Coffee Cafe Investment

[jonniebkk]

I have been presented with the opportunity to buy a newly established coffee shop cum cafe in Bangkok. It has been open for only a few months and is an in-house operation at a residential building. The investment is not large (less than B 1/2M) and is a turnkey operation. I have never owned a retail shop of any kind before, but do have extensive experience in the financial markets.

I was wondering if anyone would cared to share some thoughts on the metrics involved in making a success of such an operation? It is a small cafe - only 1-2 staff required and there is no onsite cooking involved. Just coffee drinks and baked items.

Thanks in advance. Also, if there is anyone reading this who is a consultant or has experience in the food service area (any ex-Starbucks managers bumming around Thailand at the moment) who would be interested in some paid consulting work reviewing the operation and its viability and offering operating advice, please PM to me.

Thank you.

Edited May 2, 2008 by jonniebkk

[LaoPo]

I have been presented with the opportunity to buy a newly established coffee shop cum cafe in Bangkok. It has been open for only a few months and is an in-house operation at a residential building. The investment is not large (less than B 1/2M) and is a turnkey operation. I have never owned a retail shop of any kind before, but do have extensive experience in the financial markets.

I was wondering if anyone would cared to share some thoughts on the metrics involved in making a success of such an operation? It is a small cafe - only 1-2 staff required and there is no onsite cooking involved. Just coffee drinks and baked items.

Thanks in advance. Also, if there is anyone reading this who is a consultant or has experience in the food service area (any ex-Starbucks managers bumming around Thailand at the moment) who would be interested in some paid consulting work reviewing the operation and its viability and offering operating advice, please PM to me.

Thank you.

1. Although 500K Baht is not too much I would be careful, because:

2. Not much turnover since it's residential; depends how many hundreds of people live there...

3. depend how many farang versus Thai residents; do Thai drink a lot of coffee/take away drinks ?

4. easy for staff to 'lift' money; 100% of turnover is cash.

5. headache....

LaoPo

[jonniebkk]

1. Although 500K Baht is not too much I would be careful, because:

2. Not much turnover since it's residential; depends how many hundreds of people live there...

3. depend how many farang versus Thai residents; do Thai drink a lot of coffee/take away drinks ?

4. easy for staff to 'lift' money; 100% of turnover is cash.

LaoPo

Thanks LaoPo for your input.

As to the investment, it is actually smaller than B 500k and deminimus for me. I don't need it to make much money...just a small profit or break even is fine for me. My primary motivation is to get off my duff and do something in Thailand. I would be the owner/investor but not actually work at the business (unless it became a little success and had 4 employees and qualified me for a WP - and still might just sit back and count my satangs). The cafe would be managed by my Thai GF (don't worry...have lived in Thailand for 10 years, have know her for over 4 years, and she is completing a business degree at a Bangkok uni).

The building is not too large...maybe 100 units and at least 50% farang. It is a very nice Thai apartment house...studios and 1 BRs that rent from about 10-20k month. Mostly students and farang teachers and some retirees.

You are right Thais don't drink much hot coffee (though even this is starting to change) but do love ice coffees and teas and "frappachino" type coffee and vanilla drinks.

[klikster]

I have been presented with the opportunity to buy a newly established coffee shop cum cafe in Bangkok. It has been open for only a few months and is an in-house operation at a residential building. The investment is not large (less than B 1/2M) and is a turnkey operation. I have never owned a retail shop of any kind before, but do have extensive experience in the financial markets.

I was wondering if anyone would cared to share some thoughts on the metrics involved in making a success of such an operation? It is a small cafe - only 1-2 staff required and there is no onsite cooking involved. Just coffee drinks and baked items.

Thanks in advance. Also, if there is anyone reading this who is a consultant or has experience in the food service area (any ex-Starbucks managers bumming around Thailand at the moment) who would be interested in some paid consulting work reviewing the operation and its viability and offering operating advice, please PM to me.

Thank you.

Are the baked products purchased outside. If in house, and you are near a subway or sky train station, the Thais often buy bakery sweets on the way to work.

[simcity]

Just few lines

You need to differential between you fix cost and variable cost!

Rent / power / insurance / staffs / food (backed purchases / coffee bean & milk) / accounting / uniform / repair & replacement /

Try to do a realist projection of how many customers you will be able to get a morning / lunch / afternoon

Be realistic too about how much they will spend a head !

Now you will have a clear idea if any profit can be made.

Think about your time

Where will you get the backed good?

Training of your staff

Supplier of the café machine and coffee bean

Are you in a busy area?

