Location and More

Here's an article by Karen L. Wagner on site selection for a coffee shop that should be studied by any budding entrepreneur. An excerpt:

Arvidson uses a simple formula to gauge whether potential revenues will be enough to cover the rent and then some. He advises clients to multiply the amount of the rent by 10. The result is the breakeven number. So, for example, if rent is $3,000 per month, a coffeehouse will have to bring in revenues of $30,000 per month. Breaking that figure down, the daily intake is $1,000 a day. Figure an average check of $3.50 to $5 per person, he says, and that means about 200 customers per day, which means if a store is open 10 hours, then you'll need to serve 20 customers per hour.

However, don't let a high rent figure scare you off right away. Arvidson recalls a client who paid $6,500 per month for a kiosk site at an airport. Arvidson was astounded at the figure until his client told him she took in $5,000 to $6,000 a day in sales. A good deal? Just do the math.

Another common mistake that his clients have fallen prey to happens when they lead with their heart and not their head. Sometimes, Arvidson says, clients fall in love with the site's building, which is something you definitely don't want to do in business. He tells about one client in Monterey, Calif., who found a site with a beautiful location in an Spanish-style building adorned with terra cotta floors and arched windows and overlooking the bay. The problem? There was nothing around the building except for a bike path. Where, Arvidson remembers asking his client, would business come from?