Investors have to know their beans
THE great Australian dream of owning your own pub has been replaced – these days, it’s about counting your beans and buying a coffee shop.
In fact, demand for coffee shops for sale on the Gold Coast is now so strong, it’s enabled local businessman Craig Louw to turn his lifelong love of coffee and cafe society into a niche market boutique brokerage, The Coffee Shop Brokers.
Mr Louw helps clients buy and sell coffee shops of all shapes and sizes from Noosa to Tweed Heads, working from his laptop over a latte at cafes that serve as his mobile office, including Blackboard Coffee at Varsity Lakes and Miami’s Niche Espresso.
“Australians love their coffee so it’s no surprise that many dream about running their own coffee shop,” he said. “I’ve sold a lot to people in the UK who want to live their dream – running a coffee shop in Australia.
“People from Sydney and Melbourne are selling up to come up here and buy an apartment and a coffee shop. Then there are a lot of locals – people sick and tired of the commute to Brisbane who would rather live locally and use their finances to buy a coffee shop.”
Founded almost three years ago, The Coffee Shop Brokers’s focus on the bean scene allows it to attract clients specifically looking to invest in coffee shops.
“Last year we sold 52 coffee shops, predominantly on the northern part of the Gold Coast – our biggest clientele,” he said. “In the last seven days I’ve sold six coffee shops – five on the Coast and one in Brisbane.”
While the businesses sell for anywhere from $5000 to more than $250,000, some of the smallest are sometimes the most profitable especially once the cost of rent, length of leases and other overheads are factored in.
“Generally, $1000 a week clear profit will allow you to get a $100,000 asking price but then again, you get the seller who says ‘I need X amount of money even though I know it’s only worth so much’ or people who are ill or have had a family breakup and want an urgent sale,” Mr Louw said.
“People think the bigger it is, the more money I’m going to make, but some of the small coffee shops might sell 59kg (of beans) a week while the big ones are selling 25kg a week with a bigger overhead.
“Someone could pay $2500 in rent in James St in Burleigh and then someone in Tugun has a landlord happy with $500 week.
“It’s a case-by-case basis. Coffee shop turnovers are all different.”
Mr Louw said coffee shops typically had a multiplier between 1.5 and 2.5.
“The better the cafe is, the higher the multiple,” he said.
“The longer the lease, growth opportunities, customer base, position, social media marketing results in a higher multiple.” Mr Louw said changing the beans used in a shop’s brew was one of the biggest mistakes made by new owners.
“Small niche market roasteries have been popping up and coffee shops are embracing those roasteries and selling signature beans,” he said.
“The turnover is there based on the food and the coffee. The new owners change the beans because they can get them for $4 a kilo cheaper and the locals go somewhere else.
“It’s like changing the whiskey or beer in a pub. You don’t change what’s creating the revenue.”
Mr Louw said owning a coffee shop was more challenging than buyers thought.
“If you buy a coffee shop you need people skills. If you’re not a social person, forget it,” he said.
“It’s 6am early starts and when they close at 3pm people think the day ends but they’re still busy arranging stuff for the next day and sorting issues with staff and suppliers.”