Leasing premises for Cafe

[TKay]

Hello,
We (wife and I) are looking at setting up a cafe aimed at parents and young children (we are the target market with our three little ones), combining a stylish cafe setting with a large children's role-play area.
Having done a fair bit of research, here's a load of points that I'd love your thoughts on if you'd be so kind to offer any direction:

1. No experience in the cafe game. Have done property renovations. We'd look to hire staff with experience. We've got other work/business commitments and young kids - this is my biggest concern - can I manage it all. Any advice from those who setup something new while juggling existing commitments?

2. Parents and children are apparently not the most lucrative market for cafes. However, clubs, groups, parties are ways to get in the customers. Easy to engage with via social media. Anyone had success in the parent and child market?

3. Premises we have our eye on is bang in the middle of our market town. Ideally located for passing trade and those coming from out of town to visit (good parking, train etc nearby).

4. It has been empty for over a year and advertised at "£12,000 per annum plus VAT. Terms by negotiation." I understand I will need a commercial solicitor to deal with any lease.
With the high street struggling, I want to go in at what might be seen as a crazy offer (£6,000 for the first year, going up to £9,000 following years). I see it that they are better off having someone in than standing empty, which it may well be for another year or two. I re-call reading Branson getting kicked out for offering circa £125k for a £10m island, then getting a phone call of acceptance some months later. Any thoughts on this approach?

5. I wish to setup a limited company, but understand some landlords will want a personal guarantee on a 5 - 10 year lease as it is a new company. I do not want this at all! Has anyone refused such a thing and what was your experience?

6. The council are offering grants between £2,000 - £10,000 for businesses that take up empty premises (subject to criteria being met - I am confident I can get the 10!!!). This will really help limit the setup costs.


Why I want to do this? This was my idea after seeing what I think is a gap in the market where we live. My wife is keen to get on board and she'd be perfect for getting the mums in. I'm at the stage of my life where I've done the hard work and down to only small financial commitments. Looking to move even further away from the dreaded day job and create something from scratch that I can build on for many years to come.

Thanks for reading. Any feedback much appreciated!!

 

[ecommerce84]

Hi,

Welcome to the forum. I’ve experience in the cafe/restaurant trade, a few of my initial thoughts are:

1. As you have no experience, hiring experienced staff is a good idea. You’ll need a good manager you can trust and they will cost. We supply a cafe that is nearly 6 months old, the owners set it up, threw in some staff and basically left them to it. Their tripadvisor reviews are average at best and after an initial very busy spell they are now quiet. They spent a lot of money doing it up, but don’t appear to have properly invested in staff (a strong manager in particular), training or nailing down the processes.

Cafes are hard work, if it were me I’d be there 7 days a week to start making sure everything is running smoothly, seeing what is and isn’t working, ensuring staff are working as they should be. If I invested all that money I would be very hesitant to place its fate completely in the hands of a group of strangers (my staff) from day 1.

2. Cafes aimed at parents and children are increasing in popularity. I think there is money to be made if done correctly - a lot of cafes aren’t particularly geared up for parent get together - no pushchair parking, tables to tight together, minimal toys to keep the children occupied etc.

On the other hand, a cafe overrun with children could put off those without who are looking for a quiet coffee or lunch. The best example I’ve seen is a traditional cafe downstairs but upstairs is a children’s paradise with plenty of toys, games etc with comfy sofas for the parents. It’s always busy with parents and non parents.

My only reservation about aiming solely at parents would be that it wouldn’t be unusual for the parents to take their time over a single tea or coffee whilst feeding the children food they’ve brought with them, so you need to figure out how you can keep this to a minimum and ensure they are buying plenty from you.

3. Good.

4. Every landlord is different, I dare say some would take an offer like that, although I think the majority wouldn’t.

A few things that will affect your negotiations include:

How long the property has been on the market - the longer it’s been sat empty the more agreeable they may be towards a lower price.

How many other properties are on the market locally - if it’s the only one in town, they’ll be less likely to take a low offer.

How much the landlord’s mortgage on the property is - this is really completely irrelevant as the market sets the price (as in the property is only worth what someone is willing to pay for it), but some of the more recent landlords who have overpaid for their property seem to think the rent should cover their mortgage irrespective of what the market price is. Quite a common thing with residential properties, less so with commercial but not unheard of.

