Buying an existing store & cafe

[seasunrise]

Hi
I'm currently buying a local beach store/cafe in a popular tourist area in Cornwall. The agreed price is 110k for a 15 year lease. There is a 4 bed apartment above the property with rent of 10k a year payable. The business currently runs at about 20k profit and whilst open all year makes half of its money over the summer months. It is popular with tourists who have come to the beach and forgotten to buy the things they need and capitalises on this by selling wetsuits/body boards/buckets& spades etc. It has a small local following but sells a very basic range of groceries and stocks mostly cheaper end products. The cafe sells pasties, cakes, pastries and various fried breakfast combinations. For lunch it sells sandwiches. It stops serving food at 2pm. It has a great view & location and does sunset beers & wine in summer and chips. The food and coffee served is not great quality. Pretty much everything is bought in via Booker cash & carrry. Cakes are whatever the supplier has on offer that week. Food is tired looking and there are no healthy options. Lots of young families have moved into the area and don't use the shop/cafe as the hours are not predictable and the owners are a bit rude. We have spoken to lots of locals and have great ties with the local community and everyone says what an opportunity it is. We are proposing to sell healthier food with more plant based options. We plan to repaint and change the shop shelving and stock more local produce, fresh veg and better quality products. Offer cocktails at sunset.
I've looked over all the P&L's for the last 5 years and spent lots of time chatting to the owner and next week plan to work there for a few days to understand the current customer a bit more. I guess my main concern is whether its a good venture to invest in or not. There seems to be lots of opportunity and the chance to attract new customers but I'm concerned that they have already maximised profit on certain areas such as coffee and pasties by offering cheap quality and selling at a high price. We would love to elevate it but I'm worried that its a huge investment and I'm just dreaming about what it could be like. The owner has been there 10 years and seems to have given up trying. Am I crazy to buy it?
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[Clinton]

The business currently runs at about 20k profit ...

I'll bet you £20K that it doesn't!

You sound like you're 'selling' this (crap) 'opportunity' to yourself and trying to convince yourself that you may be able to increase the profit.

You're fooling yourself. Get the hell out of Dodge!

 

[WaveJumper]

Well with out knowing more detailed numbers it would be hard to evaluate is that 20k profit after they have taken a salary ...... what salary does the owner take

Pretty sure I know someone who's going to have a view on this

 

[WaveJumper]

And he did

 

[Mark T Jones]

Am I crazy to buy it?
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Probably.

But the answer will mostly lie in your research and due diligence.

What, in your opinion makes this worth £110k?

£20k profit (pre or post salary?) Is weak.

Given that every business ever bought has had 'loads of otential', even that avenue is heavily qualified.

On the other hand, i suspect it's really a choice to make a living whilst living by the sea which nobody here can quantify for you.

 

[fisicx]

Have you ever run this sort of business before?

15 year lease is a long time should it not work out for you.

And as @Clinton says that £20k profit doesn’t exist.

Pay for a proper financial assessment.

 

[seasunrise]

Have you ever run this sort of business before?

15 year lease is a long time should it not work out for you.

And as @Clinton says that £20k profit doesn’t exist.

Pay for a proper financial assessment.

Why would the 20K profit not exist? This is after staffing costs.

 

[Clinton]

Well with out knowing more detailed numbers it would be hard to evaluate is that 20k profit after they have taken a salary ...... what salary does the owner take

Pretty sure I know someone who's going to have a view on this

Proper market wage for the ALL the time the owners spend ...tends to be the big one that people ignore (or don't calculate properly).

But there are loads of others, like depreciation. Depreciation can be used in all manner of dodgy ways (or ignored when its inconvenient).

@seasunrise , as @fisicx suggests, take the figures to an accountant and get them to do you a normalised copy.

 

[seasunrise]

I'll bet you £20K that it doesn't!

You sound like you're 'selling' this (crap) 'opportunity' to yourself and trying to convince yourself that you may be able to increase the profit.

You're fooling yourself. Get the hell out of Dodge!

Genuinely interested to know why I'm fooling myself? And why the 20k doesn't exist? Please can you clarify? When I was in there last week it was busy and people left without buying things. There's no other shop for miles around and a steady stream of people passing on their way to and from the beach.

