I am looking for assistance and recommendations in making a decision. About 4 weeks ago my sister saw an ad for a Chocolate Candy store for sale for $45,000. The shop is 7 miles from my home and I'm thinking about turning it into a bakery.

It's 836 sq ft. and the rent is $1336 a month including taxes, maintenance and insurance. The store has been open for only 3 months. The owner is stating that she is really tired and has to work alot of hours, she was currently working out of her home. I don't think she's recouping her costs as planned. I think she has limited herself by just selling chocolate and not having a marketing plan.

With the sale she would include the following:
Convection Oven
2 Commercial Refrig. (1-Victory and 1-True)
Refrigerated bakery display case
2 display cases
4 compartment sink
underbar sink
Hand sink
prep table with sink
2 Chrome shelving units
3 wooden display shelves
Stainless Steel work table
Cooling Rack
security system
brand new hot water heater
2 tables an 4 chairs
Vendor and supply listing
Misc items

She's given me an itemized list of the equipment above which totals $17,500. Since she was intitally selling the business as a chocolate store this is why whe is asking for $45k. I contacted appraisers to see if they could conduct a business valuation but they said she hasn't had the store long enough. She doesn't really have a built clientele either.

I have spoken to other friends who are/have opened businesses and based on 1100+sq ft they paid $40k and over for the build out by itself.

By the way the store is in Atlanta, GA.

PLEASE HELP WITH MAKING A DEICISION.

2 months ago. a new coffee shop was for sale for $55k. The couple had done a lot of leasehold improvments,she got pregnant with 3rd child and opted to stay home. they were only open 6 months. I can share this..keep in mind that you are buying USED equipment and it should be priced as such. I offered them 26K and they accepted..but I realized I was not wanting all of that "coffee" equipment. And there was no goodwill to be had after only 6 months. My instinct told me not to buy it. I was in the loan process and everything. Plus with the rent and loan repayment for equipment that I would never have bought in the first place to open a bakery I would have been a long time before I started making money. Now I am renting a space for $475.00 and spending maybe $1,500.00 on reno.s.. Go with what you are comfortable with financially. I was stressed about having to sell alaot each month just to pay the rent,loan,utilities etc etc. Maybe offer to rent the space only if you don't need all of the equip. Hope this helps.

When you are buying a business (open 3 months or 5 years) you are not only buying the equipment but someone's sweat, love, hard work and tears. Walking into a fully functional and licensed business...being able to open the door the very next day....sounds like a steal to me! (well, provided it's the kind of business or can be the kind of business you want to run)

gee, if you had known about this ladies situation prior to her deciding to sell she may have rented you kitchen time to help with the bills. does she want a partner, not sure i would go it alone, you would also not make it on just cakes, you would have to have a bakery as you stated.

I'm thinking that $1,336 per month rent is extreme when the business is selling for $45K. That's a lot of cakes to make just to cover the rent. Have you checked into the cost of buying the place (including property taxes, insurance, ect.)?

Why would you be paying taxes on property that you do not own ? In Ohio, the owner of the building would be paying the taxes..... might be something to check out.......

I opened (a non-cake-related) business last year, and I tend to think that price is a little too much over the equipment, but we rented a new building, and here are some things we had to also pay for:
flooring
paint and labor (ours) to paint
lots of nit-picky little things to be food-safe inspected (caulking around fixtures, etc.)
signage (which you will have also assuming you change the name).

One of the main things you are buying is time. It took us a LOT of time to get the place from bare-bones to functional - including getting equipent, having all inspections (health dept, fire marshall, etc.). So while I think it's a little high, think about what you will use, what else you would have to buy and if you're ready to jump into this full time today. I'd then make her an offer based on the fact that you are not a chocolate shop and won't benefit from everything she's selling.

A good friend of mine bought a bar and grill about 10 years ago. She had a great deal of trouble finding financing for it, as the bar was a family-owned business, the owner was in her 80's of age husband passed away 15 years prior, and her children did not want any part of running it - therefore she let the business lapse since her husband's passing.

Income and location history are very important factors to consider when opening a new business, especially in the foods industry, where only 5% of new businesses survive the first year.

In a business such as this, you have to account for several things -

Income history - You have to see their credit and debit statements for the three months they were open. Were they turning a profit? If not, was it lack of experience, lack of ambition, or poor location that caused this?

How was their product? Did you ever patronize the location? Since your new business is also food-related, it will be effected by the success/failure of the former owners and their products.

Location History - Very important when opening a new business. What other businesses were in that location prior to the last, and why are they now gone?

Are there other businesses surrounding the one you are considering? Ask them about the current owners, their products, their business habits, etc. It sounds to me like they decided they did not want to be in business after all.

Inquire with both the owner and the surrounding neighbors, regarding the structural history of the building. What kinds of repairs and renovations were done in the past 10 years?

How much renovation will need to be done to accommodate your business? What type of electrical, gas, and water systems are required by local or state code enforcement, and does this building already meet your needs? And what about zoning? A city or township which allows a coffee shop at that location may not allow a bakery there (you would be surprised what a city or town will dictate about what types of businesses go where in their area!). Will they require cement flooring or fire-proof ceilings to be installed?

When was the roof last repaired? Will you need a stove, and must it be vented (that, alone, is $10,000!).

