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Permalink Reply by Jason on March 7, 2010 at 10:47am

Your post was really interesting and unique. I own Hampton Coffee Company in The Hamptons, although I grew up in Nassau County and was born at the hospital by your shop. I was really suprised to read your post. You have a lot going for you. I think we have some mutual customers that once tried to get us to work together. I would be interested in talking to you more about this over e-mail or in person if you are interested. I think I might have some good ideas for you. Good luck in any regards.

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Permalink Reply by Ron Ingber on March 8, 2010 at 8:06am

I see this as three separate (but related) financial areas:
Physical Move - There are so many college students needing work, either near your shop or your destination, that the cost of moving is insignificant. Figure 4 guys (strong backs) and a U-Haul truck for one long day (or even two days) and you still come in under $1000.
Build-Out - If you can't do the work yourself (or have construction buddies who need the work), ask the landlord to pick up the expense, with an appropriate increase in your monthly rent. A five year pay-back should be reasonable (based on the term of your lease).
Working Capital - How is this different than the working capital you have for your current business?

I am sure there are other cash expense, such as signage, printing (you can't beat VistaPrint) etc. but you should be able to get up and running relatively inexpensively.

BTW, I invested less than $10,000 to set up my entire cafe (yes, I do have a valid restaurant permit from our county health department in NYS) with used equipment in a building I already owned. This included a small (legal) kitchen (electric & plumbing updates), and public area (tables & chairs, counter, decor... etc.).

I'll be happy to talk with you off-line if I can be of help.

Ron, the Country Guy

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Permalink Reply by Alex Galt on March 10, 2010 at 10:33am

$10,000? That's pretty awesome. Mo'Joe, we're currently involved in a moving our coffeehouse/restaurant of 10 years down the street into a location three times the current size. Financing it was a bear. Most banks we talked to would not even consider loaning to a restaurant, there's a short list: restaurants, golf courses, and hair salons. We went through all of this last Summer, so the situation may have improved since then. Perhaps you'll have better luck. But we didn't move forward until we gave up on banks entirely. We got 2/3rds of our financing from the city, via a new market loan funded by the stimulus act. It's pretty awesome, extremely low interest... we just have to create jobs. Does NYC have an economic development department? I used to live in Brooklyn, and I can only imagine that if it does - it must be kind of insane. I'd check with those guys, if your location is in a targeted area there might be some programs that are useful. We borrowed the other third from the landlord and will pay back over five years. The upshot is that we are not beholden to any banks (once the last bits of our old build out loan from '99–which we've added on to once or twice) is paid off later this year. I don't like banks.

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Permalink Reply by Marshall Fuss on March 10, 2010 at 6:05pm

Landlords are increasingly becoming the finance source of last (sometimes first) resort. But, you have to demonstrate a track record that shows you are a safe investment. Be prepared to explain those "ongoing difficulties with our landlord" in a way that your new landlord will become sympathetic.

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Permalink Reply by Jason Shipley on March 11, 2010 at 8:07am

I don't know how you could move on that kind of budget. Are you planning on going in somewhere that was a restaurant before? If you're looking at a raw space even if you do all the work yourself I don't see how you could come in under 40-50K.

What kind of volume are you doing now vs what do you think you can do in the new space?

Will the difference in volume pay for any improvements within the original lease term?

How will the new shop be different or do you think it's solely your location?

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Permalink Reply by Coffee Dude on March 14, 2010 at 10:31am

Yeah I am from a Brooklyn cafe and live in Queens so what you are looking for is going to be tuff. Any sound invester will want to know the debt you left behind and how you are going to repay that. So come to the table honest. I know Mineola and followed your link that is a busy area so failing in that location will not look good. You said you found an area with more traffic but the area you were in was near a train station and winthrop so how much more traffic do you need. 3 years of expierence is nothing in this buisness so that also is not good on your record. In Brooklyn and Queens coffeehouses/cafes are a dime a dozen so moving from a location where you had no Coffeehouses for miles to an area where a coffeehouse/cafe is on every other block is not a good idea if you already failed somewhere else. 40-50K is highway robbery this must include your salary for the first six months so look to cut that out.

Sounds like you are like many other people that thought owning a cafe would be easy and fun then it failed but you are still chasing a dream. My advice is sell your equiment save your money get a job and when the economy comes around then look to start over. Investers will be easy to find at that point and you will have had plenty of time to learn from your mistakes. You can also get plenty of expierence working in other cafes and learn from their mistakes. again 3 years of expierence in a failed location does not look good for you.

But then again suckers are always out their.

