Would it work?

Clare_Guy

I keep an eye on this forum and think that there's a lot of good advice given. I'm seriously considering setting up a new business in the new year and I'm posting here because I'm hoping to get some objective opinions to help me and, maybe even, some encouragment.

I've found a premises that previously traded as a coffee shop/internet cafe in a pretty good location in an excellent town. I want to reopen it as a coffee shop. It was fitted out and decorated in, what I'd consider, is "5 star" quality and is fully equipped so it'd mean I could open for a minimal cost. The previous occupant closed it mainly because, as far as I can understand, of a very high rent. I've spoken to the letting agent and he assures me that there's a deal to be done on the rent, "with the right tenant". But I reckon even with some negotiation and luck the rent would still be quite high at around 60-70k per annum.

I would aim to open it offering the best coffees, teas, juices, smoothies, cafe foods and pastries, that I could. I want to provide fast Wi-Fi, newspapers, magazines, books, and excellent service. My vision is to differ from the vast majority of coffee shops/cafes by being a bit more casual, quirky and, hopefully, "cooler" than them.

The previous occupant had the trading area split approx 50/50 coffee shop/internet cafe, but I want to reduce the internet cafe part to maybe 20% and make it less obvious by, perhaps, reconfigurating the area and using laptops/netbooks.

I think I could open the premises with a tidy up, my changes and a rebranding for a budget of less than 10k.

I've a history of working in small family owned, service-based, businesses (including pubs) but I've no experience of coffee shops (apart from lunch:) )

Apart from financial reasons, I'm interested in doing this because while I enjoyed many of the aspects of the pub business, the 2 things I really didn't enjoy were dealing with drunk people and the late hours. In my opinion, I think the coffee shop business offers me all of the aspects I enjoyed without the other 2.

As I said, I'm posting because I'd like some opinions and advice from the forum, so guys and gals, what do you think?...

Thanks

drunkmonkey

The rents seem off the wall at 60 or 70k, that's a lot of cups of coffee..

Sposs

Its a renter's market these days , plenty of room to negotiate with the landlord , such as asking for the first six months free , then the first year at a vastly reduced rate - and in return you'll commit to a five year lease etc. Make sure you have your figures done in terms of what you think you can actually afford in terms of the rent and remember to under estimate rather than over.

gavney

What's the square footage for the 60-70K?

Clare_Guy

gavney wrote: »

What's the square footage for the 60-70K?

Just under 3000sq.ft.

Clare_Guy

Sposs wrote: »

Its a renter's market these days , plenty of room to negotiate with the landlord , such as asking for the first six months free , then the first year at a vastly reduced rate - and in return you'll commit to a five year lease etc. Make sure you have your figures done in terms of what you think you can actually afford in terms of the rent and remember to under estimate rather than over.

I haven't started negotiating yet but I'm well aware of the current market.
Personally I'd prefer to agree a 5 year lease with a no penalty year 1 break, hopefully with a reduced rent for year 1.

I've done some figures based on a prospectus with sample p&l for an irish franchise coffee group.

These figures lead me to believe that a turnover of €250k would be breakeven point, including rent and salaries.

Bandara

Clare_Guy wrote: »

I haven't started negotiating yet but I'm well aware of the current market.
Personally I'd prefer to agree a 5 year lease with a no penalty year 1 break, hopefully with a reduced rent for year 1.

I've done some figures based on a prospectus with sample p&l for an irish franchise coffee group.

These figures lead me to believe that a turnover of €250k would be breakeven point, including rent and salaries.

The figures you have done based on the sample p&l are most likely pretty worthless as if they are from Costa Coffee, BB's or particulary Insomnia Coffee they are complete fantasy figures.

You need to remember that these figures are given to people that these companies are trying to convince to open one of their stores and pay them franchise fees etc. They are in essence part of their lovely glossy brochure to entice you to pick them

also the coffee shop Market is being savaged beyond belief, it's possibly the single sector that's been hit the most in the disposable income Market.

Yesterday I saw a Centra store selling Bewleys bean coffee in a branded bewleys cup for €1, I was actually shocked, when a store resortsto discounting heavily the one thing it needs to sell to keep the bills paid then you've got problems.

Also you idea of funky cool high quality food is great, but not if your opening it in tullamore or in (dare is say it) Co Clare.

The inhabitants of Clare are not interested in sun dried tomatos and pesto. I know this as in one of my sites located 20 mins from Dublin we cannot sell a bag or panini to save our lives, I've actually had customers buying bagels and coming back afterwards to complain that their donut was too dry and had no sugar on it, true story.

The Market has to be there, and if its not there your luxury venture will fail as you just won't be able to charge the amount you need to for a sandwich if it's just a ham cheese and coleslaw on White bread as against the premium you can sell a goats cheese, pesto and rocket ciabatta for. Customers will pay 7.95 for the second but charge them more than 4.50 for the first and you'll have a mutiny on your hands ! The fact that the cost price is the same of each is lost on the customer, they have a preconcieved value for the product.

I have a lot of experience/knowledge in both the deli and top end resturant business, if I can be of any help to you just ask.

Regards
HT

Clare_Guy

Hammertime wrote: »

The figures you have done based on the sample p&l are most likely pretty worthless as if they are from Costa Coffee, BB's or particulary Insomnia Coffee they are complete fantasy figures.

