Good Morning! ☕️

This might be the most requested industry deep dive we’ve ever had (🤯) and for good reason! With a rich blend of tradition and innovation, the Coffee Shops sector stands out as a compelling opportunity for many entrepreneurs. 

You can’t throw a rock and not hit someone who has once said, “I want to open a coffee shop!”. It feels like a low-stakes, fun business venture with nothing but cute mugs and tasty pastries. But does that make it a good decision financially? Is the market oversaturated? Can anyone compete with Starbucks? That’s what we are here to discuss today!

INDUSTRY BREAKDOWN

The Canadian Coffee Shop Market: Brewing Up Success?

Coffee, a staple in the daily routine of many Canadians, fuels an industry that thrives on both the love for classic brews and the excitement for new, inventive offerings. For those considering buying into this sector, it's a promising time. The industry's proven adaptability and ongoing growth suggest that, with the right mix of passion, creativity, and strategic insight, one can successfully navigate and prosper in the dynamic landscape of coffee commerce.

Industry Trends

Brewing more than just coffee, the Canadian market has seen remarkable resilience and growth, projected to reach CAD$40+ Billion by 2025. The Canadian coffee scene isn't just thriving locally; it's an active player on the global stage, significantly contributing to the economy through hefty imports and vibrant trade relations, particularly with countries like Colombia and Brazil. 

Although we don’t grow coffee here in the Great White North, we have made good friends with the countries that do. 🤝🌱

Let’s quickly address the elephant in the room: Starbucks. From its humble Seattle beginnings, Starbucks has taken over the world with over 38,000 locations in 80 countries and raking in over $24 Billion in 2021. As the biggest coffee chain in the world, it’s unlikely that any cafe is going to come in and overtake Starbucks anytime soon. But as a soon-to-be coffee shop owner, you don’t have to compete with the big dogs; your real contest is the charming cafe down the street. You can focus on being a standout choice in your neighbourhood, offering something unique that even bests Tim Hortons—and let's be honest, that’s not very hard. As a small business, your strength lies in creating a personal connection and a distinct coffee experience that the larger chains simply can't match.

The Finances 

Did you know that coffee is the 4th most-consumed beverage in the world by total volume sales - with 2.3 million cups of coffee consumed globally every minute. But why does it cost upwards of $5 + tip (tip culture is a conversation for another time 🫠) for your coffee everyday? Well that’s capitalism baby! Although it may just feel like bean water, there is a lot that goes into the growing, roasting, and distribution before that coffee makes it to your hand. 

With a market size that saw a jump to around $5 billion in 2023, due to the younger demographics becoming large consumers, the industry's financial health is strong​​. The diversity in product offerings - from ground coffees to innovative coffee beverages like cold brews, or whatever else is trending these days -  keeps the market dynamic and growing. 

Buy or Bust?

TLDR: is it a good idea to invest in a Canadian coffee shop? Yes. Will you be a billionaire overpowering Starbucks? Probably not. But if your heart lies in crafting lattes and being a neighbourhood staple, then you will do just fine. 

The key to success lies in tapping into trends like sustainability, premiumization, and creating something that people want to talk about on TikTok… As long as potential business owners are ready to adapt to these trends and brew up a unique coffee experience, a coffee shop in Canada could be a great investment.

Check out these Coffee Shops for sale:

1. Popular Coffee Shop in Downtown Vancouver, BC - $425,000

2. Unique and Profitable Coffee Shop in Toronto, ON - $299,000

3. Coffee Shop and Retail Bakery in Regina, SK - $323,999

Interested in a particular industry? Reply to this email with the industry you are curious about and keep your eyes peeled in upcoming issues. 👀 

DEAL REVIEW

Profitable and Delightful Coffee Shop

This week’s deal is a Reduced to Sell Cafe with a 10+ Year Tenure in British Columbia.

Deal Facts 🔥

Green Flags 🟢

• Consistent Customer Base: A steady flow of regular customers who return because they enjoy the product and the atmosphere is a great sign. It indicates the business has successfully embedded itself in the local community.

• Positive Reviews and Reputation: High ratings on review sites and positive word-of-mouth recommendations suggest the coffee shop maintains good service and quality products.

• Stable Financial Records: Transparent and healthy financial records showing profitability over several years can indicate sound management and a sustainable business model.

• Good Location: A leased property in a growing community with high foot traffic or in a strategic location, such as near offices or a university, boosts potential for sustained business.

Red Flags 🔴

• Reason for Selling: While the current owners are pursuing other interests, it's crucial to delve deeper and understand the real motivations behind the sale. Are they selling because they foresee a downturn, or are there challenges that aren't immediately visible? A lack of clarity here could be a red flag.

• Dependence on Current Owners: If the success of the coffee shop heavily relies on the personal touch or management style of the current owners, replicating this success could be challenging. This could become a problem if the shop’s charm is closely tied to its founders.

• Transition Support: With only a few employees, the transfer of knowledge and operational details is critical. If the current owners are not offering adequate support during the transition period, this could pose risks to maintaining the quality and service that customers expect.

• Lease Conditions: Since the property is leased, check the terms of the lease carefully. Uncertainty about lease renewal conditions, rental costs, or restrictions can significantly affect future operations and profitability.

Watch Our Video Breakdown 

For a more in-depth analysis, check out this video deep dive of the deal by our Founder, Morgan Tate:

Possible Deal Structure: There is no need for complicated the deal structure on this deal. A straightforward cash deal with 80% at closing (down payment + acquisition loan) and 20% in seller financing paid out over 2-4 years should get this one done for you. 

We knew that the last edition on the Death Care industry would spark some interest! 😎 Over 50% of you said that you would be interested in learning more about this spooky (but lucrative)industry. 👻

Want to learn more about this deal? Reply to this email with a “send me more details” and we will connect you with the broker!

ADVERTISE

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TWEET HIGHLIGHT

This thread, although a little long, has some great soft-skills that help leaders build better businesses. And because very few people will get the opportunity to learn from a major player in business such as Mark Zuckerberg, let this be your guide.

GOOD READS

Recommended Resources 📚

Below is a list of articles, books, and other resource we recommend for buyers or operators of small businesses!

1. Let’s get back to the basics - what are the steps to buying your first business.

2. In order to understand the seller of the business you’re trying to buy, you have to first understand the psychology of the selling a business. Check this article out so you can get inside the head of your next seller.

3. These may feel like common sense to some, but it is crazy how some of these simple considerations can make finding the right business to buy much more complicated.

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See you next time!