Café can be a good return; 1 kilo make 120 coffees cup (expresso)

Money can be made and money can be loose if no turn over !

most of my friends cafe drinker have a espresso machine at home : saeco / gaggia / rancillo

[simcity]

this link perhaps will interest you :

http://www.aasca.com/

[jonniebkk]

this link perhaps will interest you :

http://www.aasca.com/

Thanks...I'm checking it out now

[Irene]

Personally, I have yet to see any success with an in-house coffee shop or restaurant within a residential building or even in a gated housing development. This has been mainly due to a lack of demand since it is so near to your own kitchen, so why bother. Even in an office building, I have yet to note of any prosperity, forever seeing changing hand of ownership. I may miss something but please do tell us of a result of your venture. You could be an exception since 50% are farang residents.

[soundman]

Go into the shop for a day or two (surprise visit) and actually count what they are selling.

From there you will be able to get a rough idea of sales.

Think up all the forseeable expenses.

Product cost.

Rent.

Staff.

Utilities.

Tax etc.

Multiply this figure by two & deduct that from 75% of your sales estimate. If you have a positive balance - the business might be worth looking at.

Check the lease, check the lease, check the lease & check the lease.

Cheers,

Soundman.

PS. And make sure you can allocate enough money to open the doors for three months without a customer buying a thing as your "working capital".

You never know when the local administration office might just want to replace a drain pipe or whatever in front of your shop & leave you without access for extended periods of time.

[simcity]

What i think is lacking in many buildings, is a good concierge service.

Someone who can get the tradman in, receive delivery for the tenant, dry cleaner, feed the fish , water the plants, odd job !

reliable / honest ..

& you still can do the cafee shop as well.

[jonniebkk]

Very construction thoughts Irene, Soundman, and Sim...I had thought of some but not certainly not all of them.

It would be very easy for me to judge current sales as like you have suggested, I can easily sit in the lobby or garden area of the complex and observe the amount of traffic and even observe what and how much people are buying. Like I said, it is very small so overhead would quite small too. One concern, however, is that is is not directly near any foot traffic, being tucked in a side soi just off both Sukhumvit and soi 71 (On Nut). However, there is tons of foot traffic on these streets maybe 100 meters away so a little strategic sign placement and marketing might do wonders. It is definitely a popular area with with more farangs moving into this area as the Lotus is just up and across on Sukhumvit and the Carrefore on 71 just 5 minutes walk away. This is both a plus and minus as they both have coffee shops too but they are pang mak mak...Starbucks, 94 Cent, Black Canyon.

Soundman, thanks for the "back of the envelope" analysis of the business. Just a basic run-through like that would give an idea if there was any viability to the businesst! I do know the lease amount is B 15K per month but don't know it length or about renewals as I have not got that deep into the due diligence phase yet.

There is no danger of business interruption due to street construction as it is not directly on a public walkway or street. It is located within the apartment complex itself. Your ideas on working capital, of course, are the bare minimums. One additional foreseeable expenses would be any city license fees. Also, "tea money," if any, should be minimal as there is nothing shady about the business and hopefully, the pui yai who owns the complex has enough juice to keep all the police bloodsucking mosquitoes away from his property (for the very least for the reason that it effects his own cash flows if he can't keep a business in that space).

Sim, the idea of some sort of concerige (or maybe a post-office services) is a very good one and one I had not thought of. Also, it could be done at minimal extra expense. The building does have a lobby staffed during most of the day and I presume they accept package deliveries and will run small errands too if tipped but this would definitely be something to explore further.

Thanks again all.

Edited May 3, 2008 by jonniebkk

[Ubon9]

If you look around there is a lot of business for sale at same or less price,thats because they dont make any money,not even to pay the rent.To improve a business in a building block is impossible,They ask you 500.000 THB for what?

You better off going to Lotus and see if they got an empty space for rent and with 500.000 THB put up a small coffe shop,of course maybe the rent will be more expensive but you got the possibility of having a vaiable business.

Let it go.....Ubon9

Very construction thoughts Irene, Soundman, and Sim...I had thought of some but not certainly not all of them.

It would be very easy for me to judge current sales as like you have suggested, I can easily sit in the lobby or garden area of the complex and observe the amount of traffic and even observe what and how much people are buying. Like I said, it is very small so overhead would quite small too. One concern, however, is that is is not directly near any foot traffic, being tucked in a side soi just off both Sukhumvit and soi 71 (On Nut). However, there is tons of foot traffic on these streets maybe 100 meters away so a little strategic sign placement and marketing might do wonders. It is definitely a popular area with with more farangs moving into this area as the Lotus is just up and across on Sukhumvit and the Carrefore on 71 just 5 minutes walk away. This is both a plus and minus as they both have coffee shops too but they are pang mak mak...Starbucks, 94 Cent, Black Canyon.