You need to remember that these figures are given to people that these companies are trying to convince to open one of their stores and pay them franchise fees etc. They are in essence part of their lovely glossy brochure to entice you to pick them

also the coffee shop Market is being savaged beyond belief, it's possibly the single sector that's been hit the most in the disposable income Market.

Yesterday I saw a Centra store selling Bewleys bean coffee in a branded bewleys cup for €1, I was actually shocked, when a store resortsto discounting heavily the one thing it needs to sell to keep the bills paid then you've got problems.

Also you idea of funky cool high quality food is great, but not if your opening it in tullamore or in (dare is say it) Co Clare.

The inhabitants of Clare are not interested in sun dried tomatos and pesto. I know this as in one of my sites located 20 mins from Dublin we cannot sell a bag or panini to save our lives, I've actually had customers buying bagels and coming back afterwards to complain that their donut was too dry and had no sugar on it, true story.

The Market has to be there, and if its not there your luxury venture will fail as you just won't be able to charge the amount you need to for a sandwich if it's just a ham cheese and coleslaw on White bread as against the premium you can sell a goats cheese, pesto and rocket ciabatta for. Customers will pay 7.95 for the second but charge them more than 4.50 for the first and you'll have a mutiny on your hands ! The fact that the cost price is the same of each is lost on the customer, they have a preconcieved value for the product.

I have a lot of experience/knowledge in both the deli and top end resturant business, if I can be of any help to you just ask.

Regards
HT

Hi Hammertime,

Thanks for taking the time to reply.

The prospectus I found wasn't for one of groups you mentioned, but I take your point, and I understand that they are a sales tool. I based my figures on theirs but I tweaked them to be more conservative. The bottom line is, I'm figuring off a gross profit of 70%. In your experience, how realistic is this?

You'll be glad to hear I'm not thinking about setting up in either Offaly or Clare, I'm conscious that the "coffee culture" appeals to a more "cosmopolitan" audience and that such a venture requires a large population to have the best chance of success. I don't want to say where exactly the premises is, but I'm confident that it is the right town and while I don't think it's "perfect" the premises is in a good location.

I know the current economic situation is not great but think that opens up opportunities and I think this premises could be one. I'm not going to rush into it, I'm thinking about February/March for the opening. As I said in the original post, I want to get as many views and opinions as I can before I make my mind.

antoinolachtnai

That rent is nuts, unless there is pretty good foot traffic. Remember, you are mainly paying for frontage and foot traffic, not for square footage. (How would you staff a 3000 sq ft cafe as a start-up? Not for 250k/year I wouldn't think)

Exercise for you.

1. Buy two tally counters (cheap on ebay for a mechanical one, but this could save you your home and all your wealth, so splurge on digital ones if you like. )

2. Find a cafe that you like the look of, that you think is good. (don't worry, you will repeat the exercise later).

Stand opposite that cafe.

3. On one tally counter, count the number of people passing on the footpath outside the cafe.

4. On the other count the number of people going in.

5. Then try to figure out the average spend per customer and from there, the turnover.

Do steps 3-5 20 times with different cafes.

Then do part 3 of the exercise with the proposed site.

Now you will at least know something about your site and likely turnover.

Clare_Guy

antoinolachtnai wrote: »

That rent is nuts, unless there is pretty good foot traffic. Remember, you are mainly paying for frontage and foot traffic, not for square footage. (How would you staff a 3000 sq ft cafe as a start-up? Not for 250k/year I wouldn't think)

Exercise for you.

1. Buy two tally counters (cheap on ebay for a mechanical one, but this could save you your home and all your wealth, so splurge on digital ones if you like. )

2. Find a cafe that you like the look of, that you think is good. (don't worry, you will repeat the exercise later).

Stand opposite that cafe.

3. On one tally counter, count the number of people passing on the footpath outside the cafe.

4. On the other count the number of people going in.

5. Then try to figure out the average spend per customer and from there, the turnover.

Do steps 3-5 20 times with different cafes.

Then do part 3 of the exercise with the proposed site.

Now you will at least know something about your site and likely turnover.

This will only give me an idea of foot traffic, for it to give me an idea of turnover I'd have to know figures for the other cafes, but I'll try it over the holidays...

The 250k was what I reckoned would be the minimum I'd have to cover costs.

DubTony

250K is (based on 50 weeks) 5 grand a week.
For a 7 day shop that's just over €700 a day.
Would a tenner a head be too high these days for lunch in a coffee shop?

If it's an average of €8 per customer you need an average of approx. 90 customers a day.

So using Antoin's experiment you'd get a good idea of the potential of the site.
As for knowing the average sale? Sit in a cafe and look at what people are buying at it's busiest time. Take an average of what you see and count, and work it from there.

YellowSheep

I opened a couple of restaurants around Ireland and it was my strict ethos that your rent is 8% of your achievable net-turnover or I would walk away. People took over the units I refused and most of them would be closed or struggle over the last 3 years.
You should be very accurate with your prediction of turnover. And when you are satisfied with the figures.......deduct 15% and that could be your achievable turnover. Sent me your P&L and I will have a quick look, if you want that is.

Cheers Oliver

antoinolachtnai

Remember that all turnover is not equal. To take the extreme example, f you open a michelin star style restaurant you will have a pretty big turnover, but your profit margin might not be much to write home about. (Other than writing home looking for more money to keep the thing open.)