Food and supplies costs

[tedlinn24]

Hello everyone, I hope maybe someone on here can help me out. My wife and I have an opportunity to purchase an existing coffee shop. It is in a prime location and sales are good. However the expenses are through the roof. The current owner does not put in the time or effort to make the business successful. My wife and I think we can do a much better job between the two of us. She has a business degree and has been a customer service manager, operations manager and more in corporate America with some big companies. We ant to do an adventure together. I have culinary experience as a chef, and also coffee experience as a barista. I am creative and a work horse and I know that as a team we can turn this shop around. The coffee shop is averaging $25,000 to $28,000 a month in sales. Expenses are around $24,000 to $27,000. This is without any marketing at all being around Dr,s offices, 3 Schools including High, Jr High and elementary, a huge church, and a huge Engineering firm that employees 1300 people. It is on a very busy road that people take as a short cut and on a corner lot of the shopping center with 7 other businesses. It has a drive through. So it has a lot to offer for success, just poorly managed. My best friends daughter works there and gives me some inside scoop as to the operations and agrees that I could do better. Now my question is to anyone who may be doing the same or around the same in sales, could you offer an average food and supplies cost per month. Or any helpful advice would be greatly appreciated. I am putting my business plan together and right now with these numbers I dont think a bank will lend the money to purchase this business. But if I do it based of my projections and the things I know I can change to save expenses, I believe I have a better chance.

 

[Mr.Peaberry]

Your question is to folks doing a similar volume of business, and I'm not even in the coffee business...yet...but I think you're headed in the right direction in terms of putting together numbers that you can take to a bank and get some serious consideration. Banks don't loan on blue sky scenarios...venture capitalists do, or angel investors, but not banks. If you think the business in mismanaged, then you need to prove it by providing the numbers. How much of the cost of labor can be saved by you and/or your wife working the business? Food costs for restaurants are typically at 25% when pricing out menu items. So you should evaluate the pricing structure to look for opportunities to do better there. Raising average ticket sales by offering incentives for add on sales, etc. I think you know all this...I just wish there was something unique you could attempt to show the bank your solution is not just pinned to your dreams and hopes when they are lending real hard money. Can you put a dollar amount on the waste of the business? This can be unsold perishables or overstaffing. So many considerations because there is not even enough margin as it stands to pay yourselves, and repay the bank.

 

[Musicphan]

Food costs in the business are a bit higher ... more on the lines of 30-35% depending on your dairy source. The key area to look at is labor costs.. keep in mind what you pay someone is not your 'landed cost'... take your hourly rate + 50% and it will give you a better estimate for your overall labor costs. Without knowing more about the business the expenses don't seem too out of line. Rent in the Midwest is around $20/sq ft per year. My best advise it know every possible cost... and build your own plan.

 

[jval81]

This is difficult to answer; every scenario is different. Typically your food cost should be at around 25%, and COGS shouldn't be more than 35%, hopefully under 30% in a very efficient store. So just take your projected sales and multiply by the high end of those ranges.