 

[Clinton]

Genuinely interested to know why I'm fooling myself? And why the 20k doesn't exist? Please can you clarify?

That's not an analysis and multiple A4 document that I'm going to do for free.

<added>

"There's no other shop for miles around and a steady stream of people passing on their way to and from the beach."

Jeez! Why even post in this forum if you've decided you're going to buy this business no matter what?

It's not our job to talk you out of buying something you've already sold to yourself. I'm out of this stupid thread.

 

[Mark T Jones]

Adding to the above, pay close attention to trends.


The post Covid staycation bubble has now burst.

Some core running costs (including stock) have risen significantly over the past 3 years.

To repeat - don't take anything at face value. Professional analysis will save you from yourself

 

[seasunrise]

Proper market wage for the ALL the time the owners spend ...tends to be the big one that people ignore (or don't calculate properly).

But there are loads of others, like depreciation. Depreciation can be used in all manner of dodgy ways (or ignored when its inconvenient).

@seasunrise , as @fisicx suggests, take the figures to an accountant and get them to do you a normalised copy.

Adding to the above, pay close attention to trends.


The post Covid staycation bubble has now burst.

Some core running costs (including stock) have risen significantly over the past 3 years.

To repeat - don't take anything at face value. Professional analysis will save you from yourself

Thank you!

 

[seasunrise]

That's not an analysis and multiple A4 document that I'm going to do for free.

<added>

"There's no other shop for miles around and a steady stream of people passing on their way to and from the beach."

Jeez! Why even post in this forum if you've decided you're going to buy this business no matter what?

It's not our job to talk you out of buying something you've already sold to yourself. I'm out of this stupid thread.

Thanks for your advice

 

[fisicx]

When I was in there last week it was busy and people left without buying things. There's no other shop for miles around and a steady stream of people passing on their way to and from the beach.

You said it yourself. People aren't spending money in the shop.

20K isn't profit. It's a pittance the owner gets for running themselves ragged everyday keeping the shop afloat. If you were paying yourself NMW you would be running at a loss. You could make more money stacking shelves at the local supermarket with a lot less stress and the without the weight of a 15 year lease hanging round your neck.

 

[Nathanto]

And why the 20k doesn't exist? Please can you clarify?

The sceptics are surmising that the "profit" is on paper only due to perhaps not-completely-accurate accounts and/or the owner(s) are not including appropriate remuneration for the actual amount of hours they put into the business.

I echo others that before paying out £110k you would be very, very strongly advised to spend maybe £500 on professional advice for an accountant to look over the accounts. (When I sold my business I balked at the additional professional costs involved but eventually relented which turned out to be one of the best things I ever did; literally saving/making me a seven figure sum when things weren't going to plan a year later.)

 

[pentel]

You do seem to be getting a hard time on here. Is the £20k after paying the owners there wage and if so how much are they being paid by the business?

 

[Mark T Jones]

You do seem to be getting a hard time on here. Is the £20k after paying the owners there wage and if so how much are they being paid by the business?

And so they should - as should anyone who is planning to buy a business without research and due diligence.

@seasunrise may I suggest that you start your decision process by splitting the consideration 3 ways:

1) Social - the mix of Cornwall, seafront & even your name suggest that this is very much social/lifestyle/emotive. None of us can really comment on that and it's hard to quantify financially. You could talk to others in the area who have made the 'lifestyle'move to see how it has worked out for them.

2) Financial - cold, hard number crunching of (at least) 5 years figures - that pretty much defines the 'value' of the business.

3) the plan. Potential is your reward, not what you pay for. Nearly everyone going fresh into hospitality falls into the trap of having 101 'great' ideas, then gathering 1,000 more from friends and forums. The reason it's a trap is because it doesn't take account of the things that actually make a difference:

• Your personal objectives.
• Financial outcomes.
• Above all - THE CUSTOMER - either the existing walk-bys or those who you intend to attract.

Given the nature of your lease, any kind of long plan or exit strategy will be severely restricted.

