Friday, February 29, 2008
Certificate of Completion
My certificate of completion arrived from Holmesglen Institute of TAFE for the Food Safety Supervisor program I completed last weekend. It's only a 'Completion', in order to properly qualify and 'attain' my certificate I have to be assessed in the workplace - basically the lecturer comes out and checks you in the real world setting. Obviously a bit hard if you don't have a cafe yet, but apparently it's fine to open the cafe, then call them to come and do the assessment after a few weeks. There's another fee for the assessment - $225.
Tuesday, February 26, 2008
Chasing agents
Chased the agent this morning for the Albert Park premises. Says he'll chase up the key and get back to me.
Monday, February 25, 2008
Neat tea strainer
Saw this in the weekend papers. Bit pricey maybe ($18) but is individual - and might make a nice way of presenting a cup of tea for a customer.
Saturday, February 23, 2008
Off to training
Off to training today, for my Food Safety Supervisor course. It's a one-dayer at Holmesglen Institute of TAFE. Today is the classroom component, finish that and I receive a certificate of attainment, but to officially complete and pass, I have to be assessed in the workplace. But that can happen once we are open. The FSS is essential - you can't open a cafe without a Food Safety Program, and a nominated FSS who takes responsibility for implementing and monitoring the FSS.
My Statement of Attainment arrived the other day for the 'Apply Basic Food Safety' course I did a few weeks ago!
My Statement of Attainment arrived the other day for the 'Apply Basic Food Safety' course I did a few weeks ago!
Friday, February 22, 2008
Positive meeting at the bank
Had a great hour with the bank manager this morning. He told us again that the power point and financials we'd emailed over earlier this week were exactly what the doctor ordered. To his credit, he also mentioned at least one example of a client wanting to open a cafe and being knocked back by the bank's credit department. So our banker is quite correctly endeavouring to manage our expectations, by ensuring we understand there is no such thing as a 'given' when it comes to banks and credit.
However, he re-iterated his intent of personally handing our application to the credit manager - if necessary he'll book a 30 minute appointment and sit down and run through the proposal in person. This is obviously significantly good - instead of our application just coming up on the credit boss' computer screen, along with dozens of others, we'll have an advocate staring him (her?) in the eye. Can't ask for more.
We're hoping for a decision next week. That would be brilliant.
However, he re-iterated his intent of personally handing our application to the credit manager - if necessary he'll book a 30 minute appointment and sit down and run through the proposal in person. This is obviously significantly good - instead of our application just coming up on the credit boss' computer screen, along with dozens of others, we'll have an advocate staring him (her?) in the eye. Can't ask for more.
We're hoping for a decision next week. That would be brilliant.
Tuesday, February 19, 2008
The bank likes the idea
Great email rolled in just now from our business banker, to whom we sent the Power Point this morning:
"I love the Powerpoint. Well Done!! This is exactly what I meant when I described it to you and the cash flows are spot on. Looks great!!"
Plus some other nice comments. We're going to tee up a meeting, hopefully for Friday.
"I love the Powerpoint. Well Done!! This is exactly what I meant when I described it to you and the cash flows are spot on. Looks great!!"
Plus some other nice comments. We're going to tee up a meeting, hopefully for Friday.
All Hail PowerPoint
J came over yesterday afternoon with the various visual ideas he's been working on, it's a mix of mood boards and simple water colours. All in all the results provide a useful visual prompt card for our ideas. There are magazine cutouts of furniture, lighting and other fitout thoughts, along with a couple of watercolour paintings giving the general palette and feel.
The task now is to meld these into the Power Point presentation and get it off to the bank, which we'll do today.
We've also tidied up the financials, including full fitout budgets for the two cafes, and cash flows for the first two years, showing capital requirements, operating income/expense, cash etc. I think the structure works fine - eg the relationship between the numbers, the ratios and so on. Even if the actual numbers fluctuate, the budget should retain its shape fine. The numbers show that with a couple of cafes up and running, we should be doing ok. The 4 cafes gives us the scaling benefits, and an aggregate EBIT that's pretty acceptable, providing we can hit the targets.
Here's the Power Point, albeit with the financial summaries removed. I won't post the full financials either. Perhaps there is some mystery we should maintain.
The task now is to meld these into the Power Point presentation and get it off to the bank, which we'll do today.
We've also tidied up the financials, including full fitout budgets for the two cafes, and cash flows for the first two years, showing capital requirements, operating income/expense, cash etc. I think the structure works fine - eg the relationship between the numbers, the ratios and so on. Even if the actual numbers fluctuate, the budget should retain its shape fine. The numbers show that with a couple of cafes up and running, we should be doing ok. The 4 cafes gives us the scaling benefits, and an aggregate EBIT that's pretty acceptable, providing we can hit the targets.
Here's the Power Point, albeit with the financial summaries removed. I won't post the full financials either. Perhaps there is some mystery we should maintain.
Sunday, February 17, 2008
Notes to self
- Re-work the theme/mood boards, pull some stuff together and get it into the powerpoint, and over to the bank manager, need feedback on how we are looking
- Chase agent for greenfields cafe #1 - still have not heard back from him about the key he was trying to get so we can do an inspection
- Talk to agent for existing cafe #2 - think we better put him out of his misery that we're not going to review our offer.
Key issue now is to get the bank to approve finance this coming week, so we can get on with lease negotiations. Plus hopefully get a proposal from the architects and thus continue to firm up the budget.
- Chase agent for greenfields cafe #1 - still have not heard back from him about the key he was trying to get so we can do an inspection
- Talk to agent for existing cafe #2 - think we better put him out of his misery that we're not going to review our offer.
Key issue now is to get the bank to approve finance this coming week, so we can get on with lease negotiations. Plus hopefully get a proposal from the architects and thus continue to firm up the budget.
Thursday, February 14, 2008
Agents work all hours
Had a call at 8.30pm last night. Let it go to voicemail, we'd only got back 5 minutes before from seeing our daughter in ICU after her heart surgery. It was the agent for one of the cafes we've made an offer to buy. He faxed me a basic P&L statement for the three months to end December the other day after I made it clear a while back that we would not consider reviewing our offer without more financial documentation.
I told him we weren't in a position to do anything while our daughter was in hospital.
