Coffee connoisseurs can be found by the dozen in Australia. The land is known for its immense love for a variety of blends of the delicious beverage. Sydneysiders are specifically possessive of their daily dose of cocoa and side dishes.
Naturally, cafes are the most popular social hangout zones in the bustling city, which offers an ideal setting for enjoying a latte, cappuccino, espresso or black coffee. Many baristas and coffee lovers dream of owning a chic cafe in Sydney as it enjoys a thriving coffee culture which is expanding continuously.
Sharing an obsessive love for this staple, many aspiring entrepreneurs make a beeline for cafes when they are looking for a profitable business for sale in Sydney. Owning one of these doesn’t necessarily need experience, but you need to know a few things about the cafe which has been put up for sale.
So here is a list of the top six things that will help you to find the best coffee shop in the market which will bring a high return on investment.
1. Evaluate the Reputation of the Cafe
The moment you have decided the size and type of the cafe you wish to purchase. You must make a list of the preferred choices. You can make an initial enquiry to understand the location, cost, turnover, profits, staff size, equipment etc. If you find everything to be in place, then you must put on your detective’s hat and visit the cafe on your own.
You must evaluate the foot-traffic in the cafe for sale in Sydney and evaluate the customer service status and satisfaction levels. Although the quality of coffee and food can be improved after the acquisition, it is challenging to change the perception of the consumers. If most of the customers leave dissatisfied, then it will be hard to regain their trust.
Thus opt for the cafe which enjoys popularity among coffee aficionados and is known for its taste and service. You can also check the social media accounts of the brand to gauge customer reviews and fan following.
2. Assess The Location of the Cafe
The positioning of the coffee shop for sale makes all the difference in generating foot traffic. If it is not easily visible and is hidden in an inconspicuous corner, then it will not get any walk-by traffic. Most people will miss it and choose to go to a restaurant nearby or other competitors in the region.
Thus make sure that the frontage of the shop enjoys high exposure and is located in a busy shopping precinct or commercial district. Also, you must be aware of the infrastructure development in the vicinity to know about the development of the area in the future.
Make sure that the business promises growth through the attraction of new customers and the expansion of the shop. It should have ample opportunities for scalability. Also, check the local council grant approval for operating the cafe in NSW as it is the minimal requirement for operating a cafe in Sydney.
3. Equipment At The Cafe
The assessment of the equipment at the cafe for sale in Sydney is of utmost importance. Most buyers do not take a look at them until they are getting trained in the operations by the outgoing owner after the sale. A superficial look at the commercial coolers, freezers, fridge, microwave, oven, and coffee machines will not give you the correct judgement of the durability of these appliances.
You must get the purchase bills of all the equipment and maintenance contracts from the seller. Also, you must get them checked by a professional to evaluate their potential. It will help in ascertaining the cost of equipment which will be added to the final price.
Another critical thing to consider is that many cafe owners do not purchase their espresso machine and rent them from vendors. So you must be aware of the payment requirements and include it in your monthly budget.
4. Calculate The Actual Cost of the Business
First-time buyers may not be aware of this, but many sellers do not put a realistic price tag on their businesses. Also, market trends should not be considered by the buyer as they differ according to the size and type of the cafe. Thus do not start negotiation discussion on the asking price.
The seller may inflate the cost to gain maximum profit from the sale, which is one of the common mistakes to avoid when selling a business. You cannot pay for the business on the basis of the interiors and fit-out. The costing of all the elements and net profit of the business should be taken into account to determine the price.
You can take help from an accountant in this regard as they can determine the financial health of the cafe after analysing the financial documents provided by the seller. Opt for the business which will be sold at a higher price if you plan to quit down the line so that you can make a sizeable profit from the deal.
5. Learn About The Lease
The remaining term of the lease is as important as the evaluation of the business. If it is a long-term lease with options of extension, then you must check with the property owner if it can be transferred. In case the lease is going to end within a few years, then you will have to move the cafe to some other place, and the advantage of the location will be lost.
Thus you should not be paying the asking price keeping the strategic location in mind. Also, make your lawyer analyse the lease contract and understand the terms and conditions, such as rental increase or menu limitations before going ahead with the sale.
6. Scrutinise The Financial Statements
During the due diligence, the first and foremost step should be the thorough investigation of the financial statements to know about the financial health of the business. It will give you an insight into the profit margins of the cafe and how much tax is being paid by it to the ATO.
Examining the BAS statements and profit and loss documents will help you to determine if the business can be run efficiently without pumping more money into it. Understand the cash flow, overheads, weekly takings, salaries, net profit and everything else related to the finances. Your bookkeeper can help you in finding any discrepancies and save you from making a mistake.
If you have a long-cherished dream of owning a charming cafe for sale in Sydney, then you must make sure that you know about all the things mentioned above before signing the deal. It will help in easing your search for the best business for sale in Sydney.