By Arina Smith
Buying a cafe business isn’t something one does without much thought and careful consideration. Making such a big financial investment requires plenty of research and analysis. Anyone can buy into an existing coffee house, even without a tremendous amount of experience, but it doesn’t hurt to know how the market works.
There are a few different ways an entrepreneur may become a cafe owner. You could opt for the coffee shop franchise which will give you plenty of training, support, resources, and a lot of market assistance. Or you can choose the independent coffee bar option which gives you complete control. However, you’ll also be completely on your own in every aspect of managing the business. Both scenarios have pluses and minuses when deciding which is best.
No matter how you go about investing in a coffee bar, please take the time to read through what you’ll need to know before buying a cafe. Our helpful hints were curated with you in mind.
What You Need to Know Before Buying a Cafe Business:
Analyze Why You’re Buying a Coffee Shop
Why are you interested in owning a coffee shop? Anytime you begin a new business, you should start by asking yourself why this is important to you. Do you have a background in restaurant or bar ownership? Have you worked in a cafe previously? Do you feel your community would benefit from a coffee shop?
Maybe none of these reasons are what motivated your decision to buy a bistro. If not, clearly define your own motivation because you’ll need to rely on this when dealing with setbacks and challenges.
Owning a cafe, or any business for that matter can demand a large amount of your time, focus, and finances. So enjoy a good tasting coffee or wanting to be your own boss may not be enough to keep you going when times are tough. If you have a clear goal or direction and have a high level of commitment then you’ll be able to push for success.
Build a Business That Can Grow
The key to getting back all the money you’re willing to invest is to build a business that can grow. Even a business that begins with slow sales can gradually increase profitability. With the right amount of love and care, the business can still increase in value. You have to figure out the best way to get your cafe to flourish. Maybe the coffee shop you wish to buy has low sales. What’s the reason for this lack of strong profits? Perhaps the coffee served is poor quality, or the customer service isn’t good, or the prices aren’t competitive. If you are able to identify the issue with the cafe then you know what needs to be done to get your new coffee shop to its full growth potential.
Complete Due Diligence
If you’re considering buying an existing beanery, it’s necessary to complete a lot of research. From crunching the financials to visually inspecting the cafe, all of this and more must be completed before making an offer. Visit the cafe for different days and times so you can see when they are busy and when they are slow. Take notes about the operation such as the staff’s performance, the shop’s appearance, the menu items, and pricing. You’ll want to ask the current cafe owner to share as much data as possible so you really understand what you’re getting into. Use the internet to check for online customer reviews or any mentions in the local news.
Figure Out How Much Time Is Needed
Profit margins decide whether a business is booming or stalling. You’ll most likely take a look at the cafe’s profits to figure out what type of sweat equity may be needed to increase profits. What’s your goal as far as the financials? How much time can you commit to getting the coffee shop to your goal numbers? Do you have other personal or business commitments that could interfere?
If an existing cafe already has an excellent business manager then maybe that will decrease the amount of time you have to invest. Maybe there’s a current team member that’s ready to become your go-to person and help carry-out your plan for increasing profits.
Find the Potential Growth Areas
It’s best if you can clearly see the cafe’s potential growth areas and develop a strategy for exploiting those. For example, one area to consider is the location. Does the current location benefit or detract from the coffee house? In some situations, a new cafe business owner will acquire the shop because they see an opportunity to build out the location. Perhaps the new coffee house owner sees the potential of redesigning or expanding the seating arrangements, the parking lot, or the storage space. Entrepreneurs are usually visionaries and can see where the cafe business is currently lacking and which improvements may lead to extra profits.
Develop the Existing Team
The baristas, food prep team, cashiers, and managers are the coffee shop’s face. The patrons rely on the cafe’s staff to provide an efficient, friendly, and professional service. Return customers often develop a personal relationship with their neighborhood coffee shop employees which keeps them coming back. So when you acquire a coffee bar, be sure to evaluate the team and solicit feedback from each staff member. You’ll want to determine both the strengths and weaknesses of the employees, as well as make sure their current wages are fair.
You also may want to come up with a plan for ongoing training and support of your cafe staff. Incorporating your team’s suggestions for improvements can make the coffee house better while also empowering the employees. Keep in mind, the stronger your team then the better your coffee bar will do.
Decide If You Should Purchase or Lease
There are many coffee bars that exist within a leased commercial space. If you were to buy such a cafe business then you’ll be inheriting rental or leasing fees. The leasing agreement is something you should review prior to purchasing the business. Keep in mind, if the lease is short-term then you may be forced to relocate the business eventually which can be counterproductive to your clientele. Or there may be restrictions within the lease that won’t allow you to make certain physical changes to space which you would like to do.
You’ll want to compare the rental amount with the existing cafe location versus other possible venues. Are the leasing terms fair and cost-effective or should you move? If moving is the best option for your cafe business then you’ll have to figure out where to go. Should you purchase an available building? Or is it better to buy land and build your own coffee shop?
All of these matters need to be sorted out before moving forward with buying your dream cafe.
Better Understand Your Suppliers
You’ll also need to examine the condition of the cafe’s equipment. What if you need to have repairs completed? Or maybe you need to replace worn-out equipment with the most current model?
It’s also important to get to know the cafe’s existing suppliers. Make sure the companies that fulfill the coffee house’s bulk orders for coffee, milk, and other ingredients are giving you the best deal possible. Are you receiving paper cups and napkins on time? Is the creamer good quality? Are the prices for coffee beans competitive?
You’ll want to get to know the suppliers already working with your business. It’s critical that you and your team develop a solid working relationship. If you are not satisfied with any aspect of the supplier relationships then it’s your obligation to find other resources.
Don’t Do Everything Alone
A major mistake of some cafe business owners is taking on more responsibilities than they can reasonably handle. Even for experienced business owners, taking over a new organization can be challenging and will require a lot of time. That’s why it’s good to develop a team of supportive professionals, like lawyers or accountants or realtors, who can shoulder some of your burdens. In fact, get your group of go-to professionals involved as soon as you consider buying a cafe. They can help verify that you’re making a good investment and help make sure the transition is smooth.
Insurance for café owners is another area where you’ll want to rely on an experienced insurance agent. Working with a knowledgeable agent will help you easily find the best business insurance benefits for your organization and your budget.
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