The P&L is only of limited use. I don't know for sure, but it feels just a fraction contrived. The revenue is almost exactly the sum of three months of the admitted weekly takings. I can't quite get the rent to line up with the previously advised amount. And there's an expense line called 'tax office expense', which is pretty odd, given tax payments are balance sheet not P&L issues. Either someone doesn't understand the most basic accounting and they really are paying tax; or someone doesn't understand the most basic accounting and they've whacked an amount in to make it look like they're paying tax.
Even more curious, the 'tax office payment' doesn't make sense in context of the revenue. If it's supposed to be their GST payments then it should be approximately 10% of their GST applicable revenue. Which they've kindly documented by splitting revenue into 'sales' and 'sales non GST'. The 'tax expense' is 1/5th of the GST that would be liable based on their professed revenue. The P&L normally wouldn't of course have GST included at all, I'm only playing the numbers this way because of the 'tax office expense' line.
It's also a very small P&L - only a dozen expense lines or so. Which I always worry about. Real expense statements tend to have a bunch of lines to cover all the weird and wonderfuls that turn up in a business. Where's the good old 'miscellaneous'!
Of course there's also no staff expenses at all in the P&L. Which begs the question - how do they pay themselves? Or are they working for free? I suppose they could be waiting for end of the year to collect dividends but something tells me that we're back to the good old cash system.
I told him we weren't in a position to do anything while our daughter was in hospital.
The P&L is only of limited use. I don't know for sure, but it feels just a fraction contrived. The revenue is almost exactly the sum of three months of the admitted weekly takings. I can't quite get the rent to line up with the previously advised amount. And there's an expense line called 'tax office expense', which is pretty odd, given tax payments are balance sheet not P&L issues. Either someone doesn't understand the most basic accounting and they really are paying tax; or someone doesn't understand the most basic accounting and they've whacked an amount in to make it look like they're paying tax.
Even more curious, the 'tax office payment' doesn't make sense in context of the revenue. If it's supposed to be their GST payments then it should be approximately 10% of their GST applicable revenue. Which they've kindly documented by splitting revenue into 'sales' and 'sales non GST'. The 'tax expense' is 1/5th of the GST that would be liable based on their professed revenue. The P&L normally wouldn't of course have GST included at all, I'm only playing the numbers this way because of the 'tax office expense' line.
It's also a very small P&L - only a dozen expense lines or so. Which I always worry about. Real expense statements tend to have a bunch of lines to cover all the weird and wonderfuls that turn up in a business. Where's the good old 'miscellaneous'!
Of course there's also no staff expenses at all in the P&L. Which begs the question - how do they pay themselves? Or are they working for free? I suppose they could be waiting for end of the year to collect dividends but something tells me that we're back to the good old cash system.
Wednesday, February 13, 2008
Meeting the architects
We met with our friendly architect S and her colleague K this morning. Spent an hour talking through our ideas for the project. We're asking them to provide us with a fee proposal by early next week, and a scope of the services they would provide.
I think they might have been a little bemused when, in response to their query about design theme, I suggested a mix of coastal, contemporary, Gaudi, plus more!
They later emailed to ask about toilet availability - always amuses me, whenever I've worked on a building project invariably the most amount of time is devoted to debating toilets. A fundamental human need remains a constant anchor around many other decisions.
S and K also quite appropriately sought to clarify the roles everyone was playing. I made it clear they would be engaged for the design and documentation. J and us would be the clients, and provide substantial input.
The rest of this week will be devoted to life other than cafes - our daughter is having open heart surgery today and will be hospital for the next week. We'll just try and do the minimum on the cafes to keep things moving along.
Postscript: Our timing was immaculate. Within 2 hours of my meeting with the architects our daughter was being prepped for surgery.
I think they might have been a little bemused when, in response to their query about design theme, I suggested a mix of coastal, contemporary, Gaudi, plus more!
They later emailed to ask about toilet availability - always amuses me, whenever I've worked on a building project invariably the most amount of time is devoted to debating toilets. A fundamental human need remains a constant anchor around many other decisions.
S and K also quite appropriately sought to clarify the roles everyone was playing. I made it clear they would be engaged for the design and documentation. J and us would be the clients, and provide substantial input.
The rest of this week will be devoted to life other than cafes - our daughter is having open heart surgery today and will be hospital for the next week. We'll just try and do the minimum on the cafes to keep things moving along.
Postscript: Our timing was immaculate. Within 2 hours of my meeting with the architects our daughter was being prepped for surgery.
Tuesday, February 12, 2008
Software frustration
Lord, hours of frustration, reminding me why computers, software and the people who sell them are the cause of the statistics about the number of workers who wish grievious bodily harm on their PCs.
I had a copy of Home Designer tucked away (I bought it a while back to model up our lounge room during some interior renovations). I thought I might give it a try and model up the floor plan of green fields cafe #2, the one the agent sent a scale plan through for yesterday. I re-installed the software, and successfully imported the floor plan image and started to draw in the walls. Within 1 minute I was reaching for the help file. The cafe has several walls that are not nice clean right angles - the whole main room is not square. The software felt like it was 'snapping' to a grid, because I could not fine tune the wall angles, they 'clicked' from one position to the next, nothing like the fine control I needed.
Finally I found the reason in the Help - the walls only would snap around on a 7 or so degree grid. I jumped on Google, and found some others with the same problem, and a suggestion that we needed Home Designer 7.0 - which has an option to turn off the snapping. I had v6.0. So I bought and paid online for 7.0. Which took several hours to download for a 500Meg file (slow server their end presumably).
Finally 7.0 was installed, I fired up.... and hey presto, no option to turn off snapping. $US60 down the drain.
Back to Google, and finally I found some forum posts, including items from staff at the software company. Turning off snapping is only available in the Pro version ($US495 no thanks) or the Home Designer Suite 7.0 - for $US99. The 'Suite' of course is the same damn software but with a few extras thrown in.
I decided I wasn't the slight bit interested in giving this firm more money so took myself off to Harvey Norman and bought a copy of their main competition - Punch! Interior Design Suite. Three CDs and a 3Gb+ chunk of my hard drive later I was up and running.
