help with buying cafe

System

Hi,
This is my first time on the web site, both my husband and myself are looking at purchasing a cafe in Melbourne in either the CBD or close to we are looking at a smallish cafe seat aroung 20-30 people for coffee, cake and basic meals, hopefully around 50 -80k in price. However we need help! We are worried about buying a leasehold and then building up the business and at the end of the lease the owner not re-newing the lease or selling the cafe on us, can this happen? This would be our first business and we would be using money we have saved over a number of years to purchase this cafe could you advise what might be a resonable price of a cafe in the areas we are looking, so we don't get taken for a ride. What sort of profit would a cafe this size, open 7 days from 8 - 6 produce? And any other help you could give us would be much appricated. Thanks

FreshCoffee2

You need to speak with your business accountant. Good luck, FC.

admin

Nothwithstanding FC's sage advice (& yes, he is correct - you do need to speak to your accountant about these things), there is one other thing I have heard over the years from many cafe owners... ...just remember, running a cafe is hard work; many of us might have a dream from time to time about starting a cafe, but remember the long hours, early starts, etc. It would be good to hear from anyone else who has started their own cafe about their experiences. Anyway, it sounds like you are pretty determined to succeed, which is perhaps the most important thing, but as FC says, the sort of questions you are asking here are pretty much business questions, so a good accountant is probably your first step. Good luck! -A

mcbj

Good luck with your adventure, but remember not only to speak to your accountant, but your lawyer, your insurance broker and more importantly to your 'staff' - I presume that is you.  As said, can you do the long hours, 8-6 is not 8-6 but a lot before and after. Who will set up and clean up? Holidays and such?. What happens if you get sick?   You need to think about all these issues, then if still happy go for it, let us know when and where and when in town, we'll visit. Best of luck, ;D

Andrew

Hi there, a real shame I didn't read this earlier!  I was just in Melbourne over the past weekend and had a bit of a chance to look around Fitzroy, Richmond and St kilda.  Plenty of cafes thats for sure. FC's advice is spot on: get an accountant.  Unfortunately what you are asking is not an easy yes/no answer.  its not dissimilar to buying a house:  What is it worth?   A good commercial accountant can definitely help, but there is no substitute for doing your own homework.  You don't need an MBA, just good common sense and being thorough. Some things to ask/look for: 1) Financials - I'd be asking for as many years of trading records as I could get.  Will tell you how revenues have grown, what the margins are, what overheads are etc etc. As an accountant I love looking through spreadsheets but thats just me :-) 2) Be careful with the pay/wages for the cafe owners (assuming an owner run cafe) - you may find that these have been excluded from the numbers so as to artificially boost profit. 3) Lease agreements - look at the options (ie 3+3 or 5+5) and what the CPI rental increases are each year. 4) Equipment - probably want to get a feel for how well looked after it is ie will u have to replace it? 5) Competitors/Position.  Will tell you a lot. 6) How busy is it? take a look at how busy it is through the day - will give you a guide to 7) Why are the current owners selling? 8) Ask the shops either side of their opinion of the business and the location. 9) finally - make sure regardless that you do a business plan.  Can be as simple as 4 or 5 pages, but it will help you clarify your thoughts. In the end it will come down to whether you think you can the cafe can make enough profit to pay yourself a wage AND still make profit afterwards.   if you like, I'm very happy to help you through some of the numbers/process.   rgds andrew [email protected]

Unknown

Thank-you all so much for you advise, you have given me food for thought. I will let you know how it all works out. Thanks again ;D ;D ;D ;D ;D