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Permalink Reply by Jon Mitchell on March 25, 2009 at 12:42pm

That's awesome Dan. What town are you in? Do you have a website?

Dan Dean said:

Jon, I wound up buying the building. I have a pretty jaded view of commercial landlords - we found many to be incredibly stubborn and unwilling to work with us. We have one of those small cramped places - but it has great character and people love it.
A lot has changed since we were in the hunt for space. I would have to think today the tables have turned a bit in your favor. From my jaded view point - I would do everything you can to get the landlord to give you many free months of rent while they build your space for you! My view of commercial real estate agents is only slightly better than that of landlords - but today - they should be tripping over themselves at the prospect of leasing space and should be willing to beat up a landlord pretty good on your behalf.
As far as our specific building - it is over 100 years old. We pretty much rebuilt it. Rebuilt part of the foundation, poured a basement floor with new footings, jacked the floor up three inches, installed new electrical, plumbing, heating, kitchen, bathroom. It was crazy as we had never done anything like that before.
We have been open just about 18 months. We average between 80 and 120 customers a day - well below the 200 I was hoping for - but the average ticket is a bit higher and we are getting by. And it is way more fun and rewarding than I had imagined. And someday - if it doesn't kill me in the process - I will own the thing :)


Jon Mitchell said:

Hey Dan, all good questions and some of them (construction related) I've already asked my self. Most of the spaces I've looked at that would be ideal for a coffee shop will require busting up concrete to put drain lines in. This is just something I've accepted. Who typically just walks into a situation where the space used to be a coffee shop?

I'd be interested to hear more about what you experienced and what you learned from turning your retail space into a restaurant space. Did the property owner help out with any of that expense? I'm under the belief that if improvements to an owners space is required, especially improvements that I can't take with me (plumbing, electrical) that that owner should be willing to put some money into that space or at the very least give me a huge break on rent until I can recover some of the costs of making upgrades to THEIR property.

Please elaborate on your experience when you have some time. I'd be very interested to learn from it. ==Thanks.

Dan Dean said:

Hey guys,

Not sure if you are done with this thread or not. But a couple of other things to consider. Check with your local Health Dept. about your plans. Can the rollup doors stay? - can you open them during biz hours without a screen of some sort? What about the cost of tearing up concrete inside to get drain lines to your counter? This can cost a lot and if you have to go any distance at all - it could destory a budget in a hurry. Are there other fees associated with the lease for insurance, taxes and maintenance? Were the current restooms used for the public? Do they meet all the codes for public restrooms - may have update costs there as well. One last thing - is how do you pay for all the construction? Another loan? - make sure you get a good handle on those costs and figure that into how many customers you will need a day. Just some more thoughts - things I didn't know about but found out renovating our small space from a retail setup to restaurant. Good luck and have fun!

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Permalink Reply by Bryan Wray on March 25, 2009 at 7:48pm

If you want opinions on a destination you have to be more specific about who you are trying to appeal to.

We ("The Strutt") are trying to appeal to college age "kids" so we started a music venue with a ton of Indie bands coming through. We are blessed to be halfway between Detroit and Chicago, which means we have a lot of touring acts coming through. We also decided that most of the bars in the area... well... sucked. They were all the same frat/sorority kids ordering the same Miller High Life, Bud Light, Coors crap and if they had music that wasn't pumping through a jukebox it was usually some cover band or karaoke or something... So we worked really, really, really hard on securing a liquor license. We spent a ton (more than 100grand) on renovations to prove to the liquor board that we really wanted to do this. We let them hold our hands as we went through all of the red tape, we pulled permits for things like putting up shelves, building wooden structures (the bar, etc)... it was ridiculous, but in the end it payed of in a huge way. We've brought in over 50 local microbrews and imports and promoted them like crazy. We would amp up when we were going to get a new beer in and have a big release day, it's been working great. We don't really promote cheap domestic beers, we don't have pool tables or TVs, and we don't have a lazer light show over-top of our dance floor (we don't have a dance floor) so that we can try to steer away from the "dudebro" crowd. Couple that with local independent acts and you have a killer college setting.

Why did I go into such detail on our business? We know EXACTLY who our audience is and we go straight to them. We blanket the local campuses with fliers. Every Wednesday, the college radio station brings in some of their DJ's and they host a WIDR (station name) Night. My point is... if you want to be a destination, you have to know WHO you want to be a destination for. And you have to understand that by being that crowd's destination you will probably be shutting out other crowds. We know that we aren't going to be getting the "Largelattesugar-freevanillahalf-calfsoyextrahotto-go" (you know who I mean) folks because they are going to feel really out of place, but we are okay with that. It's a market that we aren't really trying to go after so it works for us. That being said, there is a TON of money in that market that we know we aren't getting. People that are only 35 years old feel out of place here and that's just kind of how it is I guess.

