Does your new site tick all the boxes for a profitable, popular and saleable business?
You want to create a business that will be easy to sell in due course, because it’s easy to run and in a busy location. Plus affordable rent (now, not when you double the sales) and a good long lease. If you’re a cafe and have a choice, the sunny side of the street is preferable – people love sunshine in winter.
We checked with a planner and a lawyer, and they had plenty of good information. Sydney planner Jason Perica made five key points.
1. Trust your ability. Think ahead about success, and how much space your business will need. Places that have room for growth, storage or expansion are preferable. It’s costly to relocate and can disrupt goodwill, so locations that allow you to grow with success (or at least the possibility with negotiation) are best.
2. Know the requirements of the Council and find out the experiences of other similar businesses. Be prepared to have a trial period for a consent, as this is a common approach to licensed premises and later opening hours. Ask around, check online and do your research.
3. Seek consent for more hours than you initially need. Your first months will usually be quieter, and if there is a “trial” period of consent (common with local government authorities), you’re better off to ask for longer hours. This needs to be balanced against seeking terms that are unlikely to be considered. Also think about future licensing requirements.
4. Know your neighbourhood. Businesses that treat the locals as neighbours and not the enemy are more likely to succeed. Neighbours vote, and like to complain – businesses rarely do. Communication is important, and you need to understand concerns and respond to them, but not be held hostage by them. Councils generally do not have resources to pro-actively check compliance, so they usually just respond to complaints. Reduce the likelihood of complaints happening is a smart move – make friends from the beginning. Your locals can be very regular customers. Or not.
5. Have a good plan of management (for late trading and licensed premises). Being able to show you’ve got good management practices in place can reduce the likelihood of reduction in hours or other restrictive conditions. That means procedure manuals and systems – things you can show on paper, proving that this will be a well-run part of the community.
Sydney lawyer Peter Panagiotopoulos, the ‘cafe lawyer’ of Craft Legal, has seen many blunders in site selection – rent too high, lease terms too short or onerous, and the odds stacked in the landlord’s favour. Here’s his 3-Step Checklist:
Step 1 – Get down to basics. How big is the site? Does it include storage, car spaces, outdoor seating areas, a toilet? Can the space accommodate a coolroom, mechanical exhaust, grease trap and trade waste disposal? Does it have a fire rated ceiling? Are these things already there? What condition are they in? Do they need to be repaired or replaced? You need answers before you start talking price.
Step 2 – Occupation Costs. Forget rent, think in terms of total occupation cost. Occupation cost is the total cost to occupy the space for any given time. Whether its rent, water rates, council rates, land tax, license fees or marketing levies – it’s all money! What is the total cost to you and what proportion does it represent of your projected weekly takings?
Your business needs to be a profit-making machine. If it makes no profit you won’t last long and you’ve got nothing to sell. Figure out an occupancy cost that allows for plenty of profit. If the numbers don’t stack up, walk away. If you haven’t done your numbers, walk away.
Step 3 – Don’t Assume. If you are taking over a business you inherit the mistakes of the previous operator. Don’t assume the lease was properly negotiated or the site complies with the terms of the planning permission. Be suspicious and use a lawyer to dig for answers to the questions you didn’t know were important.