Soundman, thanks for the "back of the envelope" analysis of the business. Just a basic run-through like that would give an idea if there was any viability to the businesst! I do know the lease amount is B 15K per month but don't know it length or about renewals as I have not got that deep into the due diligence phase yet.

There is no danger of business interruption due to street construction as it is not directly on a public walkway or street. It is located within the apartment complex itself. Your ideas on working capital, of course, are the bare minimums. One additional foreseeable expenses would be any city license fees. Also, "tea money," if any, should be minimal as there is nothing shady about the business and hopefully, the pui yai who owns the complex has enough juice to keep all the police bloodsucking mosquitoes away from his property (for the very least for the reason that it effects his own cash flows if he can't keep a business in that space).

Sim, the idea of some sort of concerige (or maybe a post-office services) is a very good one and one I had not thought of. Also, it could be done at minimal extra expense. The building does have a lobby staffed during most of the day and I presume they accept package deliveries and will run small errands too if tipped but this would definitely be something to explore further.

Thanks again all.

[LaoPo]

One concern, however, is that is is not directly near any foot traffic, being tucked in a side soi just off both Sukhumvit and soi 71 (On Nut). However, there is tons of foot traffic on these streets maybe 100 meters away so a little strategic sign placement and marketing might do wonders.

Sorry, but..forget about drawing clients with strategic signing as 100 meters is a long way and actually it's 200 meters....up and down, especially if it's hot and humid. People are lazy and want to go in an A/C shop/building where they see it..not if they have to walk or look for it.

The idea is good but if you want to do it, opt for a good top location. You need human traffic..traffic and traffic, 24/7.

Sure you pay higher rent but you've always people with a lot higher turnover.

I like the idea of a concierge service but to extend it to many other apartment buildings.

So: start a training facility, training guys/women and design a special kind of uniform/dress like the concierge guys in the 5 star hotels.

Than start a kind of delivery service for apartment buildings, meaning, contact the apartment builders/owners or groups of owners and offer them a concierge service 24/7 for a certain amount per week/month per client.

Good business and if tenants, not having the service yet, hear and see the service is top quality they will want to book the service as well.

Small investment with good profits.

LaoPo

[simcity]

Many posts are so true:

Small at it is, you will lose money if turnover is not adequate, just coffee, people will not walk 2 minutes for it.

Perhaps few tenants, but everyone have a facility in room for a Nescafe, and someone who like better perhaps will not go to your shop.

Give service to customers, something they want!

Near my place, I have a export frozen place, I get from them sometime good product, micro wave is all need it!

Many products are without MSG and natural, prices are very good, they wholesale generally & it is cheaper as lotus / Carrefour.

Get a commercial freezer & have this facility for the tenants.

Get some products difficult to find at normal shops: avocadoes from chiangmai / berries & do promotion / special price!

[LaoPo]

A business partner of mine (may he RIP) once had the opportunity to either rent a beautiful shop in an off street, but quite chique, OR a shop in the busiest -walking- street of the city. He chose the latter and the shop became extremely successful and profitable.

Why ? because he had people...people...people and buyers, buyers buyers..which he would NEVER EVER have had in the chique street.

The rent was much higher but his turnover was gigantic. He sold the cheaper kind of stuff.

Of course, if you have an upmarket product like an Italian designer like Armani you're better off in a chique street or shopping mall but not for a coffee shop.

LaoPo

[johnnyk]

100+ metres down a small soi and there are major coffee chains at Sukhumvhit... why in hel_l would anyone go that far out of their way to this place?

If they don't find what they are looking for then they have to turn around and walk back. A treat in the BKK heat.

But a sandwich board out on Suk might be the marketing brainstorm that we are missing here, not to mention the saving of 10 baht compared to Black Canyon, Starfuc_ks and 94 Cent.

Location, location, location. The rest is just coffee.

[steveromagnino]

In my old job we had a cafe concept in an upmarket condo complex with a similar number of units and also probably 50% farang tenants (about 75% Thai owners).

A few observations, for what it is worth.

You could assume that something like 1/2 the units never drink coffee, and of the remainder, perhaps 1/2 will drink a cup every couple of days, and 1/2 will drink like a cup once a week. That is pretty optimistic, but there you have it.