It DOES let me fine tune walls. So I dived in and pretty soon had the basic floor plan organised. But as with my previous experience with this type of software I'm realising it ain't as easy as they like to make it look. I can see how I could spend literally days working up the design - the walls, floors etc are easy enough to position. But of course the actual textures I want aren't set up as standard. And non of the furniture is available because this is a domestic product intended for house design, not fitting out a cafe. At the end of the day almost certainly it will be easier and quicker if more expensive to simply ask the architects to work up interior visualisations.
I had a copy of Home Designer tucked away (I bought it a while back to model up our lounge room during some interior renovations). I thought I might give it a try and model up the floor plan of green fields cafe #2, the one the agent sent a scale plan through for yesterday. I re-installed the software, and successfully imported the floor plan image and started to draw in the walls. Within 1 minute I was reaching for the help file. The cafe has several walls that are not nice clean right angles - the whole main room is not square. The software felt like it was 'snapping' to a grid, because I could not fine tune the wall angles, they 'clicked' from one position to the next, nothing like the fine control I needed.
Finally I found the reason in the Help - the walls only would snap around on a 7 or so degree grid. I jumped on Google, and found some others with the same problem, and a suggestion that we needed Home Designer 7.0 - which has an option to turn off the snapping. I had v6.0. So I bought and paid online for 7.0. Which took several hours to download for a 500Meg file (slow server their end presumably).
Finally 7.0 was installed, I fired up.... and hey presto, no option to turn off snapping. $US60 down the drain.
Back to Google, and finally I found some forum posts, including items from staff at the software company. Turning off snapping is only available in the Pro version ($US495 no thanks) or the Home Designer Suite 7.0 - for $US99. The 'Suite' of course is the same damn software but with a few extras thrown in.
I decided I wasn't the slight bit interested in giving this firm more money so took myself off to Harvey Norman and bought a copy of their main competition - Punch! Interior Design Suite. Three CDs and a 3Gb+ chunk of my hard drive later I was up and running.
It DOES let me fine tune walls. So I dived in and pretty soon had the basic floor plan organised. But as with my previous experience with this type of software I'm realising it ain't as easy as they like to make it look. I can see how I could spend literally days working up the design - the walls, floors etc are easy enough to position. But of course the actual textures I want aren't set up as standard. And non of the furniture is available because this is a domestic product intended for house design, not fitting out a cafe. At the end of the day almost certainly it will be easier and quicker if more expensive to simply ask the architects to work up interior visualisations.
Monday, February 11, 2008
Visuals in progress
'J' came over this morning and we worked on the visuals, patching together ideas onto what I guess you might call mood boards. Plus he sat up late last night working up early watercolours for a couple of visualisations. The mood boards are essentially collages of ideas, using pictures from online, magazines and so on. For example:
I'm still trying to get the imagery squared off in my head. But that's possibly because we have significant distractions this week with our youngest child in hospital for heart surgery.
While on the design path, we've teed up a coffee with our friendly architect for this Wednesday. We're hoping she'll come on board - we're going to need scale technical plans for submission to the Council.
I've also excavated a neat home design program from the closet - allows you to draw scale plans, model rooms in 3D etc. It's designed basically an interior design CAD program for home use, but I'm keen to see if we can use it to create digital visualisations. One of the software's cool features is the ability to created animated 'fly throughs' - just perfect for convincing the bank manager. I have vague memories of de-installing the program in frustration after a short try at modelling our lounge room last year. I'll try and be more patient this time.
The agent for new site cafe #2 ('M') rang this morning while we were having a lunch break in the hospital garden. I told him we'd try and wrap up a decision this week, and it would be a big help if we could have scale floor plans. He kindly sent a PDF scale floor plan through. Only had a quick look, but should kick us off. I want to see if I can import the plan to the home design program and use it as a tracing template to then lay up the walls in the CAD system.
I'm still trying to get the imagery squared off in my head. But that's possibly because we have significant distractions this week with our youngest child in hospital for heart surgery.
While on the design path, we've teed up a coffee with our friendly architect for this Wednesday. We're hoping she'll come on board - we're going to need scale technical plans for submission to the Council.
I've also excavated a neat home design program from the closet - allows you to draw scale plans, model rooms in 3D etc. It's designed basically an interior design CAD program for home use, but I'm keen to see if we can use it to create digital visualisations. One of the software's cool features is the ability to created animated 'fly throughs' - just perfect for convincing the bank manager. I have vague memories of de-installing the program in frustration after a short try at modelling our lounge room last year. I'll try and be more patient this time.
The agent for new site cafe #2 ('M') rang this morning while we were having a lunch break in the hospital garden. I told him we'd try and wrap up a decision this week, and it would be a big help if we could have scale floor plans. He kindly sent a PDF scale floor plan through. Only had a quick look, but should kick us off. I want to see if I can import the plan to the home design program and use it as a tracing template to then lay up the walls in the CAD system.
Nice cafe
Had an email alert from one of the online business for sale sites, noticed this ad:
http://www.wollermann.com.au/list.php?id=2063&list%5Bcat%5D=162
Like the fitout, some nice ideas, and not dissimilar to us.
http://www.wollermann.com.au/list.php?id=2063&list%5Bcat%5D=162
Like the fitout, some nice ideas, and not dissimilar to us.
SOUTH YARRA: 10 kgs coffee per week, as new equipment, seats 12, courtyard 20. Well presented, cosy, nothing to spend. Good size kitchen, cafe complimented by a "walk through" car park to offices and retail stores. Room for further improvement.
Friday, February 8, 2008
Chasing the brokers
Last task today before the end of the week was to chase the two brokers for the two existing cafes we made offers on a week or so ago. Just to re-cap:
- We have made offers to purchase two existing cafes
- We are considering leasing two new shops (brand new concrete boxes)
Each of the above presents different challenges, and advantages/disadvantages. But we decided it was important to maintain concurrent strategies and investigate the possibilities of each pathway.
We faxed offers to the two brokers on Tuesday 29 Jan. Both rang that evening to say the offers would be too low (which we knew), and we responded that unless they came through with some realistic financials, we would not be reviewing our offers.
Didn't hear a thing since then. So I rang around late today. Broker #1 says owners want an amount around 2.5 times what we offered, but they won't supply any financials. Even the broker says he's told them this is a dumb position. I guess some mug might come along and buy the business, but it ain't going to be us. Pity, the location is great.