5. It’s quite common for a landlord to want a personal guarantee from a newly formed Ltd company. What they are trying to avoid is someone setting up a new company, signing a 5 year lease, getting bored after 6-12 months, dissolving the company and walking away. Again whether the landlord will agree to it, will likely come down to a few of the factors above and how eager they are to have someone in.

Related to this and perhaps even more important than the cost of the rent are break clauses. These allow you to exit the lease at set points throughout the lease. On a 5 year lease you may have one after year 3 for example. If you have to give a personal guarantee, I would counter negotiate with 2 or 3 options to break - after 18 months, 30 months and 4 years for example. Leases with personal guarantees and minimal break clauses can be a liability - if your business fails you cannot legally get out of the lease until the break period.

I’d rather pay a bit extra a month and have the security of extra options to break away. There are usually strict terms on breaks though so ensure you know what they are in case you need to get out.

My closing thoughts would be to definitely give it a lot of thought (a lot), be prepared to invest more money than you would initially think required (especially to keep the business afloat until it becomes profitable), make sure you can put time in yourself and find a decent commercial solicitor to ensure you can get out of the lease should you need too.

 

[Mark T Jones]

Fantastic response from @ecommerce84 above!

Just to stress /add a few points. Are you intending to create a destination, or will you be reliant on area footfall?

Have you fully researched the demographic in your target area? Whilst you have considered a niche (which is something many fail to do), there is a significant difference between single mums on benefits and Surrey Yummy Mummies.

As has been pointed out the biggie here - having got then in to your cafe - is to get them spending real money, not just sharing a pot of tea for 90 minutes while Jonny and Jenny / Tarquin and Jemima tear up your premises

Approximately 30% of my business is start up f & b businesses (for my conscience I’m fairly selective on what I take on) I’ve listed below some key fall-over points

- licences and permits. I’m guessing you won’t be selling alcohol? It is important to be well on top of all permissions - the issuing authorities won’t rush on your behalf

- serving what you like, not what your customer likes (and is prepared to pay for). If your customer expects to pay £1.50 for a basic egg and cress sandwich, that’s what you need to be aiming for. If, on the other hand they will pay £6.50 for a sandwich as long as it is FREE RANGE, served on linseed bread with lots of leaves poking out of the side, then that’s your pitch. Your own views on linseed bread are irrelevant .

- cost/refurb overruns. You might be buying a turnkey, where you can just turn up and get going, though it is unlikely that no changes will be needed. String and chewing gum might well suffice in non-customer areas, and you can get away with shabby chic if done well,. On the other hand, the coffee machine must be reliable and of decent quality and the toilets should be spotless and well equipped. The biggest cause of overruns is making changes mid-fit. As far as possible, don’t put anyone on site until you are clear what you need

- inconsistency. Consistently average is a far more reliable offering than ‘good, but only when they have the right staff on’. This is mostly down to recruitment and training

 

[bodgitt&scarperLTD]

Great posts above. I have nothing to add other than to say that given the choice between your clean and tidy place (but full of kids) and Ali Mohammeds greasy kebab joint, I'm having a chicken shish every time. But then, I'm not your target market so take this with a pinch of salt.

I think you need to be realistic about how much value the play area will bring, and how many low spending undesirables it will bring. Even the higher spending customers will drag their heels.

I would respectfully disagree with ecommerce 84- pushchair parking and tables further apart? Have you any idea how many covers this will loose you? There's a reason popular cafes are cramped. You need covers and seat turnover to make profit, unless you are a 5* niche restaurant with a year long waiting list and prices to match.

Staff issues will be tricky too. For this to really work I think you'd have be the face of it. To engage with the parents. Talk about your kids. Make it a family friendly cafe with you and your wife, the sterotypical family at the heart of it. Your average waitress probably won't be of an age where she cares much for kids, and will certainly resent clearing up after them.

The bottom line is- what will make more money? A cafe where every seat is filled with a hungry builder eating a hearty lunch or an OAP out for (profitable for the cafe) tea and cakes with friends? Or a cafe where 50% of the seats are filled with toddler meals at £3.50 and the seat turnover takes twice as long, with single mums chatting over a pot of tea interspersed with fag breaks whilst the kids destroy the play area? That play area cost you at least ten covers too. Think of the clearup- that's gonna take twice as long too once the little bastards have finished throwing shit at eat other.