Doing the numbers, would seem unless you have 500+ units, it would never work unless you also sell food and do room service. Which is what we did. And we also aimed to make it a destination branded restuarant using an established operator who needed to expand. You cannot make money from the units alone unless we are talking 500+ units in a complex almost fully occupied, like an LPN developmnt for instance...and even then the money will be in doing lots of things.

No point in undercutting Starbucks, Coffee World etc; there are few farang who think these places are too expensive that will therefore drink your coffee; those cheapskates are busy drinking their Birdy 3 in 1 crouched over their 14 inch telly with the fan on saving every penny they have for a night out at the Thermae. There are, however, MANY farang that will tell you starbucks is lousy coffee and would be willing to pay the same or more for a better cup, but in that case you BETTER have ambiance for them to enjoy; I'm thinking Starbucks Langsuan for instance. Bad coffee, but nice ambiance.

The idea of a concierge is a nice one, but Onnut is a mid market area; people Thai people aren't going to pay for something they can get themselves easily enough. The concierge concept works and is used in upmarket developments as a selling point - Sansiri, Sukhothai that sort of place.

100m, there is not a chance in hel_l I would walk 100m unless you have a pretty special ambiance. And I'll drive. If you have parking.

Most non branded coffee places don't succeed because they look and feel cheap and rubbish. Coffee is a nice little everyday luxury, if you cannot package it as this, then forget it.

Incidentally, take a look on the street, probably there is a coffee vendor already operating using BMA land in the neardby area (or would be if there is money in it). If you can run a lower cost structure than (assumed) 500b rent per day, everything else variable cost excluding depreciation, then I am impressed. And Thai people generally are happy to buy at such a place no problem if the coffee tastes ok; usually priced around 1/2 the price (or less) of Star bucks etc.

[disgruntled]

At my school there are 5 UFM bakery coffee shops and five 7eleven's not to mention other shops selling coffee from 15 baht for the cheap stuff up to 40baht or so. They also have a lot of yammazaki style bakery stuff going from 10 to 30 baht a piece. The students spend. University students are leading the way with all the coffee and bakery stuff. Try one of the campuses that are growing by the day where the better students from wealthier families go. Bangkok University, Thammasat, Burapa have new growing campuses. Actually there are a lot more place to look around Bangkok and in Thailand. It's true that a lot of sellers don't make money but those with good locations and quality products can do well.

As you investigate, if you are pretty good at Thai don't be afraid to ask the counter staff what they sell per day. Most of the workers at chain shops just do their job. They'll tell you how much runs through their register with small talk.

[LaoPo]

At my school there are 5 UFM bakery coffee shops and five 7eleven's not to mention other shops selling coffee from 15 baht for the cheap stuff up to 40baht or so. They also have a lot of yammazaki style bakery stuff going from 10 to 30 baht a piece. The students spend. University students are leading the way with all the coffee and bakery stuff. Try one of the campuses that are growing by the day where the better students from wealthier families go. Bangkok University, Thammasat, Burapa have new growing campuses. Actually there are a lot more place to look around Bangkok and in Thailand. It's true that a lot of sellers don't make money but those with good locations and quality products can do well.

As you investigate, if you are pretty good at Thai don't be afraid to ask the counter staff what they sell per day. Most of the workers at chain shops just do their job. They'll tell you how much runs through their register with small talk.

You hit the nail on the head !

If I would to do business there I would open a top-of-the-bill outlet and completely different than anybody else. A bit of a pub-, warm (but A/C of course) and cozy style with many international news papers, magazines about fashion and gadget magazines...dozens of them. Have FREE wireless Internet installed and a few, also free access computers with Internet.

Also TV screens with MTV and Sports.

Offer top quality sandwiches, coffee and drinks only and Thai style bakery stuff as 'disgruntled' mentioned. Train your staff to be friendly, friendly and friendly with the famous Thai style smile; hire students (for students) to make an extra buck.

The moment they approach a client (student) have them tell the Client: "Hello, my name is .....what can I do for you?" (In Thai of course).

Give the clients service, service and service and once the drink is finished: "May I bring you a new one ?"

You will have a top shop.

Call it: Cafe & Coffee

LaoPo

[Digger]

That last post sounds very similar to what Delibean have started in Pattaya. Maybe you should chat with the owner - he is farang but I forget his name - he is rarely in the shop but it seems to work fine without him. Last time I spoke to him he said they are expanding to 5 oulets in Pattaya - second being in Naklua and then Jomtien. No idea if its profitable but I suspect it must be as that store has been there for 3 years at least. Something about it makes it work - cant put my finger on it but it does.