Get all the information on the bottom line of what you have and what needs to be done before you jump into this.

Theresa

i guess i would bid lower then the 45k. start that way. but be prepared its going to take time and money to build it up. a business here closed after 11 months. she spent all her money and didnt make it. but they didnt have a good business plan. i think they just assumed things would be great.

does this person own the building? otherwise talk to the landlord if you havent yet.

keep us informed.

Wow, I never new there was so much involved into opening up your own buisness!

you could open a bakery and rent out part of your kitchen. You could keep the chocolates also just get someone to make them. You could put a small cafe' for breakfast and lunch. You could get other people to come in and work for you to cover the cost of rent. I have a bakery near me that does that. She is in the back and has just hired people to do everything else.

If you can afford it, good for you. If you are already doing that much business that could pay the rent, that's great. I wouldn't think a business is going to make a profit for a few months either.

I would recommend having a look at the foot traffic through that shopping centre maybe just go down there and hang around a bit at different days/times to see. Because you are changing the business to something different her sales may not represent yours but you do still need to be sure that it wasn't the location that was a problem.

There is an element of risk in every business purchase so you need to account for that. When we bought our restaurant the previous owner had two sets of books one for the taxman and one for himself. As far as we knew he could have pulled the figures from his "little black book" out of the air as he had no proof of them but we decided to take the risk and bought it because of its location (heaps of foot traffic we spend very little on advertising) and it was always busy everytime we went there or went past. We were lucky that everything worked out and we are doing well above his little black book figures now (although we do work hard at maintaining a successful business). In hindsight though I wish we had had pushed more on a lower price and I think your idea of offering a lower price and being prepared to walk away is a good one.

Good Luck with whatever you decide

p.s. if you do decide to go ahead maybe think about approaching the neighbouring restaurants with some wholesale products ie. cakes for desserts etc

When I opened my bakery 2 years ago, I had 1000sq ft. Last year, I added another 1000sq.ft. I think you really need to consider the sq. footage. I think it will not allow you any room to grow your business.

Spring

Just to put in my two cents, I am looking at a space to rent as well. There has never been a food business in this small plaza. But the building owners are so nice, and are willing to let us do what we need to make it workable.

I have a friend who does catering. She also wants to start a business, but we're two different licenses, two different inspections. So we've decided we're going to consider sharing kitchen space. We haven't signed a lease yet. We're doing our research first.

We both love this space. Its big (1000sq. ft.), its clean, its in a busy enough location, and the rent in unbelievable (only $800 mo.!) But we want to make sure we wont have to sink thousands into a unit that we don't own to make it a kitchen.

That said, I called dept. of ag. and an inspector is being kind enough to meet me at this place on friday to do a "pre-inspection". He'll tell me what changes I'm going to have to make to pass his inspection. At that point, my friend will call her inspectors and see if they will come out and do the same. I've spoken to the fire marshall, and he gave me a quick run down of what he expects. Dept. of Ag should be able to fill me in on the fire marshall's details. We also need to find out if our blueprints will have to be signed off by an architect or engineer since its never been a food establishment. Or maybe we can just draw our floor plan to scale ourselves. I'm not sure yet.

Once we have all our information, we can contact plumbers, electricians, etc. and see what their costs are going to be if we need them. Then we can decide if this is the right space for what we want.

There are so many hoops to jump through, so much red tape to untangle, and lets not forget all the catch 22's! This is definitely a learning experience for me.

In the meantime, I take my test next week for my food manager's certification. Wish me luck!

ldbaker, all I can say is do your homework, ask lots of questions even if you think they may be stupid questions, call people even if you think they may not have answers. they'll know someone who does, and they will probably tell you more stuff you need to know that you didn't know about already. If opening a business were easy, there would be alot more of them.

As far as your rent, it does sound high, and it may be more space than you need. I've seen some pretty small kitchens that are very successful. Also, consider the exposure. If its a really busy busy plaza, and there is not alot of competition in your area, are you prepared to handle alot of business? (Once you start hiring employees, its a whole other ball game with the tax man!) do you have an advertising plan to get your name out if you're in an off the beaten path location.

So much to think about, it goes on and on. I don't want to discourage you at all. I'm going through the hoops right now myself, and frankly, i'm a little scared, but optimistic at the same time.

Do open your business. Just consider where you're going to open it. Visit other bakeries, see how they're set up. The cake shops I've visited, they've all been very nice, very helpful, and I've even made a friend (hi johnniekake!)

Good luck to you, and keep us posted!

ldbaker - I just PM'd you! With what I hope is a welcomed proposal!

I'm just going to straight out say that based on what you've said, $45K is too much. If her equipment is only worth $18K, the difference isn't worth her blood, sweat and tears. If she had a reputable name, customer contracts to offer you, etc... maybe. But if she's only been in business for 3 months it is most likely she doesn't. She should have stayed in business longer to be paid for her... time.

Once you take over the shop, you will be putting in your own time, blood, sweat and tears trying to market your new business. Not her old one since it seems she doesn't really have any customers to offer you. Since she mainly sold chocolates and you will be selling cakes, you will be spending additional money to get that end of the business off the ground.

The rent also seems high per the square footage. Could be one reason she is working so many hours trying to make as much money as she can just to pay the rent.

I say low-ball her. It sounds like she is desperately trying to get out.