Anyway, I think you know what I am getting at. Establish wholeheartedly who you want your audience to be and run straight at them. If you want suggestions on how to appeal to certain groups just post away on who you want to go after and (as I'm sure you can tell by now) you will get responses from us.

BTW, in Michigan you can't so much as open windows without having screens, let alone doors. Just figured I would throw that one out there...

-bry

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Permalink Reply by ray peck on March 29, 2009 at 7:10pm

A formula I saw one time was to figure that you need to generate 10X the rent. So $25000 month. Are sure sure the rent is only $2500 and not also triple net on top? Also figue $3.70 average sale.

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Permalink Reply by Jay Caragay on March 29, 2009 at 9:52pm

Is 3000 sq ft "too big"? Well, it depends on what you want to do.

For just a simple espresso bar/coffee shop, it could be. Add a roaster and a small kitchen and you're starting to fill up the space. While 3000 sq ft is considerable for a coffee shop, it's the bare minimum we're looking for to open a restaurant next year.

Is it too much? That's hard to say as well without knowing the going rate in the neighborhood. Their asking price is ten dollars per square foot - and if the shop were located in the neighborhood we're currently negotiating to open a coffee shop, we would have jumped on that price yesterday. However, your mileage will vary. Start checking around with local businesses and agencies to find out the going rate. I simply started going into spaces and talking with the owners and managers, asking them how business was doing, the problems of the neighborhood and the average rents for the area. I also spent time meeting with other landlords and seeing what they have to offer.

Bear in mind that the economy is going down, which means this could be an opportune time to negotiate a lease. Most people are bearish on the market and not willing to spend their money or open new businesses. Landlords with vacant (or soon to be vacant) spaces need to fill them and are being pushed into lowering their asking prices and being more "flexible" for negotiation. Use the market to your advantage. Ask for a reduction in the rate - the worst they can say is "no." One landlord dropped his asking price by twenty dollars per square foot when I told him the price he was asking was crazy and insulting.

2.5% sounds optimistic. Use a pessimistic figure of 1% and see how the numbers bear out. That's about 110 people per day - is that enough?

If I were you, I would follow the advice given here on trying to reduce the leased size and negotiate the rate. Watch out for yearly percentage increases, CAM fees and Triple Net leases.

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Permalink Reply by Jon Mitchell on March 30, 2009 at 6:26am

You think 2.5% sounds optimistic? Really? I thought that was being pretty conservative. Ok, I'll take that into consideration.

Jay Caragay said:

Is 3000 sq ft "too big"? Well, it depends on what you want to do.

For just a simple espresso bar/coffee shop, it could be. Add a roaster and a small kitchen and you're starting to fill up the space. While 3000 sq ft is considerable for a coffee shop, it's the bare minimum we're looking for to open a restaurant next year.

Is it too much? That's hard to say as well without knowing the going rate in the neighborhood. Their asking price is ten dollars per square foot - and if the shop were located in the neighborhood we're currently negotiating to open a coffee shop, we would have jumped on that price yesterday. However, your mileage will vary. Start checking around with local businesses and agencies to find out the going rate. I simply started going into spaces and talking with the owners and managers, asking them how business was doing, the problems of the neighborhood and the average rents for the area. I also spent time meeting with other landlords and seeing what they have to offer.

Bear in mind that the economy is going down, which means this could be an opportune time to negotiate a lease. Most people are bearish on the market and not willing to spend their money or open new businesses. Landlords with vacant (or soon to be vacant) spaces need to fill them and are being pushed into lowering their asking prices and being more "flexible" for negotiation. Use the market to your advantage. Ask for a reduction in the rate - the worst they can say is "no." One landlord dropped his asking price by twenty dollars per square foot when I told him the price he was asking was crazy and insulting.

2.5% sounds optimistic. Use a pessimistic figure of 1% and see how the numbers bear out. That's about 110 people per day - is that enough?

If I were you, I would follow the advice given here on trying to reduce the leased size and negotiate the rate. Watch out for yearly percentage increases, CAM fees and Triple Net leases.

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Permalink Reply by Greenway Barista on March 30, 2009 at 9:37am

<1000 square feet = ideal

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