How to Buy a Coffee Shop

Maybe you’ve always dreamed of being a coffee shop owner. Maybe you have imagined the comforting smell of a fresh roast or the leisurely customers enjoying a moment of peace reading a book or exploring a new passion project on their laptops. These images are just a few that might come to mind for business owners when they imagine owning their own coffee shop business. 

While some entrepreneurs prefer to start from the ground up and develop their own coffee shop concept, you might be more interested in buying a pre-existing business, and benefiting from the pre-existing loyal customer behavior. If buying a coffee shop has caught your interest for your next business venture there’s just one question: how does someone go about buying a coffee shop business?

Buying vs. Starting a Coffee Shop

When considering whether to buy versus open a new coffee shop in your desired neighborhood or location, the overarching decision revolves around the pros and cons of either starting a business or buying a business in general. 

One pro of buying an existing coffee shop is the pre-existing structure and the benefit of onboarded staff. Employees who choose to stay with the business (and often, they will, as most people need job security) are already trained to run the established business, in ways that it will take you a little while to catch up. If the pre-existing business was well-run, then the staff can likely be allies and help you. Do not underestimate a staff member that knows how the machinery works, understands the register, and knows the ins and outs of this particular small business. Similarly, buying an established business means that you can inherit not just the employees but the business structure which may include shift schedules, how employees are paid and when, and details that kept the old business operational. In the best case scenario you are purchasing a small business in a box, where all the pieces and loose ends are tied up, and all that is left is for you to learn how to keep what is already working, going. 

However, there are also pros to opening a new business that you do not receive when purchasing an established business. A new coffee shop is your business, your baby, your startup. A new coffee shop can be run with your vision, it can start fresh with your product ideas, your branding, and you can hire the type of staff you prefer, and train them on how you would like them to operate from a day-to-day perspective. Some of that control and creative input is lost when buying an established business. While you certainly have the option to make big changes to a pre-existing business, you may alienate not just the staff but also the customers who liked the business and the products the way that they were. Buying a coffee shop requires entrepreneurs to negotiate small changes and strategic initiatives while retaining a sense of the original brand and the utility of the staff based on what they already know.

How Much Does it Cost to Buy a Coffee Shop?

It’s impossible to analyze the pros and cons of buying a coffee shop versus opening your own coffee shop without thinking about the financials. While every business is unique, generally speaking, buying a coffee shop or any other established business requires greater up-front cost. You are not only buying the location, but also everything that has been put in place for you, including a likely track record of profitability. According to Viking Mergers, lenders and investors also prefer a business with a proven track record, which means that you might have an easier time attaining the financial backing you need through buying a coffee shop. Additionally, according to the SBA’s Office of Advocacy, about 50% of new businesses fail within the first five years, which means starting your own coffee shop may be an investment that you will never recuperate. 

All of these are important aspects to consider, but what about the actual numbers? Well, according to Start My Coffee Shop (a great resource with additional documentation and information), established coffee shops usually are placed on the market anywhere between $80,000 - $250,000, and sometimes even higher. All of this will depend on the location, the traffic, current revenue, the square footage, operating cost and, to a certain extent, the owner’s discretion. 

If you’re wondering about your location, consider searching existing coffee shops for sale near you, check out Biz Buy Sell, a site specifically for people selling their business and segment your search to include coffee shops and cafes in the geographical areas of your interest. For example, established coffee shops in Tampa, Florida range between $85,000 - $300,000 to acquire, and come with differing amounts of equipment, inventory, and of course lease prices. Keep in mind that when you purchase a successful coffee shop, it often does not include ownership of the retail property (though it can) but instead the takeover of the lease, which is an expense you will incur. 

With all of this information and decisions to make, it’s important to determine what your personal goals are, so you can navigate all of these choices with a foundational plan, and make adjustments along the way. 

Determine Your Goals

Maybe you would prefer an established coffee shop business with all of the equipment it needs and a full operational staff, as your top goal is to be up and running immediately and this business is more about revenue than a passion project. Or, on the other hand, perhaps you want to put a personal stamp on this entrepreneurial endeavor. Here are a few questions to ask yourself when considering buying a coffee shop:

• What types of coffee shop business models do I hope to emulate?

