Advice for first time cafe owner

[TheFortune8]

Re comments from PL and David ... The premises I'm talking about are effectively split in 2, but run as a single cafe. Subject to plannning permission one half could be sandwich takeaway and the other half an eat in cafe. (Not sure if I'd need additional A5 consent)

Finishing at 3pm would be great if the numbers stacked up. I'm under no illusions about the amount of work required, but I've always been a bit of a workaholic and if I can apply myself to this and have even a moderate amount of success, well it's better than waiting 6 months for another IT contract job.

For now, I'll continue to dream ... http://animoto.com/play/2Kz8pvXx9MBChHS0t6pjaw

 

[Gratis Guidance]

This really is a great thread!!

Adding my 2p - I would ask if you have considered getting some work experience of working in a cafe prior to actually putting some money into this?

While it seems to me that the financials seem to point to this being over priced, I don't know the details, after all, location is mostly everything!

The work experience issue should give you an idea of how difficult customers can be and how much they strain your patience - especially considering your background. Being totally honest, I find that people who are good enough to have a career in various engineering disciplines, find it difficult to deal with the big picture thinking involved with dealing with people. That isn't a criticism, its an obsevation. It is also a generalisation, but you need to be honest with yourself before you spend a stupid amount of money!

 

[TheFortune8]

This really is a great thread!!

Adding my 2p - I would ask if you have considered getting some work experience of working in a cafe prior to actually putting some money into this?

While it seems to me that the financials seem to point to this being over priced, I don't know the details, after all, location is mostly everything!

The work experience issue should give you an idea of how difficult customers can be and how much they strain your patience - especially considering your background. Being totally honest, I find that people who are good enough to have a career in various engineering disciplines, find it difficult to deal with the big picture thinking involved with dealing with people. That isn't a criticism, its an obsevation. It is also a generalisation, but you need to be honest with yourself before you spend a stupid amount of money!

Thanks GG - I agree getting experience first would be great, but I like the location so much that if it becomes possible to gain the experience in my own business then that's what I'll do.

I suspect that particularly in the present climate that if my full business plan doesn't stack up to the bank manager then the whole venture will simply not get off the ground. It's the big picture and the details that will matter.

Coming from an IT background I understand that I've been primarily a details guy for a long time, but I've always been quite gregarious. I have a large circle of friends and I'm seen as an arbitrator, a peacemaker. I'm one of those people who prefers to see the good in others rather than presume the worst first. Like most I guess I could still work on my sense of humour in a crisis!

 

[patientlady]

Damn it all the good ideas are used up!

You are totally right to wait for the right site, it is the single most important factor. What part of the country are you looking in?

Hi David
What is a fantasy garage door?
Berkshire by the way...

 

[Duke Fame]

can I use Mocachoccadoublepenatationachini or do you have the trademark?

Well, the recipe is rather special, I add a little something of myself in it and don't even ask what the little chocoloate bits on the top are.

 

[papverpoppies]

Hi David
What is a fantasy garage door?
Berkshire by the way...

You just beat me to that question!
They sound interesting..

Poppy

 

[david9108]

You just beat me to that question!
They sound interesting..

Poppy

Haha. well Fantasy Garage Doors is our new business, launching at the start of March, the website (it ends in .com with the name as the web address if you wana see the holding page which has a small example).

Basically it is a specially designed cover that fits to a garage door and has an image on it that looks like the door is open and something is inside the garage i.e. a helicopter, F1 car, lion etc. They are easy to put up and cost £99 so its a cheap way to brighten up a boring garage. I know it sounds stupid but we'll soon see if I've wasted a small fortune!

 

[Duke Fame]

Rent is £30k, Rates payable £14k.

The £100k is for Fixtures and fittings plus some working capital, however from other comments above I think the purchase price and even rent has to be negotiable.

The current owner prides herself on surviving where others have gone to the wall. She's paying her bills. Whereas this may mean she's just breaking even it could hide the fact that she's haemorrhaging money. The accounts will be interesting reading.

Refurb? Hmmm back to my spreadsheet. I'll not change the character of the place much without spending something ...

The £15k salary is not a lot ... but once the loan is paid off all those repayments disappear and £15k becomes something like £40k ... but can I pull off a 120% increase in sales?

How does all this compare to your daughter's suituation patientlady?