Broker #2 says the owner promised to drop P&Ls off today or tomorrow. He'll fax 'em over to us if and when they arrive.
Not very promising. Still maintain our amazement at the businesses practices prevalent in the small end of the cafe sector. When we sold our online company in 2006 we spent several months prepping the business for sale, including restructuring the corporate entities to create a 'clean' and tidy business. Much work went on documentation and so forth. We 'packaged' the business for sale as our advisors termed it. True, there was an investment required, and yes the deal size was many times larger than we're talking with these small cafes. But surely the same principles apply?
A well managed, well documented business is going to sell for a higher price, and quicker, than a poorly managed one with incomplete or unavailable documentation. These cafe owners cripple their wealth creation opportunity by taking a short term view about cash, record keeping and their attitude to potential buyers.
I've been pondering the motives. And unkind or uncharitable it might seem, for me it's all about expertise and experience. Some people make the effort to learn how to be competent in business. Some of them have a particular propensity or talent for business - and they'll fly even higher. But basic business practice is not hard. Or at least that's what I thought. I'm possibly having to change my mind. Maybe the harsh reality is there are a big bunch of people out there running businesses who you wouldn't put in charge of a race between two flies, let alone a retail outlet turning over several hundred thousand dollars a year.
If that's the truth, then there's an even scarier notion - if they're rubbish at business, just how good are their health and safety standards? Bear in mind, these people are directly responsible for your health. They sell you food, you eat the food. History is littered with an abundance of examples of poor food safety resulting in widespread illness - and death. The same people who can't manage their way out of a paperbag; who seem hell bent on avoiding selling their business (despite professing a desire to do so); who deliberately under-report their cash takings to avoid paying tax ---- are the ones making your lunch tomorrow. How's your stomach feeling now?
- We have made offers to purchase two existing cafes
- We are considering leasing two new shops (brand new concrete boxes)
Each of the above presents different challenges, and advantages/disadvantages. But we decided it was important to maintain concurrent strategies and investigate the possibilities of each pathway.
We faxed offers to the two brokers on Tuesday 29 Jan. Both rang that evening to say the offers would be too low (which we knew), and we responded that unless they came through with some realistic financials, we would not be reviewing our offers.
Didn't hear a thing since then. So I rang around late today. Broker #1 says owners want an amount around 2.5 times what we offered, but they won't supply any financials. Even the broker says he's told them this is a dumb position. I guess some mug might come along and buy the business, but it ain't going to be us. Pity, the location is great.
Broker #2 says the owner promised to drop P&Ls off today or tomorrow. He'll fax 'em over to us if and when they arrive.
Not very promising. Still maintain our amazement at the businesses practices prevalent in the small end of the cafe sector. When we sold our online company in 2006 we spent several months prepping the business for sale, including restructuring the corporate entities to create a 'clean' and tidy business. Much work went on documentation and so forth. We 'packaged' the business for sale as our advisors termed it. True, there was an investment required, and yes the deal size was many times larger than we're talking with these small cafes. But surely the same principles apply?
A well managed, well documented business is going to sell for a higher price, and quicker, than a poorly managed one with incomplete or unavailable documentation. These cafe owners cripple their wealth creation opportunity by taking a short term view about cash, record keeping and their attitude to potential buyers.
I've been pondering the motives. And unkind or uncharitable it might seem, for me it's all about expertise and experience. Some people make the effort to learn how to be competent in business. Some of them have a particular propensity or talent for business - and they'll fly even higher. But basic business practice is not hard. Or at least that's what I thought. I'm possibly having to change my mind. Maybe the harsh reality is there are a big bunch of people out there running businesses who you wouldn't put in charge of a race between two flies, let alone a retail outlet turning over several hundred thousand dollars a year.
If that's the truth, then there's an even scarier notion - if they're rubbish at business, just how good are their health and safety standards? Bear in mind, these people are directly responsible for your health. They sell you food, you eat the food. History is littered with an abundance of examples of poor food safety resulting in widespread illness - and death. The same people who can't manage their way out of a paperbag; who seem hell bent on avoiding selling their business (despite professing a desire to do so); who deliberately under-report their cash takings to avoid paying tax ---- are the ones making your lunch tomorrow. How's your stomach feeling now?
Prepping for the bank
Today's mostly been about prepping for the bank. We've been re-writing the power point, and tidying the financials. The fitout budget is looking reasonably solid, and the cash flows are hanging together nicely - ratios seem right in terms of cost of goods, wages etc. Still battling the great unknowns - eg
F was about ready to head hunt one of the waitresses - young, funky, terrific manner and friendly.
- just how quickly will revenue ramp up?
- what's the theoretical maximum income we can show for each cafe whilst still legitimately supportable?
- what balance between casual and permanent staff (been hedging the bets both ways, each has advantages, casual staff much more expensive because of the 25% loading, but permanent staff need holidays, sick leave etc)
F was about ready to head hunt one of the waitresses - young, funky, terrific manner and friendly.
Visual concepts
'J' came over yesterday and we spent a couple of hours talking through the interior design. He's put together a kind of mood board, with pictures clipped from magazines, samples, fabrics and so on. His initial assemblage is terrific, a good mix of colour and texture. We did mess with some blue - strong cobalt, Mediterranean. But it became quickly obvious it doesn't work. Especially in winter the blue will be too cold.
But what was really kicking arse was black/brown timber, lime greens, some purple. Cool, contemporary, with elements of coastal. I'm also quite partial to the odd wicker lampshade.
Looking at the magazine clippings it struck me how important the idea of a large timber communal eating table is. Cafe #1 won't have the space, but #2 should have the acreage. Mix that up with a small couch/coffee table area, and half a dozen small tables and chairs, and maybe a wall bench with bar stools.
'J' as always full of innovative ideas - for example, he's heard me banging on about storage (eg, you can never have enough storage), and his suggestion is the couch area can be built as wall couches, lift the couch to up and reveal storage below. Just like on boats and in caravans. Perfect for long term bulk hiding of non-perishables.
He's now working on some simple visual concept drawings, not particularly specific to either of the two premises we're hot on, but rather an amalgam. This will give us something to add into the power point presentation for the bank. Should be able to get that off to the bank manager on Monday. It's difficult to commence any serious negotiations on the premises until we know the money's lined up.