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Permalink Reply by mo'joe on March 16, 2010 at 10:55am

This long ass post is a blanket reply to various comments, feel free to ask for more info if it's unclear...
wherever this ultimately goes, the experience in this case has proven the paramount importance of a properly written and executed commercial lease. I haven't thought of LL financing yet, though I have seen it mentioned before, i dunno how receptive they'd be b/c :

1. not dealing directly with LL but with prop. manager (prop. owner info probably to be found on nyc.gov website)
2. this is NY (not manhattan though), my opinion is that certain characteristics unique to the metro area--gentrification, foot-traffic, upward mobility--means deviation from real estate practices/trends common elsewhere.

as for the nature of ongoing difficulties, let me preface this by saying my LL is nearly 80, property in family since the stone ages, and is hands-on in terms of property management. my non-medical opinion is that he's at initial stage senility, or as our atty. described it "old man syndrome." Realizing such explanation would not curry too much favor with prospective landlords, I'll elaborate here if only for the benefit of this community, who understanding the intricacies of coffee/food/retail cafe, responses and feedback I respect and appreciate.
About 6 months after opening in '07, which coincided about when the economy hit the fan, the LL made an offer to sell us the property, which comprised of 2 commercial (us +1)+ 2 residential units either to us or a 3rd party we solicited (i.e landlord/partner).
The benefit gained in this, besides securing occupancy indefinitely and presumably a rent concession of some kind, would've been a rewritten lease and landlord relationship that ensured our status as primary tenant with total operational flexibility to maximize the leasehold however we saw fit. As it stood, existing lease prevented us from the following

1) having anything in the way of an open-mic in the evenings or, for that matter, playing music beyond 4:30-5PM at any volume above barely audible
2) obtaining a beer/wine license
3) using certain types of cooking devices, regardless of proper protection by ventilation and fire suppression, namely any type of gas range or deep fryer.