On the basis of what you are saying, I'd say you should pay absolutley nothing for this business, it's only a going concern because it's funded. Are you not beeter off by simply renting a place next door, buying a second hand set of catering equipment for £5,000 and getting on with it. It soundls like you are taking on a liability.

 

[Lee Jones Jnr]

There are companies already doing that kind of thing, Ive seen them with speedboats and fighter planes, I can't recall seeing a price but £99 seems cheap.

 

[david9108]

There are companies already doing that kind of thing, Ive seen them with speedboats and fighter planes, I can't recall seeing a price but £99 seems cheap.

There is indeed one German company offering a similar service, they charge approximately £150. It's not an original idea...but then not many are...

 

[TheFortune8]

Well, the recipe is rather special, I add a little something of myself in it and don't even ask what the little chocoloate bits on the top are.

[regrets asking!!!]

 

[TheFortune8]

On the basis of what you are saying, I'd say you should pay absolutley nothing for this business, it's only a going concern because it's funded. Are you not beeter off by simply renting a place next door, buying a second hand set of catering equipment for £5,000 and getting on with it. It soundls like you are taking on a liability.

... as it happens there is an empty unit a few doors up. Whereas I might get up and running cheaper it would take longer and I'd be going head to head with an established business - even if they're not making a profit.

I'll make enquiries though! It would be silly not to explore all options.

Agent not releasing historical accounts until I have agreement in principal from bank for loan - er the prospective accounts have to be based on something don't they? I'll speak to the owner direct!

 

[Duke Fame]

... as it happens there is an empty unit a few doors up. Whereas I might get up and running cheaper it would take longer and I'd be going head to head with an established business - even if they're not making a profit.

I'll make enquiries though! It would be silly not to explore all options.

Agent not releasing historical accounts until I have agreement in principal from bank for loan - er the prospective accounts have to be based on something don't they? I'll speak to the owner direct!

Out of interest, how much are they asking for this business? Why is the refurb costing so much?

 

[sysops]

... as it happens there is an empty unit a few doors up. Whereas I might get up and running cheaper it would take longer and I'd be going head to head with an established business - even if they're not making a profit.

But that's the key point, making no profit. Start afresh, with half the capital, do things your way, and you will either:

1. Make a go of it, because you have a better chance of doing so with a smaller loan to pay interest on.

or

2. Fail just like they have (the current cafe owners), but lose a lot less than 100k.

It's a win-win. Go for the empty one every time.

 

[TheFortune8]

Out of interest, how much are they asking for this business? Why is the refurb costing so much?

Asking price is £90k - that's before any refurb! I'd need another £10k for SAV and working capital just to stay afloat in the 1st 3 months!

When borrowing money from a bank secured on your home, is it normal for them to value it at 70% of market value for the purposes of a loan?

One option may be to remortgage and take my existing loan up to 90% (or 95% if I'm very lucky???)

 

[TheFortune8]

But that's the key point, making no profit. Start afresh, with half the capital, do things your way, and you will either:

1. Make a go of it, because you have a better chance of doing so with a smaller loan to pay interest on.

or

2. Fail just like they have (the current cafe owners), but lose a lot less than 100k.

It's a win-win. Go for the empty one every time.

Hmmm - thought I was going to have to ring the other agents tomorrow, but have just Googled for details of the empty unit and it looks like tha might not be as daft as tha looks sysops. Have a virtual beer on me.

The ground floor area is smaller but the rent is a lot less. Pro rata it's about the same rate ... for the ground floor alone. But ... the empty unit has about another 800 sq ft on the first and second floor. Sub-letting may be a possibility or just hold for "more seating upstairs" in busy periods.

There's no mention of the planning consent other than it's suitability for offices/shop.

... I'd still have concerns about setting up a 3rd cafe within a 200 yards stretch ...

 

[oldeagleeye]

First of all as Sysops said. This business ain't worth didley squat for 2 simple reasons.

1) This place doesn't make a profit despite all the present owners experience and I'll tell you this. If you went along to see David's parents with ideas like putting newspapers out or installing background music and how you expect to more than double the turnover they would have the best belly laugh they have had for years. Lets get real here. You don't get a tranquil oasis in a busy cafe. You do however go bankrupt quickly if you can't get bums on seats - and what is even more disheartening is pulling the business in but not making a profit at the end of the day. The bottom line here then is that there is no value in the existing trade if on Sunday all you have to eat is some cold bacon left over from the day before at work..