Talking to 'J' and I had something of a mind flash about how to deal with the ceiling space at cafe #2. It's a high bare concrete ceiling. I reckon we should do a lighting grid - 2inch pipe grid, just like we used to use back in my theatre days. Our favourite Melbourne restaurant Circa uses something similar. It's incredibly flexible, you just get a bunch of powerpoints at each corner, then hang all your lighting gear from the grid, using extension leads wrapped along the pipe. If you want to move a light, it's easy. Spray paint the whole thing the same colour as the ceiling paint and it'll meld in visually.
Managed to find a sort of an image that shows a lighting grid. See the black 2inch pipe grid fastened to the ceiling? Then the lights and cables hang from the grid.
And it's cheap - the pipe is low cost, you stick it together with scaffolding clamps. Major item is ensuring the pipe grid is securely fastened to the ceiling and the walls. Although in reality it won't have much weight load compared to a professional theatre environment.
Just checked the Circa web site, they have a private function room with a great limey green wall couch. Must show J.
But what was really kicking arse was black/brown timber, lime greens, some purple. Cool, contemporary, with elements of coastal. I'm also quite partial to the odd wicker lampshade.
Looking at the magazine clippings it struck me how important the idea of a large timber communal eating table is. Cafe #1 won't have the space, but #2 should have the acreage. Mix that up with a small couch/coffee table area, and half a dozen small tables and chairs, and maybe a wall bench with bar stools.
'J' as always full of innovative ideas - for example, he's heard me banging on about storage (eg, you can never have enough storage), and his suggestion is the couch area can be built as wall couches, lift the couch to up and reveal storage below. Just like on boats and in caravans. Perfect for long term bulk hiding of non-perishables.
He's now working on some simple visual concept drawings, not particularly specific to either of the two premises we're hot on, but rather an amalgam. This will give us something to add into the power point presentation for the bank. Should be able to get that off to the bank manager on Monday. It's difficult to commence any serious negotiations on the premises until we know the money's lined up.
Talking to 'J' and I had something of a mind flash about how to deal with the ceiling space at cafe #2. It's a high bare concrete ceiling. I reckon we should do a lighting grid - 2inch pipe grid, just like we used to use back in my theatre days. Our favourite Melbourne restaurant Circa uses something similar. It's incredibly flexible, you just get a bunch of powerpoints at each corner, then hang all your lighting gear from the grid, using extension leads wrapped along the pipe. If you want to move a light, it's easy. Spray paint the whole thing the same colour as the ceiling paint and it'll meld in visually.
Managed to find a sort of an image that shows a lighting grid. See the black 2inch pipe grid fastened to the ceiling? Then the lights and cables hang from the grid.
And it's cheap - the pipe is low cost, you stick it together with scaffolding clamps. Major item is ensuring the pipe grid is securely fastened to the ceiling and the walls. Although in reality it won't have much weight load compared to a professional theatre environment.
Just checked the Circa web site, they have a private function room with a great limey green wall couch. Must show J.
Thursday, February 7, 2008
Punching in the dark
Just thought I would illustrate what we mean when we say we're being forced to make offers to buy businesses based in zero information. Here's a case in point. It's the print out from the online real estate web site, listing a small cafe for sale in St Kilda. Now we have signed an NDA on this cafe, but I've removed all identifying stuff so I can't see the issue with showing you. The scrawled information is me writing down notes when talking to the broker. On the basis of this information it was intended that we would make an offer to purchase the business. As I told the broker, we'd be punching in the dark. So we made a very low offer, because without documentation and evidence to justify a value, my business bone freezes and doesn't want to play. Bizarre.
Notes to self for today
- Chase agent for cafe #1 premises - we asked for an inspection, he said he was waiting on the key, that was 3 days ago
- Chase agent for cafe #2 premises - he's sent us a heads of agreement for the lease, and I emailed straight back querying a couple of things. One is a % of the council value of the property to go to a precinct marketing fund. Trouble is, it doesn't mention the value, so we could need to find several thousand dollars more a year in the budget
- Also want to check with him if he has any contractors for particularly the aiconditioning system install
- Chase the agents for the two existing cafe businesses we've made offers on - they've gone quiet for a week now since we faxed offers (and I told both a wouldn't consider changing the offer until I got some more detailed numbers).
- Chase agent for cafe #2 premises - he's sent us a heads of agreement for the lease, and I emailed straight back querying a couple of things. One is a % of the council value of the property to go to a precinct marketing fund. Trouble is, it doesn't mention the value, so we could need to find several thousand dollars more a year in the budget
- Also want to check with him if he has any contractors for particularly the aiconditioning system install
- Chase the agents for the two existing cafe businesses we've made offers on - they've gone quiet for a week now since we faxed offers (and I told both a wouldn't consider changing the offer until I got some more detailed numbers).
Rallying the troops
OK, have sent notes off to 'R', our friendly builder (he built our house); and 'S', our friendly architect. Suspect they're both going to think us quite mad, hence not using their names right now. But if we can sell them on the idea and vision, they'll be welcome additions to the team for the Parlour Cafe project.
How expensive is a fridge!
We're obviously preparing some pretty detailed budgets for the cafes, and especially this week the fit outs. If it's going to cost too much to fitout the spaces we've chosen, then there's no point progressing the leasing conversations with the real estate agents.
As with many new businesses establishments, it's scary how much things cost. And the food business is no different. Items such as display fridges, coffee machines and so on cost significant amounts of money. We'll easily drop $30,000 on the basic equipment plus some tables and chairs for the smaller of the two cafes, let alone the larger one.
You only have to look through the Trading Post, or one of the online second dealers to see that even pre-used equipment is expensive.
Which of course has a huge impact on cash flow - we have to find these enormous slabs of cash before we even open the door. We might be able to stick some of it on the credit card, and thus delay the pain for a couple of months (always have your 55 day interest free credit card in your wallet in this game), but watching a good proportion of your free cash walk out the door before you've served one customer has to hurt.
We've leased equipment lots of times before in our previous businesses - particularly computers, web servers and so on. It's a pretty established concept in the IT industry. But I was curious to see what's available in the food end of town.
