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Buying A Business
Buying a Coffee Shop? Here’s What You Need to Consider
In a world where Starbucks is on seemingly every corner, it may come as a surprise that many independent coffee shops are holding their own in the marketplace. However, there are a number of factors that determine the success of a local coffee shop. If you’re contemplating buying a coffee shop, ask yourself the following five questions to ensure you’re making a wise investment decision.
- Is the coffee shop in a high traffic area?
- What sets this coffee shop apart from competitors?
- Are the furnishings or coffee equipment included in the sale?
- Why is the coffee shop for sale?
- How did the owner arrive at his or her asking price?
Considerations When Buying a Coffee Shop
When it comes to buying an existing business, knowledge is power. Ensure you are equipped with all of the facts in order to make a worthwhile investment.
1. Is the coffee shop in a high traffic area?
According to a 2017 National Coffee Association news release, 62 percent of Americans drink coffee on a daily basis. With a majority of the country’s population consuming coffee, the success of an existing coffeehouse is heavily dependent on convenience and location.
When considering a specific coffee business, look at the accessibility of the shop and the surrounding population. Successful coffee shops are typically located in high foot traffic areas or areas that many people pass on the way to work.
If you feel the shop is in a great location and you want to stay in the existing retail space, be sure that the lease is transferable.
2. What sets this coffee shop apart from competitors?
In a highly saturated market of both big box coffee stores and independent shops, small business owners must consider how to differentiate their coffee shops and grow their customer bases. When looking at an established coffee shop, think about how it compares to Starbucks and local competitors. Ways a shop might stand out include but are not limited to:
- Serving pastries, food, or sweets
- Latte art
- Hosting book club
- Live music events
- Free wi-fi
- Drive-thru service
- Authentic, local atmosphere
More and more customers are being drawn to local businesses and shops rather than the big box retailers. Ensure the coffee shop you are considering for purchase is known for delivering a memorable experience and excellent service.
3. Are the furnishings or coffee equipment included in the sale?
During negotiations, determine whether or not the shop’s equipment and furnishings are included in the sale. A commercial espresso machine alone can cost upwards of $3,000. Buying all new furniture and machines could add thousands more to an already sizable investment.
4. Why is the coffee shop for sale?
One of the most crucial questions to ask the coffee shop owner is, “Why are you selling?” Common reasons owners list coffee shops for sale include retirement, burnout, illness, poor performance, financial issues, and new business opportunities.
If a seller indicates that he or she is selling the coffee shop business due to performance or financial issues, take it as a red flag that the business is not doing well. While it is possible that under new ownership the performance of the coffee shop may turn around, you will want to do some further investigation before signing on the dotted line.
5. How did the owner arrive at his or her asking price?
Another important question to ask the coffee shop owner is, “How did you arrive at your asking price?” From cash flow to location, there are many value drivers that can impact the asking price of a coffee shop.
By understanding how the owner reached the asking price, you will get a better sense of bargaining power. An asking price without a credible valuation behind it is likely to be negotiable.
If you’re ready to begin browsing for a local coffee shop business for sale, consider working with Sunbelt Business Brokers. With years of experience connecting buyers and sellers, you can depend on our business brokers to help you find your dream coffee shop. Plus, working with a professional business broker ensures you have an expert guiding you through every step of the business buying process from start to finish. Contact a Sunbelt office near you today to begin your journey to buying a coffee shop.
Article updated on December 20, 2019.