2) It seems that here is no value in the lease either. In fact it sounds like the lease is high for the area. Don't be mislead by the £90K price tag then . I know of one pub over in North London that was up for £150K last year. 6 months later the tenant paid a friend of mine £10K to take it on just to get rid of the £40K a year FRI lease and mounting debt. Incidentally. My buddy negotiated a years free rent & rates with the pubco so had nothing to lose. All of which leads us full circle.

You go and talk to any cafe owner OP that slaved away to make a living for 20 years and ask them what their ambition was at the outset.

I guarantee most will say to own their own home at 45-50 of have a decent amount of equity in it. You it seems already have that and seem intent on risking it to earn less in real terms than one of the part-time Sat girls you will inevitable employ. Risk your home never to be able to get a mortgage again because £15K a year will get you just £45,000. It's your call OP but to risk everything you have now just to hope to be in a worse situation is 25 years time seems utter madness to me.

 

[david9108]

First of all as Sysops said. This business ain't worth didley squat for 2 simple reasons.

1) This place doesn't make a profit despite all the present owners experience and I'll tell you this. If you went along to see David's parents with ideas like putting newspapers out or installing background music and how you expect to more than double the turnover they would have the best belly laugh they have had for years. Lets get real here. You don't get a tranquil oasis in a busy cafe. You do however go bankrupt quickly if you can't get bums on seats - and what is even more disheartening is pulling the business in but not making a profit at the end of the day. The bottom line here then is that there is no value in the existing trade if on Sunday all you have to eat is some cold bacon left over from the day before at work..

2) It seems that here is no value in the lease either. In fact it sounds like the lease is high for the area. Don't be mislead by the £90K price tag then . I know of one pub over in North London that was up for £150K last year. 6 months later the tenant paid a friend of mine £10K to take it on just to get rid of the £40K a year FRI lease and mounting debt. Incidentally. My buddy negotiated a years free rent & rates with the pubco so had nothing to lose. All of which leads us full circle.

You go and talk to any cafe owner OP that slaved away to make a living for 20 years and ask them what their ambition was at the outset.

I guarantee most will say to own their own home at 45-50 of have a decent amount of equity in it. You it seems already have that and seem intent on risking it to earn less in real terms than one of the part-time Sat girls you will inevitable employ. Risk your home never to be able to get a mortgage again because £15K a year will get you just £45,000. It's your call OP but to risk everything you have now just to hope to be in a worse situation is 25 years time seems utter madness to me.

I can only echo what is said here...it just makes me sad to be putting down someone else's dream. It may be interesting to note that during the recession one bit of cost cutting my dad has implemented is to stop playing background music to save the money on the PRS licence - every little helps...and if that needs to be put into context the business turned over nearly £450,000 last year, has 96 covers and is a franchise from a brand name that anyone over the age of 20 will have heard of (even if they are surprised to find it still exists now). They do make good money and through being very sensible with money have got a large house which thy own a large percentage of plus 3 other rental properties. It is just simply the case that the amount of work and stress they geet is not really reflected in their annual take home pay.

 

[Duke Fame]

First of all as Sysops said. This business ain't worth didley squat for 2 simple reasons.

1) This place doesn't make a profit despite all the present owners experience and I'll tell you this. If you went along to see David's parents with ideas like putting newspapers out or installing background music and how you expect to more than double the turnover they would have the best belly laugh they have had for years. Lets get real here. You don't get a tranquil oasis in a busy cafe. You do however go bankrupt quickly if you can't get bums on seats - and what is even more disheartening is pulling the business in but not making a profit at the end of the day. The bottom line here then is that there is no value in the existing trade if on Sunday all you have to eat is some cold bacon left over from the day before at work..

2) It seems that here is no value in the lease either. In fact it sounds like the lease is high for the area. Don't be mislead by the £90K price tag then . I know of one pub over in North London that was up for £150K last year. 6 months later the tenant paid a friend of mine £10K to take it on just to get rid of the £40K a year FRI lease and mounting debt. Incidentally. My buddy negotiated a years free rent & rates with the pubco so had nothing to lose. All of which leads us full circle.

You go and talk to any cafe owner OP that slaved away to make a living for 20 years and ask them what their ambition was at the outset.

