Buying an existing cafe business? Here are some tips to get you started
Buying a cafe business is both an exciting and huge decision, especially if it’s your first business so take your time and do your research before committing yourself.
Look in the mirror - Why is it that you want to own a cafe business? What does it mean to you to be self-employed? Are you realistic about the hard work and long hours involved in operating a cafe? Do you have the necessary skills? If not, what are your skill gaps and how will you fill them?
How will you run the business - Do you see yourself as a hands-on operator or plan to put the business under management? Cafes rarely perform well under management especially with inexperienced owners or ones that run their businesses off a spreadsheet.
If you’re new to the industry, you may want to either consider getting some experience before buying a business or working under an experienced Manager in your own cafe. This can be a good strategy if you wish to eventually expand into multiple locations or be able to have the occasional day off.
If you are looking to fund the purchase of a cafe for a family member to operate, be very clear about your expectations & don’t buy a business to keep your spouse ‘busy'.
Finding the right cafe - Spend time in the business on different days of the week and at different times of the day. Who are the customers, what are they coming for, what are they buying and how long do they stay? What’s the culture of the team like? Can you relate to the team and the customers? Is there room for you to improve the business & if so, how?
Please be discrete when visiting the cafe, it can be unsettling for the team to know the business is potentially for sale. It is never appropriate to question the team on the performance of the business or mention a potential sale.
Check out the competition; how many competitors are there in your trade area? The quality of their offer, menu pricing and proximity to the business you’re looking at.
What are the traffic generators in the immediate area? In other words, what are the reasons customers would be passing your cafe?
Are there, schools, offices, retail stores and other everyday usage tenancies that draw in potential customers?
It is also important your business is accessible, a highly visible location that people can’t get to or easily park near, may limit your sales potential.
The Detailed Research - This is where the real research comes in. Once you are satisfied you’ve found the right potential business for your needs, it’s time to ask for a detailed sale pack.
Expect you may be asked to sign a confidentiality deed before receiving any information.
Just as you may not have experience in buying a business, the seller may have never sold a business before either so this is where your professional advisors come in. You don’t know what you don’t know.
Make sure your Advisors have relevant industry experience, the Lawyer that did the conveyancing on your home may not have experience in business sales or in the food industry so always check their credentials.
As a basic guide, you can expect to receive:
Price guide for the sale of the business
Profit & Loss statements, prepared by a qualified Accountant (at least 2 years)
Lease for the premises including any licenses for any outdoor seating or storage areas.
The latest 2-3 rental invoices. Check these against the P&L and also the lease, this is particularly important as the tenant may have temporary (Covid) rent relief.
An Asset Register outlining what assets are included or excluded from the sale
Copies of any contracts related to the business that are currently in place
Staff Rosters with the team’s personal information removed. 6 weeks is usually a reasonable time period to check staff entitlements & accruals are reflected on the P&L
Want to talk to us directly or interested to learn more?
We would love to hear from you!
Email us at:
info@emucoffee.com.au
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Legal Disclaimer a.k.a keeping our Lawyers happy -
This article is by no means a comprehensive guide on buying a business & Emu Coffee doesn’t provide business advice. The tips in this article are simply some pointers based on our experience. Buying a business is a long term, financial commitment so get advice from an Accountant, Lawyer and/or Business Advisor with experience in the cafe industry.
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