I'm out.

My main point is this- work out how many covers you need at your proposed menu prices to make rent and payroll. Can you cover it? Great. Now ditch the playpark. How many more covers can you fit in? How much more would that make?

That figure is called 'profit'. It's how all cafes that survive work.

 

[Mark T Jones]

? Or a cafe where 50% of the seats are filled with toddler meals at £3.50 and the seat turnover takes twice as long, with single mums chatting over a pot of tea interspersed with fag breaks whilst the kids destroy the play area? That play area cost you at least ten covers too. Think of the clearup- that's gonna take twice as long too once the little bastards have finished throwing **** at eat other.

I.

Are you by any chance descended from King Herod?

 

[bodgitt&scarperLTD]

Are you by any chance descended from King Herod?

Hey- I said take it with a pinch of salt!

It's always good to get the cynical view of things to provide an opposite to the rose tinted glasses.


Also- think of your average kids play park. How much does it cost? Then think of their cafe. Are the prices 'reasonable' or are they 'captive audience' prices?

There is money in the target market. Lots of it. I just don't think it's where OP's rose tinted glasses want it to be.

 

[Gordon - Commercial Finance]

Not sure if you've already looked into the cost of fitting out a soft-play type venue....if you've not done so already then brace yourself. It costs a fortune.
Funding is available of course - @Mark T Jones is your man for all that.

Other than that, I think its a fantastic idea, but pay close attention to the points of Mark and @ecommerce84 above. Get it right, and it could be excellent. My wife is always saying how our town (very affluent, a lot of mothers who don't work...ladies who lunch etc) could really do with something like what you are proposing.

Nearby to me in a place called Callander, there is a coffee shop with soft play attached, but the coffee shop is a bit "school dinners" and not very nice, doesn't feel all that clean etc. That puts me off massively.

 

[Gordon - Commercial Finance]

Also, you could charge admission for the kids into the soft play.....which would cover some of the cost of losing a lot of seating space to it.
Soft play around our way is usually about £3 per kid. Most parents wouldn't begrudge paying that if it means they can sit and have a cup of tea in relative peace.

 

[Chris Ashdown]

Most cafe are open from about 9 in the morning till about 5 in the afternoon, kids are at school most of that time apart from those to young to go to school, so limiting your customers apart from saturdays, Mums with there young brood are looking for a social chat with other mums and likely to stay a long time and buy very little

Near impossible i imagine to run a cafe without hands on time and staff will take up a large amount of money in wages, pension and administration. If serving hot meals then a chef does not come cheap and all staff need holidays and days off so extra staff needed to cover. along with being a cash based outlet light fingered staff may well find it a easy target

Planning if new change of use and fitting out costs a good few thousand

Unlikely you will find the profit worth the while as a off site owner

Explain why you think the council will give you a £10,000 grant

 

[bodgitt&scarperLTD]

Most cafe are open from about 9 in the morning till about 5 in the afternoon, kids are at school most of that time apart from those to young to go to school, so limiting your customers apart from saturdays, Mums with there young brood are looking for a social chat with other mums and likely to stay a long time and buy very little

Well spotted Chris! Yup, I'd say totally a no go.

I agree with your other points also, but hadn't spotted the glaring issue of school times clashing.

 

[TKay]

Hello all and thank you kindly for all of your detailed posts and to the point views - I appreciate your time! So useful to have this input when adapting the plans. Apologies for my delayed response.
I will respond in full this evening.

 

[The Byre]

1. No experience in the cafe game.

Doomed!

2. Parents and children are apparently not the most lucrative market for cafes.

As mentioned above - they're mostly not around during the day.

3. Premises we have our eye on is bang in the middle of our market town.

At last, something positive!

4. It has been empty for over a year

Followed immediately by a huge negative - why has this shop been empty for over a year? Is the location doomed? Can one park directly outside this location?

5. I wish to setup a limited company, but understand some landlords will want a personal guarantee on a 5 - 10 year lease as it is a new company.

They do indeed and for a very good reason!

