Leasing a Roadside Drive Thru Espresso Stand

[AlaskaAng]

Here is the situation. There is a drive up espresso stand that has come up for lease. The terms are $1K per month and includes the building and all of the equipment. Utilities are separate. The location is decent, one block of the main highway/street that goes through town, and although not right on the main drag, it is definitely visible from it.

There was one espresso business there for the past three years, and recently changed to a new one that has been there only for a month and a half. The reason it is now available is that the newest business owner has had a major family crises and cannot spend the time on a new business. Neither business owned the property or equipment, both leased. The customer base has changed somewhat as the baristas previously wore lingerie, and the new business owner did not want to continue with that. There are no financials available from the previous business. The new one has shared her average daily sales, and while modest they have been adequate to cover the lease expense and one part time employee, but it's only been a short time period.

If I were to lease the stand, it would be under my own business name, essentially a brand new identity. Assuming no issues in product quality, hours of operation, etc, is it reasonable for me to expect sales to continue to be enough to cover the basic expenses?

I own and operate a mobile food business which is seasonal, so I'm not new to business ownership or the food industry.

I will supplement my training on the operation/maintenance of the espresso equipment through a very good program here and have reliable help if needed. This will be a joint venture with my daughter who is an experienced barista. Is there anything else specific to operating an espresso stand versus other food service that I'm missing? Any red flags with leasing everything to start?

 

[dstrand]

A few questions;

• How long do you need to commit to on the lease?
  • What are the consequences if you break the lease early?
• What is traffic like? How many cars drive by per hour during busy and quiet times?
• You say that it's one block from the main hwy, but what side of the street is it on? If traffic is headed toward the hwy in the morning, but your shop is on the other side of the street, it will cost you sales.
• Can you get the first 2 - 3 months free on the lease, while you learn the business?
• Will the lessor be willing to take a cut of the profits, instead of a set amount of money each month?
• Really? The financials are missing from the previous business? Really? That's hard to swallow after just a couple of months. If the person you're doing business with doesn't have them, can you contact the previous owner/operator? that person may be able to provide some invaluable business intelligence about that particular location, particularly if s/he was able to make it work for 3 years vs. a month and a half.

Those are the first questions I came up with. Drive by traffic is good. Walk by is infinitely better. Still, it's possible to do quite will with a little stand, if you do your homework, and stack the deck in your favor.

Best of luck on your new venture,

 

[AlaskaAng]

The lease is only six months, so relatively low risk but getting a couple months free is probably not likely. We are going to try and negotiate a lower monthly amount, but they have been charging that for some time so not counting on it.

Traffic is good on the highway - and while it is technically a highway, it is a four lane road going through town with multiple stop lights. Businesses are only on one side of the road through town. There are railroad tracks and a lake on the opposite side. Getting in from either direction is easy, out less so if turning left because of the traffic, but there is a light two blocks down via side street. Because it sits back a bit, we will need to do some things to attract attention.

I went and talked to the current business owner and found out a bit more about the previous. There are several issues with the previous business. The owner was absent a lot during the last year, employees paid in cash out of the till daily, boyfriends and pets hanging out all day, poor product quality and so on. It is likely that the lingerie business model is the only thing that kept it going. She also left quite a few bills unpaid and no one seems to know where she is, so it is likely that she left the state. So even if available, I doubt the records would be very accurate or of much help.

Our area is still growing rapidly and the economy while not as robust as a few years ago, is not bad either. We also get a fair bit of tourism in the summer, though I'm not sure if will impact us much.

Thanks so much for your response and questions.

 

[CanadianBrian]

Hello and welcome AlaskaAng
I am always scared of a limited lease. Do you have an option to go longer spelled out in the lease? You put 6 months in of hard work to get it going and the owner sees this and kicks you out? That is my first stumbling block. How many people in the town? What is traffic count for different times of the day on the main road? Any other fast food restaurants in town. Coffee shops?
Brian

 

[MyMugsHalfFull]

I'm with Brian, a limited lease is a double edged sword.

On the one hand, as mentioned it's less risk if it doesn't work out, but let's stay positive and say it does. You have put in all the hard work, and then get the boot with nothing to show for it afterward.

The other points above are all valid as well. What's the competition like? What are their sales prices, how much coffee would you sell in an average day?

Another scary thing and makes me want to run for the exit, as was mentioned by a previous poster, is that there are NO financials available from the previous tenant? How do they expect to file taxes? You can get a tax break if you have a failed business venture (business costs, etc), so it's just really hard to believe they didn't keep any financial records. My guess is they didn't make anything worthwhile and don't want to blow their chance at leasing the place.

Talking to the person that was there for 3 and a half years prior (if at all possible) would be an ideal situation. Why did they leave? What was their business like? Etc etc.

 

[AlaskaAng]

Thank you for the input, it really helped make sure we were looking at all of the variables. We hashed it over for a few days and decided not to go for it. In the end, our time and resources will be better spent working to expand the current business and make it less seasonal.