  What is my budget?

• Who is my target market in addition to pre-existing customers?

• Do I need investors?

• What type of food service do I plan on retaining or expanding with the current business when I make a purchase?

• How many staff members do I feel comfortable having?

• How much managerial oversight or physical presence do I plan on having at the coffee shop?

• How long do I have before I need to turn a profit?

• What are my long-term profit goals?

• Do I need supervisory staff such as a store manager or accountant?

• How much money do I hope to spend on renovations?

• Do I hope to make changes to the physical location and if so, how much do I plan on spending?

• Do I plan on having marketing or promotional assistance?

Once you have answered some of these questions and completed your due diligence regarding your own goals and financial situation, you can take a shrewd look at the market and know what to ask potential business owners.

Look at the Market

Now that you know what you want, you can look at what is available in the coffee industry for purchase with fresh eyes. You can think about the location that your target market spends time, their price points, and the type of ambiance they prefer. You can also think about the restaurant industry as a whole - are there similar coffee shops in the area or restaurants that sell coffee nearby? You may consider offering coffee in an area where you have limited competition. Lastly, what about the potential foot traffic of your coffee shop - do you want to cater to people wandering in or is this a location where people park and come specifically to your establishment. All of these considerations, in addition to the homework you have already done, will help you make concrete choices based on available coffee shop businesses for sale near you

Ask The Right Questions

You have done your homework, you have explored the market, and now you have a potential coffee shop seller in front of you. Here are a few questions (in addition to those you have accrued on your journey) that are worth asking the established business owner.

• Why is the coffee shop for sale? - Why is the current owner selling and what are their current pain points with the business?

• What is the coffee shop’s reputation? - Who does the owner see as the prototypical customer base, and does that align with your goals or will you need to make changes?

• What does the competitive landscape look like? The current owner might know of a business that has not opened or of a competitor you might not expect. 

• What is the potential profitability?

Finalize Financing

Now that you have figured out exactly what you want, what your money can buy you, and you know what to ask the seller when making your decision, the time has come to finalize the financing for purchasing your coffee shop. If this is your first time buying a business or owning a business, getting expertise assistance cannot be overstated. Hiring a consultant or business professional to walk you through the process can save you tens of thousands of dollars in oversight.That being said…

1. Do Your Due Diligence: Make sure you understand the businesses financial, legal, and operational components before purchasing and how those factor into the asking price. You want to make sure that you’re getting a fair price for the business (and how the existing lease plays a role, and that means understanding what makes the business more or less valuable. 

2. Understand the Financial Performance: If this is not your area of expertise, consult with an accountant to understand the operating costs, the cash flow, existing equipment value, income statements and cash return to get you ballpark numbers of what you need to do to ensure ends meet and plan for a healthy profit margin. 

3. Know Which Licenses and Permits Are Necessary: running a business, from a legal standpoint, can vary from state to state and even city to city. Consult with an attorney who can help you understand what is and what is not necessary to operate legally, particularly since being shut down for failure to comply with local ordinances can mean serious revenue loss. 

4. Be an Expert of Your New Staff (if relevant): If you have new staff coming in, it’s important to understand how they are paid, how much, what their schedules are, and what the average week looks like. Look to a shift manager or owner to help explain this to you, if possible. 

Hire a Lawyer and Negotiate the Final Contract

Now that you have decided one way or another that you would like to purchase a specific coffee shop, call the attorney who helped you make that decision and have them assist you in drafting and negotiating a final contract with the existing business seller. This will likely include a purchase agreement as well as a final purchase price. By having an attorney, you have someone looking out for your legal interests and who can negotiate professionally on your behalf.

Congratulations! You’re a Coffee Shop Owner!

We understand it was not quite that easy, but the final step is to transition ownership from the previous owner to you, the new owner. This means meeting with staff, talking about how to reopen under new leadership, which renovations are happening and when, and considering any additional baristas or staff that you may need as you expand and take leadership. Are you changing the coffee shop name? This is an incredibly exciting time and relies on emotional intelligence and strong social skills, but with kindness, enthusiasm, and an eye towards business success, you can make it happen. 

And if you need help with the opening of your coffee shop business, we have your back!