6. The council are offering grants between £2,000 - £10,000 for businesses that take up empty premises

Everybody and their mothers-in-law seem to think that we have to support the High Street. Councils give grants to High Street shops and then prevent people from driving to the High Street and charge exorbitant rates, after they have fined your customers for daring to go there!

 

[Prime81]

We have a cafe near us aimed at mums and little kids based in the park. They have an outdoor area where they have lots of bikes, scooters and prams for the children to play with. Unlike your cafe this is more for the summer months with outdoor activities. They make all their cakes and scones themselves which draws in the customer's and cater for gluten, lactose, wheat free etc. My friend can make 'free from' cakes that taste exactly like the original versions so if you can find someone to make the same you will only need one lot of food for everyone. Most parents spend money buying a drink and cake/lunch. They are popular from what I can tell.

 

[TKay]

Hi,

Welcome to the forum. I’ve experience in the cafe/restaurant trade, a few of my initial thoughts are:
...

ecommerce84

Yes, thank you for advice on the need to employ a capable manager. I would need to be there 7 days a week while it is getting going to nail down the processes as you say.

Indeed, we would need to make sure parents are spending. The cafe in Chester I gave as an example offer free use of play area when spending so much on food. Their play area is pretty crap as well compared to what we have in mind. So we were thinking we would set the prices where it wouldn't make sense not to buy food and to seem like the food/play package is great value considering the play only cost e.g. play area entry only £3 / kid food platter (a good one!) and drink £4.50 with "free" play area entry / parent lunch and drink £5.50 with "free" play area entry. Also an option if too many customers hanging around too long, play area time limited to one hour unless paying extra.

Thanks for the advice regarding the lease and break clauses. Great to know these things!

 

[TKay]

Fantastic response from @ecommerce84 above!
...

Mark T Jones

We want to create somewhere that will capture passing trade, but also where people plan to go and meet up for play-dates and parent groups.

I haven't fully researched the demographic to be fair. We're not talking Surrey Yummy Mummies, but mainly middle class with some single mums thrown in. Not the wealthiest area, but where people have a bit of money for this sort of thing.

"As has been pointed out the biggie here - having got then in to your cafe - is to get them spending real money" - indeed that is the biggie - please see my above reply to ecommerce84 about the package idea.

No we won't sell alcohol - might not look too good as a cafe aimed at parents looking after kids Just the accepted drug - caffeine.

Thanks for advice on the my food views being irrelevant - need to give the customers what they want.

Great points about overruns due to changes of plan and the importance of consistency.

 

[TKay]

bodgitt&scarperLTD

Great posts thank you - very to the point and I appreciate that!!

"I think you need to be realistic about how much value the play area will bring, and how many low spending undesirables it will bring. Even the higher spending customers will drag their heels."

I need the play area, otherwise I am just another cafe with no USP - there must be a dozen of these in town already. I can attract a lot of customers to the cafe for this purpose. Please see my replies above about how I will combat the low spenders and heel draggers.

Staff issues - I completely see the point. Indeed the average waitress won't care and customers are far more likely to find a family run (with young kids) business more appealing.



Gordon - Commercial Finance

Thanks for advice. Fitting costs will actually be low for the play village area anyway (I can do this for under £2k) - the main cost would come from the carpenter's time (£150 per day). Materials are not that expensive. My renovation experince will help me out here. The average soft-play area maybe, but this is something different.

Thanks for the positivity and I'm glad your wife thinks there is a need for something like this!!

Indeed, will need to get some money out of them for using the play area.



Chris Ashdown

Thank you for post.

We will be aiming at the baby to 8 years - the first half are about in the day and always looking for a place to go and the second lot can arrive after school.

Good points about the staff and food.

Thanks for advice on lack of profit.

The council are giving grants to revive the high street, which is of course struggling. I meet the criteria for the grant and have read the success stories of others who have been granted the money.



The Byre

Thank you for comments.

Shop has been empty because high streets are struggling now - everything moving online. A cafe is something that can't move online. Location great, free nearby parking.


Prime81

Thanks for advice.
Indeed, our cafe will be an all year round destination.

 

[TKay]

So thank you for all the input - brilliant advice to help us with the DNA of the business.
We're going to go away and do the proper market research - speak to people on the street about what they want and how much they are willing to spend. Then we need to crunch the numbers to make sure it is worthwhile.