a specific locations than from what currently exists.
10. What are you daily sales numbers?
Knowing the daily sales numbers will be critical in deciding whether to move forward with purchasing the drive-thru business. Though owners are not obligated to show you anything unless indicated in writing, you should ask to see the sales reports and receipts, etc.
Daily sales impact everything about your business planning. The information of your daily sales captures your number of customer receipts per day, your ebb and flow of revenue during the week, your scheduling, your hiring, and your break-even point. Your sales numbers, while important, is separate from the next question – profitability.
11. Is the business making a profit?
You may have high sales numbers, but it may not mean that the business is actually returning a healthy profit for your coffee business to be self-sufficient. You can only stay in business if you are making a profit. Even a coffee business that is simply “breaking even” will not last because the owner(s) will not be able to live and pay their personal bills. While you should definitely double check the business's profitability based on receipts and P&L statements, you should also listen to what the owner says about his profitability and future potential of revenue.
Asking an “open ended” question regarding profitability allows you to hear directly from the current owner what his or her concerns are – and potentially any bright spots. Remember, it is in their best interest to portray their business in the best possible light to improve their negotiating position. Profitability is the “factor” that rules all other determinants and should be thoroughly examined and double-checked.
There are plenty other questions, you'll want to ask. The rest of this list, along with explanations, and a printable template, is included as bonus material in our Coffee Shop Startup Kit.
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