I guarantee most will say to own their own home at 45-50 of have a decent amount of equity in it. You it seems already have that and seem intent on risking it to earn less in real terms than one of the part-time Sat girls you will inevitable employ. Risk your home never to be able to get a mortgage again because £15K a year will get you just £45,000. It's your call OP but to risk everything you have now just to hope to be in a worse situation is 25 years time seems utter madness to me.

Spot on, so many people believe their business is worth a lot of money. Valuing a business is lie skinning a cat but for a business without many assets, 3 x the annual profit is generous. 3 x a loss is worthless. For the agent to demand to see proof of funds before releasing the accounts is just daft. The bank need a business plan to lend you the money, they can't possibly do so without the financials, the agent knows full well the business is not worht the money being asked.

If you do want to get into that busienss, I'd say there is no rush, take your time looking at other opportunities and the owner will not find a buyer other than you, if they do , that buyer will have gone bust within 12 months and you can buy up the scraps.

 

[Spongebob]

If you do want to get into that busienss, I'd say there is no rush, take your time looking at other opportunities and the owner will not find a buyer other than you, if they do , that buyer will have gone bust within 12 months and you can buy up the scraps.

I was just about to say very much the same thing.

Some mug may well well pay over the odds for a loss-making business. They may make a success of it but the odds are that they won't and it will be back on the market within a couple of years.

The price next time will be a fraction of what it is now.

Bide your time. If it's right for you it will happen.

 

[oldeagleeye]

Just a small but important point here. The OP mentioned that to open a 2 rd cafe in the area would be too much. Even if the other 2 were hugely successful however I would take the opposite view.

People shop where they have choice. My ex wouldn't dream of going shopping for a new outfit in a small village where there was only 1 boutique. She would want to wander around dozen's. Cafes are no different. Some are greasy Joes. Others Cafe's and sarny bars.

Never be afraid of competition then and in this case we have one cafe where where the owner is tired of it all. Lost their enthusiasm. Why pay a premimium then for a business that is going downhill fast.

 

[patientlady]

Just a small but important point here. The OP mentioned that to open a 2 rd cafe in the area would be too much. Even if the other 2 were hugely successful however I would take the opposite view.

People shop where they have choice. My ex wouldn't dream of going shopping for a new outfit in a small village where there was only 1 boutique. She would want to wander around dozen's. Cafes are no different. Some are greasy Joes. Others Cafe's and sarny bars.

Never be afraid of competition then and in this case we have one cafe where where the owner is tired of it all. Lost their enthusiasm. Why pay a premimium then for a business that is going downhill fast.

And remember someone else might do it! I agree with this wholeheartedly. If you go into the Oracle in Reading I think there is a choice of around 15 coffee shops and bars... (not all doing well tho, rents are too high)

 

[TheFortune8]

Hey folks. I asked for advice and I got it. Maybe not what I wanted to hear, but I appreciate the straight talking. I'll continue to explore options, but backed by a healthy dose of realism.

I'll have loads of time to do that after next week. My current temporary contract of employment ends next week and there's nothing in the pipeline. The last thing I want to do though is panic and start something in desperation.

I'll get back to the agent (using some carefully chosen quotes from my "business advisers")

Thanks for your time and input. Will let you know if this goes anywhere!

 

[cocoy]

The recession has been a big factor for a lot of business failures but it could also be a big factor where your cafe could succeed. There is big opportunity out there.

Take a look inside and outside of the business. What is the strength and weaknesses of the business, what can be done to improve on this? What is it like outside? Who are your customers? Who are your potential customers? What are your competitors doing (not doing), are they successful or not? What can you offer that customers need that others cannot provide? The advantage of your situation is that you can see the business before you even started. You can see beforehand.

 

[writecombination]

I've just come across this thread and I've skimmed but not read it all.

I set up a community/conference centre a few years ago on behalf of a church charity. It included a cafe but I wasn't directly responsible for that (thankfully).

Here's a summary of what I learned:

- location is very, very, very important. You need lots of passing trade.
- high quality staff are essential. Not just efficient and detail focused, but the best have a natural, easy manner that immediately engages customers.
- keep costs as low as possible. It might seem obvious but it's too easy to spend a little more here and there 'hoping' it will boost sales. If you want to trial something, decide how much you can afford to lose and monitor it closely.
- be child friendly. Mum with pushchairs and toddlers spend a lot on coffee and cake but they need to be made welcome. Is there somewhere they can warm up milk/pots of food for the babies.
- don't be tempted to overstaff. You'll be surprised how few you really need when you cut back.