Hey presto, I find Silver Chef Hospitality Equipment Funding. Very similar to the FlexiRent financial company we've used for office equipment, but these guys deal in the hospitality sector. They'll even finance a full kitchen fitout. Their pitch is good - they'll finance the equipment for 12 months, after which you can buy it (at reduced rate), return it, or finance again.
I'm liking this concept. I reckon we should budget to lease the equipment for 12 months, then make a capital expenditure allowance to buy after 12 months. Like all leasing, it'll get expensive in the longer term - hence get it off the expense sheet and onto the balance sheet once free cash allows.
As with many new businesses establishments, it's scary how much things cost. And the food business is no different. Items such as display fridges, coffee machines and so on cost significant amounts of money. We'll easily drop $30,000 on the basic equipment plus some tables and chairs for the smaller of the two cafes, let alone the larger one.
You only have to look through the Trading Post, or one of the online second dealers to see that even pre-used equipment is expensive.
Which of course has a huge impact on cash flow - we have to find these enormous slabs of cash before we even open the door. We might be able to stick some of it on the credit card, and thus delay the pain for a couple of months (always have your 55 day interest free credit card in your wallet in this game), but watching a good proportion of your free cash walk out the door before you've served one customer has to hurt.
We've leased equipment lots of times before in our previous businesses - particularly computers, web servers and so on. It's a pretty established concept in the IT industry. But I was curious to see what's available in the food end of town.
Hey presto, I find Silver Chef Hospitality Equipment Funding. Very similar to the FlexiRent financial company we've used for office equipment, but these guys deal in the hospitality sector. They'll even finance a full kitchen fitout. Their pitch is good - they'll finance the equipment for 12 months, after which you can buy it (at reduced rate), return it, or finance again.
I'm liking this concept. I reckon we should budget to lease the equipment for 12 months, then make a capital expenditure allowance to buy after 12 months. Like all leasing, it'll get expensive in the longer term - hence get it off the expense sheet and onto the balance sheet once free cash allows.
Wednesday, February 6, 2008
Do we need this?
The other side to the Parlour concept here. I guess I'm the one who'll do the yakka with my brother JKB when it comes to fitout, painting, install etc for the cafes, which is a titch daunting but is also a chance to create a series of cafes that are more than that, that are also venues as well. Places to hang out, take your laptop and write your first novel, sip latte and do that darn business plan you've been putting off, write up that sales report - all in a happy, cheerful, relaxed environment.
I guess I keep asking myself, does Melbourne really need more cafes? But then I see nothing that's remotely like Parlour (well the idea we're envisioning and talking about anyway) anywhere here. It's a concept that's about more than good food, coffee and treats, though it will have those, but it's really about a great place to hang around, relax and create. I reckon most of us have become too busy again. I complained about this when I left corporate in the 1990s - too much busy work, not enough quality thinking done, therefore rushed decisions and poor quality outputs. And no-one does great things rushing around like a buzzy bee - though I know many people who believe behaving like this makes them more important, I just reckon it makes them more noticeable.
So, let's strike a blow for busy work and super long to do lists. Parlour is all about doing things supremely well and elegantly - and having fun while you're doing them too. And maybe doing a bit less, but doing it a whole lot better.
Back to the planning board. Hope you're starting to get what Parlour might be about!
Getting head around the requirements
Today's primary task is to pull together a broad requirements list - eg everything we need/want in our cafes in terms of fitout and major equipment. This is so we can start doing some rough drawings visualising the concept.
We're dealing with a sequence of activities that all interlock together, and which have to occur in the right order:
- In order to operate a cafe we need a Food Permit. In order to obtain a Food Permit we need to apply to the local council. For example, the City of Melbourne. Here's the pages on the City's site about Food Safety.
- In order to apply for a permit we need to have scale drawings detailing where everything will go and what it will look like.
- But first we need to convince the bank to lend us some money. We're part financing ourselves, and borrowing the rest. To win the bank over we need 'pretty' concept drawings, so their credit department can get all excited and agree to give us a big pile of dosh - preferably unsecured. Oh, and of course, capital budgets and cash flows.
- In order to do the visualisations, we need to determine which premises we want. And to do that, we need to assess that the premises will be appropriate. And to do that we need to work out in detail our..... requirements! And cost them with at least ballpark figures.
- In order to assess the appropriateness of the premises, we need to work out in detail that we comply with the requirements of the Council and the Food legislation. And only reliable way to do that is to submit preliminary plans to the Council and have them assessed.
- In order to get plans drawn we need concepts and vision. So we've got a friendly brother-in-law 'J' who's going to throw some creative juice around; then we can pass to our architect 'S' who can turn them into something the Council inspectors can interpret. But to do the concepts we need .... requirements.
Hence today's quest being trying to compile a list of requirements, which will evolve over time into a more formal specification document.
We're dealing with a sequence of activities that all interlock together, and which have to occur in the right order:
- In order to operate a cafe we need a Food Permit. In order to obtain a Food Permit we need to apply to the local council. For example, the City of Melbourne. Here's the pages on the City's site about Food Safety.
- In order to apply for a permit we need to have scale drawings detailing where everything will go and what it will look like.
- But first we need to convince the bank to lend us some money. We're part financing ourselves, and borrowing the rest. To win the bank over we need 'pretty' concept drawings, so their credit department can get all excited and agree to give us a big pile of dosh - preferably unsecured. Oh, and of course, capital budgets and cash flows.
- In order to do the visualisations, we need to determine which premises we want. And to do that, we need to assess that the premises will be appropriate. And to do that we need to work out in detail our..... requirements! And cost them with at least ballpark figures.
- In order to assess the appropriateness of the premises, we need to work out in detail that we comply with the requirements of the Council and the Food legislation. And only reliable way to do that is to submit preliminary plans to the Council and have them assessed.
- In order to get plans drawn we need concepts and vision. So we've got a friendly brother-in-law 'J' who's going to throw some creative juice around; then we can pass to our architect 'S' who can turn them into something the Council inspectors can interpret. But to do the concepts we need .... requirements.
Hence today's quest being trying to compile a list of requirements, which will evolve over time into a more formal specification document.
Tuesday, February 5, 2008
Inspection Cafe # 2
We took overselves off to Docklands today for an inspection on a new shop space, which we are considering for cafe #2. It's brand new, one of half a dozen in the bottom of a new apartment block, but located right next door to national headquarters of companies including Ericsson (2,000 worker bees), National Australia Bank (4,000) plus ANZ bank, Lend Lease and others. Magic spot, right next to the water at Victoria Dock.