 

[DoolallyTap]

As always, arrogant, opinionated, negative responses. Not a positive comment from anyone.
Just to clarify - The lease is £7666 per year? is this a new lease? or a sublease? the flat rent is £10000 per year? You expect to live in the flat?
What is your goal? a living wage by the seaside? hard work in the summer, time out, closed in the winter months? You can see areas of improvement, you can see potential additional products/profits?
Presumably the current owners run this as self employed? I wonder if there is a 'cash' element?
Go for it, give it your best, if it does not work, you can do what the current tenant is doing.

 

[fisicx]

Remember also @seasunrise that the products sourced from bookers are at the cheap end of the range. If you want to start selling plant based and other healthy options your costs are going to be a lot higher. And have you even considered how you are going to prepare and cook these items?

It’s going to take many months of negotiation before you are in a position to buy the cafe. By which time the holiday season will be coming to an end. You need to be doing your negotiations later in the year so you are ready to buy in the spring of 2026.

But you need to get that lease down to something far more sensible. 5 years with a break clause after 3 would be better. And maybe even 12 months rent free while you get things going.

Is there anyone in the flat? If not, why not.

 

[DoolallyTap]

Why will it take many months to negotiate a lease? I recently did this with the property owner and it took just 5 days!

 

[fisicx]

Why will it take many months to negotiate a lease? I recently did this with the property owner and it took just 5 days!

It’s not just buying a lease. They are buying a seasonal business with stock, staff and the myriad of other considerations. They don’t want a 15 year lease hanging round their neck. Negotiating this down to something sensible will take a lot longer than 5 days.

And then you have to consider how long it takes to arrange mortgages and transfer the actual business.

But well done for getting your negotiations done in 5 days. How long before you can actually move in and begin trading?

 

[fisicx]

Wife has just pointed out that the tax and other financial changes that have just come into force may well make a large hole in that £20k profit.

 

[DontAsk]

The agreed price is 110k for a 15 year lease.

What was the initial asking price?

There is a 4 bed apartment above the property with rent of 10k a year payable.

Are you planning to rent it? How/when will that rent be adjusted?

Who is the freeholder? The current business owner?

Are you buying fixtures and fittings?

 

[Paul Kelly ICHYB]

Why would the 20K profit not exist? This is after staffing costs.

Do you include yourself in that staffing cost?

If this is a bit of a lifestyle business or for someone winding down/retired/financially stable, it will probably be great, especially if you are also going to live there (although you would probably be better renting the flat out when you can and renting somewhere smaller/further away).

As always, the devil is in the detail - get someone independent to look at things. You will already be emotionally attached to the deal and no be subjective!

 

[WaveJumper]

What we are all really saying here is go into this with open eyes, check double check the numbers, get proper legal advice on the lease, what the ":true" value of fixtures and fittings, value of stock. Whats the business rates, staffing costs as believe me you are going to need help running the place through the summer months (i have close ties with Cornwall) you can run yourself raged if not careful.

As I mentioned in previous post the numbers are the important factor here as a fist resort if you have copies of accounts run them through AI this will will you a pretty good overview, then if its worth pursuing go see an accountant.

Plenty of people make it work in Cornwall but it can be a nightmare outside of the season, go into it eyes wide open and please please make sure you get proper legal advice.

Where in Cornwall (without giving to much away) and wishing you the best of luck

 

[seasunrise]

What we are all really saying here is go into this with open eyes, check double check the numbers, get proper legal advice on the lease, what the ":true" value of fixtures and fittings, value of stock. Whats the business rates, staffing costs as believe me you are going to need help running the place through the summer months (i have close ties with Cornwall) you can run yourself raged if not careful.

As I mentioned in previous post the numbers are the important factor here as a fist resort if you have copies of accounts run them through AI this will will you a pretty good overview, then if its worth pursuing go see an accountant.

Plenty of people make it work in Cornwall but it can be a nightmare outside of the season, go into it eyes wide open and please please make sure you get proper legal advice.

Where in Cornwall (without giving to much away) and wishing you the best of luck

Thank you. I've engaged an accountant to check the numbers over.
The staffing is my main area of concern. I've budgeted to increase it and allowed for the new NI and wage increases. I wouldn't be paying myself a wage. I'm financially stable and don't currently work. I can't see that the owner is paying herself a wage but then she lives in the apartment upstairs. I would hope to rent this out.

