To make sure that you invest in a café that works for you, use this checklist for buying a café to h..
To make sure that you invest in a café that works for you, use this checklist for buying a café to help you get a sense of how the business is run, where its potential lies and what you will need to budget for.
If the café you’re thinking of buying doesn’t occupy a ‘high street’ location, don’t discount it straight away; it might still be a ‘high footfall’ location. If the café for sale is located close to municipal areas such as a public park, bus terminal or train station, for instance, it could enjoy a surprisingly high level of walk-in trade. Business and Industrial parks can also prove surprisingly successful locations for a café business.
The beauty of the coffee business is that it can work well in a variety of settings, from 100-cover restaurants to mobile catering vans. If you want to add your own personal stamp to a cafe business, whether it be office catering, gourmet coffee retail or a small local gallery, you need to make sure that the premises will enable you to pursue your ideas. If you are looking at a lock-up coffee kiosk surrounded by offices, for instance, the takeaway earnings might be strong, but you will struggle to launch a commercial catering service without adequate food preparation space. Similarly, if you’re operating from a restaurant premises in a quiet end of town, then you can’t expect to depend on takeaway coffee sales - you will need to sell some food items to appeal to dine-in customers.
You need to know how old the equipment is, but it’s equally important to know the ownership status of the equipment. Is the equipment owned on a HPA (hire purchase agreement) basis, or is it owned outright? Does it need to be insured? If so, for how much per annum and what is the nature of the cover? All of these items are things that you need to understand before you proceed.
A commercial lease tends to be issued for a 10-15 year period, and if you buy the business, you buy the time remaining on that lease, also known as the term. If the remaining lease term is very short, you may find it hard to borrow money to purchase the café, as it’s harder to prove to the lender that you are capable of operating the business for the duration of the loan. If you’re trying to buy a business with a short lease and finance is a problem, you can ask the landlord to extend the lease, or you can ask the landlord to cancel the lease and draw up a fresh one. Both options are costly, and not necessarily in the interests of the landlord, who will need to agree to any changes.
When advertising a café for sale, the seller will often state a profit and turnover amount on their listing. This information might be based on the last available monthly or quarterly accounts, or it could be a ‘top of the head’ figure based on numbers that the seller knows by heart. You can rely on these figures for general browsing purposes, but when it gets to the purchasing stage, you need to examine at least three years’ worth of accounts before signing on the dotted line.
If you want more formal indication of how the business is doing, if the café you want to buy is trading as a limited company, you can buy the latest set of accounts from Companies House for a nominal fee. If you have shown that you are genuinely interested in buying the business, then a truthful seller who has built a business that they’re proud of will have no issue introducing you to their accountant.
As soon as you become the owner of the business, you will become responsible for the legal compliance and licensing aspects of the café. From a local planning perspective, the premises you operate from needs to be A3 registered if you plan on selling hot food, and you will need to comply with food labelling legislation regarding use-by dates and allergy advice. The FSA are the public body responsible for food hygiene and food safety, and can advise you further in this area. If in doubt, contact your local council who will be able to give you advice on what you need to do to keep your business operating within the law at all times.