It's a from scratch fitout - at present just a concrete shell with fireservices hanging down from the ceiling. But all the right proportions and facilities including grease trap and vents.
Outside we'd be able to have a pretty good size seating area. The agent spoke enthusiastically about the developer's plans for the area.
Agent's sending a heads of agreement, so we'll see what the offer is. We need to be cautious - whilst there is no questioning the potential of the area, our concern is how long we'll need to wait as the foot traffic, office workers and general activity builds in the area. Suspect it'll be 12 months at least, but this would get us in on a magic spot from day one, ready to take advantage of the projected growth in the vicinity (they are still building some of the big office buildings).
Added bonus is 150 apartments above us - and we'd be right next door to the front entry. Hard to miss us.
It's a from scratch fitout - at present just a concrete shell with fireservices hanging down from the ceiling. But all the right proportions and facilities including grease trap and vents.
Outside we'd be able to have a pretty good size seating area. The agent spoke enthusiastically about the developer's plans for the area.
Agent's sending a heads of agreement, so we'll see what the offer is. We need to be cautious - whilst there is no questioning the potential of the area, our concern is how long we'll need to wait as the foot traffic, office workers and general activity builds in the area. Suspect it'll be 12 months at least, but this would get us in on a magic spot from day one, ready to take advantage of the projected growth in the vicinity (they are still building some of the big office buildings).
Added bonus is 150 apartments above us - and we'd be right next door to the front entry. Hard to miss us.
Saturday, February 2, 2008
The nature of the cafe business
The first thing you learn about buying an existing small cafe is how there is a disconnect between the information on paper and the true performance of the business. And that's because owner operators of small cafes are invariably operating a part cash, part official business. That is, they only are reporting a percentage of their true revenue. The rest is disappearing out of the till as cash.
We know this for a fact - it's such an ingrained and accepted practice the business brokers representing the cafe owners even speak openly about the 'cash ratio'. One broker we're negotiating with spoke about how it would be our decision to choose a cash ratio - 50%, 60% - eg what percentage of the takings would be officially reported.
They even cover off the situation where, because the books don't reflect the true takings, a potential buyer might be nervous about paying the asking price. So they offer 'trial periods', whereby the sales contract will include a get out clause if takings don't hit a certain level.
It's not hard to pick a cafe that's under-reporting takings, the signs:
- The paperwork from the broker is minimal or non-existant (they don't want to have to provide a signed off Vendor's Statement certifying the revenue)
- If you are provided with some financials, the ratios will be off. Here's how you tell:
A cafe is advertised for sale. The ad says the takings are $4,500 a week, with 10kg of coffee being sold. The you receive the financials and they show a gross revenue for a year of $150,000 - and a cost of goods vs revenue ratio of 40%.
Start doing the maths. For a start $4,500 a week = $234,000 a year. 10kg of coffee makes around 1,200 cups of coffee, say at an average of $2.50 retail. That's $156,000 just in coffee sales alone for a year.
And cost of goods at 40%! Should be around 22-25% maximum.
When I first realised this was the situation my ethical business bones started to ache. How come the tax office doesn't start in on these people - we've run businesses for 15 years, and we've always run our accounts above board. So while we've been paying taxes, these guys have been evading taxes.
Then I considered the cash chain. Whilst the cafes can't pay cash for some products - for example, buying in drinks from major suppliers like Coca Cola, they do buy a lot of fresh food - fruit and vegetables for example. These are often distributed by small businesses - basically a bloke with a van who looks after a small group of cafes. He goes to the markets early in the morning, purchases the orders, the delivers them out to his customers, the cafes.
The cafes often pay cash to the distributor. Who in turn is quite likely paying cash to the market stall holder. And there's no tax disadvantage. Because there's no Goods and Services Tax on fresh food. So no input credits to claim for the cafe owner. Or the distributor, or the market stall owner.
Thus you get a cash driven supply chain. Some sales are reported on the books - enough to keep filing Business Activity Statements. And a decent percentage are not.
If the tax office got involved their first point of investigation would be requiring the cafe owners to hand over their cash register till rolls, and reconciling these with the BAS filings. If the cafe owners have not been careful to not ring up all their sales whilst sticky fingering cash out of the till, there will be a discrepency.
The tax office seriously does not like you mis-reporting, and evading tax. And they come down hard. They are the one creditor your NEVER piss off in business, because they'll close you without compunction. And that's what'll happen to the small cafes if they get caught. And the distributors. And the market stall holders. Only problem - big bunch of businesses will close, and people out of work.
It reminds me of the big debate during the introduction of the GST back in 1999-2000. Originally the GST was to apply to everything. But after much public outrage, the government backed off and did not impose GST on fresh food. Their argument in support of taxing fresh food was that the GST could be a powerful tool to counter the cash black market. But creating exceptions - eg fresh food - would severly compromise the effectiveness. Now I see they were right.
We know this for a fact - it's such an ingrained and accepted practice the business brokers representing the cafe owners even speak openly about the 'cash ratio'. One broker we're negotiating with spoke about how it would be our decision to choose a cash ratio - 50%, 60% - eg what percentage of the takings would be officially reported.
They even cover off the situation where, because the books don't reflect the true takings, a potential buyer might be nervous about paying the asking price. So they offer 'trial periods', whereby the sales contract will include a get out clause if takings don't hit a certain level.
It's not hard to pick a cafe that's under-reporting takings, the signs:
- The paperwork from the broker is minimal or non-existant (they don't want to have to provide a signed off Vendor's Statement certifying the revenue)
- If you are provided with some financials, the ratios will be off. Here's how you tell:
A cafe is advertised for sale. The ad says the takings are $4,500 a week, with 10kg of coffee being sold. The you receive the financials and they show a gross revenue for a year of $150,000 - and a cost of goods vs revenue ratio of 40%.
Start doing the maths. For a start $4,500 a week = $234,000 a year. 10kg of coffee makes around 1,200 cups of coffee, say at an average of $2.50 retail. That's $156,000 just in coffee sales alone for a year.
And cost of goods at 40%! Should be around 22-25% maximum.