The area is a wealthy part with lots of weekend guests/london folk and day trippers from a nearby city. The locals are mostly now a mixture of families that moved down during covid, young people into surfing and long-timer families that have stopped using the shop and cafe because of the quality/unpredictable hours and poor service.

There seems to be a market that they're not catering for and there is little to zero social media engagement or community engagement. It feels like a cafe/shop that is trading on its location and not on its offering.

The fixtures & fittings are included in the business
The landlord is not the owner & is open to lease negotiations. They are keen to see it becoming a bigger part of the community.

Remember also @seasunrise that the products sourced from bookers are at the cheap end of the range. If you want to start selling plant based and other healthy options your costs are going to be a lot higher. And have you even considered how you are going to prepare and cook these items?

It’s going to take many months of negotiation before you are in a position to buy the cafe. By which time the holiday season will be coming to an end. You need to be doing your negotiations later in the year so you are ready to buy in the spring of 2026.

But you need to get that lease down to something far more sensible. 5 years with a break clause after 3 would be better. And maybe even 12 months rent free while you get things going.

Is there anyone in the flat? If not, why not.

Yes this is my concern with higher end products. And also that their cafe profits are based off expensive coffee and pasties prices using cheap coffee and cheap quality pasties. It feels like they've stretched as much margin out of this as much as possible.

 

[seasunrise]

Do you include yourself in that staffing cost?

If this is a bit of a lifestyle business or for someone winding down/retired/financially stable, it will probably be great, especially if you are also going to live there (although you would probably be better renting the flat out when you can and renting somewhere smaller/further away).

As always, the devil is in the detail - get someone independent to look at things. You will already be emotionally attached to the deal and no be subjective!

yes this is true re the emotional attachment. Have engaged an accountant!
yes it would be a lifestyle business with the chance for an online presence also.

 

[fisicx]

Excellent, looks like it could work for you. Have you considered taking over as manager for the summer to see how it all works?

 

[Paul Kelly ICHYB]

I wouldn't be paying myself a wage

So, this isn't a business, it's a risky/expensive hobby?

 

[DoolallyTap]

Some confusion over what is happening her.
You say - I am buying a beach store/cafe and then talk about a lease? Are you buying the freehold and leasing the property to someone. You are going there to work for a few days to se how it operates.
You say you are financially stable and don't work, do you mean you are not going to work in this business, pay a manager and staff, and just take the profit? if this is the case, why are you even remotely interested in this.

 

[BusterBloodvessel]

Firstly, still unclear on what wages the current owner is taking. How much are they paying themselves BEFORE the £20k profit? (lets ignore the argument whether that profit exists or not, for now).

The biggest thing I always say with this kind of business is ask yourself "what would it cost me to set this up myself"? You've already said that the business isn't well used/respected/liked by the locals - so you have to fix that. You've already said they don't have the right stock - you have to fix that. You want to change the food offering - so you have to fix that.

Therefore, what are you actually buying?

What would it cost you to lease the nearest unit down the road (quite possibly on better terms if it's empty), kit it out with second hand catering equipment (available dirt cheap in abundance in the current environment), and to kit out the shop with stock that's more relevant/current?

Somehow, I don't think it would cost £110k. So what are you paying for?

 

[Socio South West]

. Am I crazy to buy it?
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Any seaside enterprise like this can be a very good earner: This sounds like the proverbial run down business, ripe for new ideas and investment: However, my thoughts would be that you need to concentrate on what you plan to bring to the business, not what the current tired rude unpopular local owner has been doing.
From what you say there is scope to rebuild a chunk of local trade which will keep you ticking over out of season.

Without sight of financials and terms of lease it's impossible to comment constructively on the purchase price.
You mention painting - What are the maintenance terms of the lease? That could be an extremely significant item if the property is already dilapidated, and spending a few quid with a surveyor could be a wise investment.

One idea that has done well for a couple of seaside cafés with parking around here is a Biker's evening every week - on nice spring and summer evenings a gathering of maybe up to 100 biking brothers meeting to talk bikes over snacks/coffee etc has been quite a lucrative extension to the trading day.