[LaoPo]

That last post sounds very similar to what Delibean have started in Pattaya. Maybe you should chat with the owner - he is farang but I forget his name - he is rarely in the shop but it seems to work fine without him. Last time I spoke to him he said they are expanding to 5 oulets in Pattaya - second being in Naklua and then Jomtien. No idea if its profitable but I suspect it must be as that store has been there for 3 years at least. Something about it makes it work - cant put my finger on it but it does.

Yes, more or less; didn't know about them but it looks very good.

http://www.delibeanthailand.com/home.html

LaoPo

[burman]

unless it became a little success and had 4 employees and qualified me for a WP

Not much to add ( it is 3am!) but thought I would mention, you don't need 4 employees to qualify for a WP.

[steveromagnino]

If I would to do business there I would open a top-of-the-bill outlet and completely different than anybody else. A bit of a pub-, warm (but A/C of course) and cozy style with many international news papers, magazines about fashion and gadget magazines...dozens of them. Have FREE wireless Internet installed and a few, also free access computers with Internet.

Also TV screens with MTV and Sports.

Offer top quality sandwiches, coffee and drinks only and Thai style bakery stuff as 'disgruntled' mentioned. Train your staff to be friendly, friendly and friendly with the famous Thai style smile; hire students (for students) to make an extra buck.

The moment they approach a client (student) have them tell the Client: "Hello, my name is .....what can I do for you?" (In Thai of course).

Give the clients service, service and service and once the drink is finished: "May I bring you a new one ?"

Some good ideas; there are places doing almost every idea here already, but mostly not all in one place.

Service is a funny one; the idea of the American style 'I'm XXX, can i take your order'type service will fly as long as you have American customers or Thais who studied in the States; otherwise the rest of the world doesn't like that particular aspect too much (as it is a bit OTT) however all the rest is good. Upsell is ALWAYS good. Staff who know what they are doing. etc.

You'd be surprised what works service wise for students; be prepared to pay a decent wage otherwise they won't do it i.e. you are not going to get by with 200b a day + tips for anyone good at a guess!

However, it ncessarily won't work near a university, as most students already have their hang outs and it is a very price sensitive market.

Only problem with a format like this (speaking as the landlord renting premises to a business operator with a plan like this) would be concern that people would sit there all day talking rubbish, meeting friends, and no one would buy much.

That's why this concept will work best in a more upmarket environment as True Cafe etc have been doing already. But a slightly different spin on it could work....

That's not a 500k investment however; but the right location and service and so on as outlined above is what it will take to get a successful coffee business working here.

[johnnyk]

two more satang... 100 metres down the soi?

It will take a Thai 2 days to open up only 20 metres down the same soi and game over.

[katom]

Why do you think competition is bad?

Is there any kind of business in the world without competition?

and for the OP,if you're willing to put some hard work on the business live the business and ready for competition (as you want to open business means you are..).

Go for it.

[ralph444]

the metrics is the guy knows its a lousy investment. he needs help with his gf. i say give her an allowance, it would be cheapeer than buying an obvious moneyloser.

[bucklt]

two more satang... 100 metres down the soi?

It will take a Thai 2 days to open up only 20 metres down the same soi and game over.

Good point!

To paraphase that famous saying about the 3 most important things in having a good retail business:

1.Location

2.Location

3.Location.

Pick a better location - be prepared to pay more initially - but equally - earn more in the long-term.

Study where (and why) the 'Big Boys' have located their operations in certain areas - and learn from it.

Good Luck,

Bucklt

[Parvis]

I have been presented with the opportunity to buy a newly established coffee shop cum cafe in Bangkok. It has been open for only a few months and is an in-house operation at a residential building. The investment is not large (less than B 1/2M) and is a turnkey operation. I have never owned a retail shop of any kind before, but do have extensive experience in the financial markets.

I was wondering if anyone would cared to share some thoughts on the metrics involved in making a success of such an operation? It is a small cafe - only 1-2 staff required and there is no onsite cooking involved. Just coffee drinks and baked items.

Thanks in advance. Also, if there is anyone reading this who is a consultant or has experience in the food service area (any ex-Starbucks managers bumming around Thailand at the moment) who would be interested in some paid consulting work reviewing the operation and its viability and offering operating advice, please PM to me.

Thank you.

Is "Coffee" the only reason why one drinks "Coffee". I think it has more to do with the ability to sit down and watch people go by while sipping coffee.

[klikster]

Sell the sizzle, not the steak!

(60's concept)

[raro]

apart from all the "location, location" calls (which are absolutely valid!) make a spreadsheet with a calculation.....put in the variables and the fixes and play around with it. You will get very easy a feeling about how many units you have to sell to break even and how many to make a decent profit.