When I first realised this was the situation my ethical business bones started to ache. How come the tax office doesn't start in on these people - we've run businesses for 15 years, and we've always run our accounts above board. So while we've been paying taxes, these guys have been evading taxes.
Then I considered the cash chain. Whilst the cafes can't pay cash for some products - for example, buying in drinks from major suppliers like Coca Cola, they do buy a lot of fresh food - fruit and vegetables for example. These are often distributed by small businesses - basically a bloke with a van who looks after a small group of cafes. He goes to the markets early in the morning, purchases the orders, the delivers them out to his customers, the cafes.
The cafes often pay cash to the distributor. Who in turn is quite likely paying cash to the market stall holder. And there's no tax disadvantage. Because there's no Goods and Services Tax on fresh food. So no input credits to claim for the cafe owner. Or the distributor, or the market stall owner.
Thus you get a cash driven supply chain. Some sales are reported on the books - enough to keep filing Business Activity Statements. And a decent percentage are not.
If the tax office got involved their first point of investigation would be requiring the cafe owners to hand over their cash register till rolls, and reconciling these with the BAS filings. If the cafe owners have not been careful to not ring up all their sales whilst sticky fingering cash out of the till, there will be a discrepency.
The tax office seriously does not like you mis-reporting, and evading tax. And they come down hard. They are the one creditor your NEVER piss off in business, because they'll close you without compunction. And that's what'll happen to the small cafes if they get caught. And the distributors. And the market stall holders. Only problem - big bunch of businesses will close, and people out of work.
It reminds me of the big debate during the introduction of the GST back in 1999-2000. Originally the GST was to apply to everything. But after much public outrage, the government backed off and did not impose GST on fresh food. Their argument in support of taxing fresh food was that the GST could be a powerful tool to counter the cash black market. But creating exceptions - eg fresh food - would severly compromise the effectiveness. Now I see they were right.
Friday, February 1, 2008
So here's the plan
So here's what we're thinking of. We want to aggregate 4 small, under performing street cafes in the Bayside area, re-brand and refit cheaply. Inject good quality small business practice where not present already under a good concept brand to create a viable group of small, locally focussed, coastal theme cafes in the Bayside area with much improved turnover to present a viable equity exit opportunity after 12 months, or ongoing dividend stream.
As a variation, we may decide to lease vacant shop space instead of buying existing businesses. This has the advantage of not having to pay for an existing business, but the fitout will be pricier, and we have to build trade from zero instead of tapping into existing customers.
We reckon there are a number of opportunities we're exploring that can help us to success:
1. The vast majority of small street cafes in the Bayside area have zero brand or style. There is no individuality, theme or concept. We will create a strong branded theme and style.
2. Very poor business practices appear to be prevalent. We have now looked at nearly a dozen small café operations for sale, and all have been characterised by low quality management, reporting and systems. We will employ sophisticated small business management practices built over 15 years of successful business management.
3. The small street cafes do no marketing that we can discern. Yet they are located in high population centres, usually with major businesses and residential clusters in immediate proximity. We have long experience in creating below line highly targeted low cost marketing campaigns, and we will use this background to encourage locals to give us a try.
4. Same old same old food and beverage and/or too large or too inconsistent menu. We’ve seen cafes selling hot chips along side freshly squeezed juices; vast menus for a 10 seater café; or just a lack of imagination. We will present a consistent menu of food and drinks, with something different to capture peoples’ interest. For example, platters of high quality French and local cheeses, with good breads and biscuits with a matched glass of wine. (we plan to apply for a liquor licence for all our cafes).
5. Aggregation benefits. With poor management, zero marketing and lack of brand, small street cafes are often breakeven, with a high owner turnover as a consequence. Our plan is to have four cafes within 12 months, with superior management, strong concept and brand, and good marketing. We will achieve efficiencies and savings in back office, accounts and purchasing, yielding an improved return on investment and inevitably a better experience for the customer.
As a variation, we may decide to lease vacant shop space instead of buying existing businesses. This has the advantage of not having to pay for an existing business, but the fitout will be pricier, and we have to build trade from zero instead of tapping into existing customers.
We reckon there are a number of opportunities we're exploring that can help us to success:
1. The vast majority of small street cafes in the Bayside area have zero brand or style. There is no individuality, theme or concept. We will create a strong branded theme and style.
2. Very poor business practices appear to be prevalent. We have now looked at nearly a dozen small café operations for sale, and all have been characterised by low quality management, reporting and systems. We will employ sophisticated small business management practices built over 15 years of successful business management.
3. The small street cafes do no marketing that we can discern. Yet they are located in high population centres, usually with major businesses and residential clusters in immediate proximity. We have long experience in creating below line highly targeted low cost marketing campaigns, and we will use this background to encourage locals to give us a try.
4. Same old same old food and beverage and/or too large or too inconsistent menu. We’ve seen cafes selling hot chips along side freshly squeezed juices; vast menus for a 10 seater café; or just a lack of imagination. We will present a consistent menu of food and drinks, with something different to capture peoples’ interest. For example, platters of high quality French and local cheeses, with good breads and biscuits with a matched glass of wine. (we plan to apply for a liquor licence for all our cafes).
5. Aggregation benefits. With poor management, zero marketing and lack of brand, small street cafes are often breakeven, with a high owner turnover as a consequence. Our plan is to have four cafes within 12 months, with superior management, strong concept and brand, and good marketing. We will achieve efficiencies and savings in back office, accounts and purchasing, yielding an improved return on investment and inevitably a better experience for the customer.
Diving in
And so we dive in. We've founded, run and sold a number of businesses, including several online companies. Amongst our new ventures is investing in launching a new group of cafes in our home town of Melbourne, Australia. This blog is a diary of our adventures as we take on this new challenge.
We'll have to get up to date - we've been on the case since the new year, so we'll post a few updates to review progress to date, and some of the lessons already learnt.
As of today, we have two offers in on existing cafe businesses (which we would refit and re-brand), and are pursuing two brand new spaces (which would require complete fitouts starting from scratch).
We'll have to get up to date - we've been on the case since the new year, so we'll post a few updates to review progress to date, and some of the lessons already learnt.
As of today, we have two offers in on existing cafe businesses (which we would refit and re-brand), and are pursuing two brand new spaces (which would require complete fitouts starting from scratch).
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