Buying a cafe & due diligence

Hi

My husband has an engineering/manufacturing business been in this for over 10 years.

First up I would look at:

1. Current lease on premises
2. Financials (minimum of 2 years)
3. Accountants contact details and access to everything.
4. Comprehensive details on equipment - how old, leased/owned outright
5. Number of staff, salaries, turnover


One concern I would have in the current climate in WA is how difficult it can be to find and retain good staff. I believe this is also case in South West area (hospitality industry). If your sons decide to bail out, how would you cope with this scenario?

What are the operating hours of the business? How many hours do the current owners work in the business, very important to know this.

Do the owners take holidays each year, (what period) and who manages the business during this time?

Who maintains the accounts, book keeper? They maintain their own?

Is the food pre-prepared? Can this standard be maintained.

How did the current owner come to the current asking price?? What is the breakdown

Do they employ casual staff during peak season?

How long has the business been operating, and who does it service?

Who is your competition, and is the cafe well located?

Look at the layout of the cafe, make sure it is not too small, this can kill a business.



All the best

Cheers, AL

Probably the initial questions I'd be asking are:

- Do your sons have any experience working in hospitality, especially in a managerial/ordering role? Working at McDonalds doesn't count.
- When the current owners leave, will they be able to maintain the current standard? How are they going to do this?

There are jillions of cafes all over the place and if a business doesn't maintain a standard that it's customers expect, they'll just go next door to the next guy. When it comes to hospitality, the consumer is VERY spoilt for choice.

Mark

Edit: I just remembered that I had a very brief conversation once with a friend who was thinking of setting up a hospitality business. It went a little something like this:

Friend: Do you think it would be a good idea for me to start up a cafe?
Me: No.

End of conversation.

Its bee a very interesting thread and ive learnt alot from it, it was only yesterday when i was at a cafe i thought to myself, this would be great to buy! busy as hell, great atmosphere, happy staff, what more could you want?

After reading through the finer details all of you have mentioned, there really is alot more involved in the business side of things, and i have taken it all on board myself. You wont ever know unless you ask the questions so of course your best off to go over everything in detail and be comfortable with the decisions your making.

the biggest question there that i find hardest to face is - what procedure will you put in place if your sons bail out? you fall ill, customers dont start coming in etc..? Of course all the benefits are there if things run smoothly, but coming to terms with the downside of the plan will take alot of consideration indeed.

I wish you luck with whatever you decide though!