Bear with me, I'll explain....
1) & 2) go hand in hand and relate to the flows and types of visiter traffic encountered in the area. being a commuter hub and a medical professional area, while certainly subject to frequent rushes at key points during the day, follows a 9-5 routine. the typical customer could be characterized as "captive," meaning they're in the area solely because they need to be: for work, for a train, for a doctor or hospital. Which means they tend to be hurried and impatient (god-complex clock-worshipers, my lead barista once quipped). then at 5PM there's beeline to go home so by 6PM it's a ghost town.
holiday weeks, 3-day weekends, or most any other time when the 9-5 world isn't in session fare little better. Parking is generally difficult morning thru early evening, though it does lighten up somewhat after 6pm.
Still, if there's one sort of establishment thats busy if not busier in off-peak it's the bars, of which there's 2 on my block and several more in the area. their common denominator is music, which compliments the product to create the happy hour "destination" atmosphere in turn into happy revenue. Not that I sought to become a bar, conversely, it was an alternative destination to the bar, something in the way of a more intimate performance/gathering space, serving tapas/small plates, a couple of wines + some tap microbrews. Hosting musical events doesn't mandate booze, however from a revenue standpoint it's difficult imagining a group having more than 1 or 2 rounds of coffee/tea/etc the way they might've otherwise had 4-5 beers + some pub grub. Time of day figures also consistently indicated that 79% of total sales occurred before 5PM.
Booze or not, from the get-go in '07 music was severely curtailed on account of a lady living upstairs who had somehow thought a downtown apartment, above a commercial space, btwn a train station and busy hospital, meant it was quiet area. everything to appease her was tried, from keeping it to reasonable hours (before 10PM) only on Fridays, to inviting her, to offering to send her a movie. Nothing succeeded, so whenever she'd complain to LL, a year to year tenant paying 1/5 the rent, he'd side with her and hold our feet to the fire with lease requirement for soundproofing and insulation against objectionable noises and odors. I explored in good faith what it entailed and basically learned that 80 year-old spaces of this size, brick/wood construction, 1100 sq. ft, 11" drop ceiling, are not sound-proofed for any practical purpose, certainly not for less than 8-10k. Supposing I did want to invest in a non-removable improvement and she still wasn't happy? then what?
I'd imagine these 2 reasons alone demonstrate the virtue of buying the property, if not, then the fiasco involving (3 will hopefully make it abundantly clear that change needed to occur with respect to LL, either by quitting the lease (and moving) or buying the building.
although our kitchen/cooking area had all required ventilation/fire protection installed, it was originally setup for electric fixtures. The original business model anticipated that most non-beverage sales would be from pastries, bagels, etc. soon after opening, sales breakdowns indicated that food (sandwiches, burgers, breakfast grill) to beverage sales were about 50:50 and peaked during the hours of 12PM-3PM. also observed was how inefficient (and expensive ) electric fixtures were at handling a lunch rush. customers having 30 min lunch breaks tend to become impatient if they wait for more than 5 min for their order, any more than that makes it less and less likely that they'd be regular business. especially when the greasy-spoon around the corner could crank out a rush on their 5' grill.
realizing the need to upgrade, and we had existing gas service, I asked the LL if we could replace the electric with gas fixtures to improve the situation. his initial response was "no" to any gas cooking whatsoever. While he might've intended the lease to be written to support this position, the lease section defining "use of premises," which with respect to cooking reads: No "open-fire" or deep-fry cooking shall be permitted.
This language did not rule out the use of gas entirely. A gas flat-top grill is contained in a sealed cavity, thus not an open-flame. Despite offering documentation from the fire protection company, LL persisted for over a year in refusing to sign a plumbing permit authorizing the work, citing everything from the "souls" living in the apartment units to it not being permitted by the local municipality. all of which were a bunch of hog-wash, and after much back and forth btwn lawyers, he reluctantly signed the permit application.
I could run off another half-dz instances where his obstinate position amounted to "no you can't," when as his largest tenant, should've been "yes you can," but the malfunctioning landlord-tenant relationship is obvious.
Finally, after looking high and low for 2 yrs., during which time LL repeatedly encouraged and reiterated his willingness to sell and price sought as recently as Sept 09 (both to me, and in letters btwn our attory's), we found a suitable buyer, ready and able w/ cash in-hand, in Oct. '09 and put the party in contact w/ LL. LL informed that he was concluding another transaction @ another property and wouldn't be able to negotiate until finished. The back and forth continued through the holidays until some time in January when I was curtly informed by LL that he had changed his mind (not the first time, in this case and others) and would not be interested in selling, apparently due the capital gains tax liability. This development left me with the unpleasant decision to either pack it up and move or (not ashamed to admit that we owed him rent for Nov., Dec., and Jan.) throw more good money after bad money in this losing proposition. I could've gotten a "merchant cash advance" from our credit card processor to pay him the bulk of the arrears, however, he refused to even discuss a rent reduction, even though our rent p/sq. ft (lease was signed in March, '06, a very different economy than now) was nearly double current comparable commercial rents in the area.
Given this impossible situation, I started looking at other areas, and honing in on the metro area, I was surprised to learn that rents for the same size space were at least half of the present rent and that many LL were offering very attractive move-in concessions (6 months free rent being common). With this in mind, it seemed obvious that moving, provided the location was "right," would be best in the long term.
While very saddening, the fact that we had built up a good customer base from the 9-5ers--same people coming back day after day---and had managed to draw the attention of a NY Times food reviewer among some other local press, as well as refined our own capabilities and evolution of our model, suggest that this wasn't a fluke. Considering the obstacles we faced, troublesome LL, competition with numerous other food service establishments for the same 9-5 customers, among others, that we held out as long as we did attests to the type of operation we had going in terms of product, staff, and management. Heck, most of our customers were shocked to learn we were having such difficulties.
Though achieving the volume to justify the rent proved untenable, as owner-op, I can speak with certainty that cost of sales were in line with accepted best practices (18% beverage, 25-30% food).
Although not part of the original business model, I think it speaks to my adaptability in the face of shifting conditions that I also developed a secondary revenue source in the way of breakfast + lunch catering for pharmaceutical reps which comprised 10% of total sales. Some of the many "hats" I came to wear required quickly learning to proficiently cook my menu during a rush as well as prep out all our sauces, syrups dressings, and marinades for both the coffee area (mocha, vanilla, nut-syrups: almond, hazelnut) and the kitchen (all dressings, emulsions, sauces from scratch, including the mayo base). Our in-house, from scratch baking (cookies, scones, shortbreads, cheesecake, tartlets), which I managed to teach the hispanic dishwasher with maybe a 5th-grade education, is also worthy of mention. Not to say that I know it all either, as I'm always looking to learn.
Did we make any mistakes? Sure, I'd be lying to say we hadn't. but my core staff remains committed and ready to move given the go-ahead.
and while I admit 3 years experience in commercial food service isn't much, given what was required of me to stay afloat, working in some capacity for 7 days p/ week for that 3 years, while still distinguishing ourselves from the 5 other places just on our block also selling coffee/food, not to mention the nearby sbux and dunkin' donuts, that 3 years may be equivalent to at least double that time. In any event, that kind of commitment by me, especially when some original "partners" flaked out within a few months of opening, hardly assumes running my shop, as you say coffeedude, would be "fun and easy". And while it is true quality orientated coffee-shops are becoming a dime:dz in the metro area, we're not a one-trick-pony either considering the scope of our operation also encompassed a solid food and baking dynamic. As far debt, outside of the rent arrears to the LL (who can kiss me where the sun don't shine before he sees that), there isn't anything owed in terms of loans or such. This project was financed entirely by myself with the help of family and one other partner (the who'd flaked out once the going got tough), and who while still a good friend currently has no involvement or equity interest.

Jason, to reply to your comments, here's a rough budget
Electrical trade 4000

plumbing trade (gas/drains/water)
4000
Cooking-hood/ventilation
6000
General Contractor
2500
Permits-Inspections
3000
Lease (1st/last/security)
10000
Starting Inventory
3000
Miscel (insurance, Beer, sidewalk licenses, refrigeration setup)
5000
Beer-tap, miscel fixtures
1500
Total
4000

To be sure, 15-20% over the estimated total, or about 47k total, covers the "unknowns" which always arise. Costs are based on previous buildout, which included demo work + occupancy change. I was g/c on buildout, pulled permits, purchased materials, coordinated with electric/plumbing trades, inspection walk thru, all-around "go-fer." A family friend and skilled carpenter/mechanical engineer was my foreman, who's also willing to lend a hand in the new location.
we're looking at a clean "vanilla box," water/sewer ready, ample gas service, 200-300amp 208/240v, 3/phase service, CoO for assembly occupancy, new store front, at least a 6 month rent concession + favorable long, renewable lease...

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