I hope this helps!

 

[trendy kid]

Hiya,I haven't read every single post either. My advice is , if you do decide to go ahead look at the location. .Make sure you get a proper coffee machine and get your take out trade sorted.
It can icrease your profit massively. If you have any local offices then set up a sandwich and coffee delivery round. Cut back on your staff too, initially anyway. Its harsh though.

 

[andrewweaver]

if they're not making profit then why will you? it's very working for nothing. be realistic about what you can achieve with this business and what you're going to pay/invest. if you do open then concentrate on one thing. cash.

 

[Alfs Ads]

i believe your passion and enthusiasm will get you what you deserve. you seem to have the drive and imagination to achieve anything. good luck

 

[TheFortune8]

Hiya,I haven't read every single post either. My advice is , if you do decide to go ahead look at the location. .Make sure you get a proper coffee machine and get your take out trade sorted.
It can icrease your profit massively. If you have any local offices then set up a sandwich and coffee delivery round. Cut back on your staff too, initially anyway. Its harsh though.

Location is good though not High Street. It's opposite the main church in town between the theatre and the main pedestrainised shopping area. It's a bit of a thoroughfare but not really a destination in it's own right (unless you're a churchgoer). As a thoroughfare though footfall is not bad. The layout is such that eat in and take out could be neatly split but remain part of the same business. Not sure how easy it would be to let staff go - will need to take advice on TUPE (http://www.berr.gov.uk/whatwedo/employment/trade-union-rights/tupe/page16289.html)

Oh and the right coffee machine has to be at the heart of the business. If we can't make a decent coffee, well, the business is doomed from the outset. (They currently call themselves a coffee house - but where's the coffee menu with prices? That needs to be easily visible to all, so folks know what they're getting and what they're going to pay!)

 

[TheFortune8]

if they're not making profit then why will you? it's very working for nothing. be realistic about what you can achieve with this business and what you're going to pay/invest. if you do open then concentrate on one thing. cash.

They haven't even begun to scratch what they could do with the place. In a PM, someone who knows the road commented "I didn't even know it was a cafe - the clue was in the tables and chairs outside"

:| I know folks aren't stupid but they're not going to spend time wondering what those table and chairs are meant to signify. How about a sign for a start -

Cafe - Open


Why leave potential customers guessing what goes on inside?

Oh and you're right. Cash is King. Business success is dependent upon many things and it's not all about the money, but cash is the lifeblood. I went into a previous venture with a simple business plan. "Have fun, make money", but of course it's easier said than done and you have to work out the details. I'll be visiting a couple of competitiors today to suss out their strengths and weaknesses. One of them, quite close to this business seems to be doing already what I'm currently planning. A great name and a simple menu are obvious. What else are they doing right I wonder? I'll be taking notes this lunchtime!

 

[TheFortune8]

i believe your passion and enthusiasm will get you what you deserve. you seem to have the drive and imagination to achieve anything. good luck

Thanks! Now ... how can I tap into that even more .. and persuade the banks I have the management capability to deliver success over an extended period?

 

[paulears]

My wife has fancied this kind of business for years - so for the past few months, while I'm away travelling around, I've visited all sorts and while having food and drink studied the footfall and estimated their takings. The biggest expense seems to be staff, and the little Tea Shop with two ladies doesn't seem that much different from the busier ones with plenty of expensive staff. As they get busier, they need more staff, and it does seem that takings in the busy ones are considerably diluted by the staff costs - even though the busy ones always have young kids on minimum wage. I'd certainly recommend getting a seat near the till and note down everybodies till spend total. Count the staff and do those sums too. I have no idea how many of these places make any money at all. I did find one that did. Location, next to a beach, miles from anywhere, big car park for people, premises in essence a huge beach hut. They sell fish and chips, sit-down style. Amazingly expensive and really busy each saturday and sunday. Average spend per family was £35 while I was there - queue up. give your order, sit and get waited on - average time per family in the place 15 mins - covers, around 60ish. Now that's a cafe.

 

[cafelife]

Hi there

I have a cafe on the high street and am now looking for a business partner to progress it further.

We are in the northamptonshire area.

Is anyone interested in going into partnership with an established Café or know where I can find someone who is??

any help or advice would be much appreciated.

Thanks