Buying a Cafe: Insider Tips from Cafe Owners.

by Vanessa Lovie 24th of June, 2021

Buying a Cafe: Insider Tips from Cafe Owners.

In a recent online discussion, someone asked the question: “I’m looking at investing in a small cafe that is run under management. I’m meeting the owner tomorrow. What questions should I ask? I don’t want to miss anything.”

This post piqued my interest. When someone is looking to buy a cafe whether privately or through a business broker there are a number of questions a potential buyer needs to ask. With over 70 comments on the posts, business owners, cafe managers and baristas were all quick to jump on board and offer their advice.

With some suggesting watching the cafe to get an idea of sales.

“I’d be hanging out in the cafe watching the clientele and the general vibe. Or from the street just watching how busy they are and counting the coffees.”

Get Professional Advice

With multiple people suggesting to seek professional advice and get assistance from accountants, business brokers and lawyers to help in analysing the financials and business information.

“Having dealt with the buying and selling of cafes before it can be hugely intricate so I would suggest having an account or business lawyer. Ask what assets he will be selling with the business and if those assets are on leases. If they are, you need to know the remaining time on the leases and all expenses to do with those leases - monthly payments, balloon payment and depreciation claimed each year.”

“Have an accountant with you.. P&L, revenue, expenses and incoming outgoings etc .. connections for inventory and see what they’ve done from a branding / marketing perspective etc go into the business side of it with discernment as you’d have a business plan no doubt, so identifying gaps etc is critical”

Understanding the work of owning a cafe.

Successful cafe owners joined in to showcase the struggles that are inherent with owning and managing a Cafe. It's important that potential buyers see the hard work that is involved owning a cafe.

“As someone who built a cafe with no cafe experience I can tell you it’s an incredibly hard industry. We had a thriving cafe, it was incredibly popular. Hour long wait lists at the door. But despite being “busy” that doesn’t guarantee it to be financially successful. Bums on seats doesn’t equate to a viable business.”

“I come from parents that have owned multiple cafes, franchises and food businesses. I would say that cafes take A LOT of work and knowledge, and if you do not have the background I would be very careful with investing money and time into it.”

With some current cafe owners suggesting the importance of working within the business before buying:

“After working in the hospitality industry for years and I own a B&B, I really think you need to work in his cafe for 6 mths as a manager. He pays you a wage and you’ll see how much money is made. How training staff to be hard working is a challenge. How to have staff arrive sober and not drug affected to work. How to fill in the gaps when they want to go home or don’t turn up. It is hard work.”

The initial poster was looking to buy a cafe under management, many commenters were skeptical on why a business owner would want to sell their profitable cafe if they had it under management.

“My husband and I own a successful Cafe which my husband runs... it seems odd to me that if a Cafe is under management and profitable the owner would sell. We would love to get someone to manage our Cafe so we could expand our catering business but finding a suitable manager has proven near impossible”

“Ask if the owners have been paying themselves a wage, and make sure to check their financial statements from the past few years. If they’ve not paid themselves a wage, you need to add back a reasonable wage and consider if the cafe still runs a profit.”

What you should look out for when buying a cafe.

With a warning to potential buyers the importance of effective managers

“Cafes have large overheads and you are managing a team that is in charge of the reputation. Once management is off, and the service drops, things can change rapidly which impacts turnover. The traffic and business is absolutely tied to experience, unfortunately. We have had several successful cafes being sold (due to my mum being very ill) and the business crashing after 2 months.”

A business owner who bought a cafe and then sold it 4 years later, stresses the importance of getting all of the figures.

“I recently sold a café that I started from scratch and built up for 4 years. Happy to offer any knowledge I can provide. I bought ours as an existing café, they were very dishonest with their figures which is very common in this industry, but we were gutting it and starting from scratch so it didn’t matter. But if you are relying on his figures to be accurate to sustain the business I would be looking at them very carefully and pushing more specific info for that café. If it’s going through a broker then I would be pushing him to get them for you.”

Buying a cafe is an exciting venture. There are currently over 1,000 cafes for sale on Bsale. Its the type of business that can have a low entry point and a ‘feel good’ element when people get to invite their family and friends to their business. As showcased by current business owners though, the hospitality industry and cafe’s, in particular, can be hard work.

What was the main consensus?

As stressed multiple time by commenters there were 3 main areas to focus on before investing in a cafe business:

The importance of having previous experience within a cafe.
Obtaining all of the financials and business information such as; eftpos and till receipts, P&L, Balance Sheets, BAS, Tax returns, lease agreements, employee contracts, equipment leases etc. Then having these professionally reviewed by an accountant and lawyer. Seeking advice from an experienced business broker can also help you to navigate the buying process.
The staff you have in place. Creating the right team for your business can make or break a cafe. People come for the experience and the food. If you can't effectively obtain and manage your staff then the cafe will struggle.

Owning a cafe is a great business idea and they can be profitable. But it is important to have the right advice and experience when buying a cafe.

Tags: sell