Buying a coffee shop: what to check before you buy
Short answer
A coffee shop's revenue is transactions times average ticket, concentrated in the morning. When buying one, get POS data by hour and day to see ticket counts and averages, then cross-check against cup, lid and milk purchases (they scale closely with drinks sold) and card processor deposits. Check labor as a share of sales, the lease (rent relative to sales, term, drive-thru rights), espresso machine and grinder condition, and whether the owner is behind the bar every morning.
Coffee shops are a common first business, often bought for the lifestyle. The numbers are unforgiving: a few dollars per ticket, high rent, long hours.
The revenue model
| Driver | Data source | What to look for |
|---|---|---|
| Transactions by hour | POS | Morning peak, afternoon dead zones |
| Average ticket | POS | Food attach rate, price changes |
| Weekday vs weekend | POS | Commuter vs neighborhood customers |
| Wholesale or catering | Invoices | Concentration, margins |
| Delivery apps | Platform payouts | Commissions |
The cup test
Illustrative example, not a real cafe
The POS shows about 90,000 drinks sold last year. Supplier invoices show 96,000 hot and cold cups purchased, and inventory hasn't changed much. A few percent difference for waste, staff drinks and mistakes is plausible. If invoices showed 60,000 cups, the drink count (and the revenue) would need explaining.
Worked example: labor by daypart
Coffee shops make most of their money in a few morning hours and often lose it in the afternoon. Hourly POS data plus the staff schedule shows you exactly where.
Illustrative example, not a real cafe or wage
The shop opens 6am to 6pm. From 6 to 11, it averages 70 tickets an hour at $7.20: 5 × 70 × $7.20 = $2,520 a day. From 11 to 6 it averages 18 tickets an hour: 7 × 18 × $7.20 = $907. Staffing is 3 baristas in the morning and 2 in the afternoon at $17 an hour plus 12% payroll costs. Morning labor: 3 × 5 × $17 × 1.12 = $286, or 11% of morning sales. Afternoon labor: 2 × 7 × $17 × 1.12 = $267, or 29% of afternoon sales. Before rent and coffee, afternoons barely pay for themselves. That isn't necessarily wrong (some regulars come because you're open), but it's where a new owner has room to change hours or staffing, and where the seller's claims about "easy upside" should be tested.
Add-back traps
- Owner as morning barista or baker: you'll pay for those hours.
- Family helpers not on payroll.
- Equipment repairs called one-time; espresso machines need regular service.
- Cash tips and sales handled informally.
Lease and equipment
Rent relative to sales is a key survival number for cafes. Check the lease term (for an SBA loan, including options you control, at least the loan term), escalations, and use clauses. Confirm who owns the espresso machine and grinders; roaster-supplied equipment can come with purchase commitments. See lease assignment.
Red flags specific to cafes
- A sale timed after a new competitor opened nearby. Ask for ticket counts by week for the last year and look for a step down.
- Wholesale accounts that are really the owner's friends. Coffee or pastry sold to a few local businesses can vanish with the seller.
- Equipment tied to a roaster contract you'd have to keep or pay to exit.
- Delivery app sales counted gross. Check payouts after commissions.
- Health inspection problems. Read the reports; milk and ice handling are common issues, and health departments generally base their rules on the FDA Food Code. Your health permit will usually be issued in your own name.
What an SBA lender will check
A lender will match tax returns with IRS transcripts and test debt coverage after paying for any shifts the owner works. They'll look at rent relative to sales and require the lease term, including options you control, to run at least as long as the loan. Equipment is modest collateral, so cash flow and your guarantee do the work.
Worked example: what a price increase does
Illustrative example, not a real cafe
The shop sells 90,000 drinks a year at an average of $5.60, plus food, for $620,000 of sales. Raising drink prices by $0.40 (about 7%) adds $36,000 if nobody changes behavior (90,000 × $0.40). If 3% fewer drinks are sold, that's 2,700 fewer at $6.00, or $16,200 less, for a net gain of about $19,800, still positive. If 8% fewer are sold, the loss is 7,200 × $6.00 = $43,200, and the increase costs money. Look at what happened after the seller's last price change: the POS shows transaction counts by week. That's the best evidence you'll have of how this shop's customers respond, and it matters if your plan depends on raising prices.
Delivery apps and wholesale: check the net
Delivery app sales show up at the menu price in the POS but arrive in the bank after commissions, marketing fees and refunds. Get each platform's payout reports and compare gross orders with what was paid. Wholesale coffee or pastry sales to other businesses are another line to check separately: who the accounts are, what they pay, whether there are agreements, and whether they'd stay with a new owner. Both lines can be worth having, but neither should be counted at gross.
What moves the value of a coffee shop
We don't value deals or publish multiples we can't verify. Appraisers and lenders weigh these factors:
| Factor | Supports a higher value | Pulls it lower |
|---|---|---|
| Ticket trend | Steady or rising transaction counts | Falling counts propped up by price rises |
| Location | Morning commuter traffic, drive-thru, parking | Hidden, limited access |
| Owner role | Manager and baristas run shifts | Owner behind the bar every morning |
| Rent | Low relative to sales, long lease | High rent, short term |
| Equipment | Owned, serviced espresso machines and grinders | Roaster-owned, contract tie-in |
Documents to request
- POS reports by hour and day for 24 months; card processor and delivery platform statements; bank deposits.
- Tax and sales tax returns.
- Supplier statements for coffee, milk, cups and pastries for 12 months.
- Staff schedules and payroll; tip handling records.
- Lease, health permit and inspection reports.
- Equipment list and any roaster supply or equipment agreement.
The first 90 days after you buy
Keep the menu, recipes, coffee supplier and opening hours. Regulars notice a different espresso before they notice anything else. Learn the morning rush from behind the bar, then look at the afternoon staffing against the hourly sales data. Small, steady changes (a better pastry case, faster mobile ordering, trimming dead hours) usually beat big ones.
Supplier agreements that come with equipment
Some cafes get espresso machines, grinders or brewers from a roaster or supplier in exchange for buying a minimum volume of coffee. Ask whether any equipment in the shop is loaned, leased or financed this way, and read the agreement. Check the minimum purchase, the term, what happens if the volume falls short, and whether the agreement can be assigned to you. Equipment that belongs to a supplier is not part of what you are buying, so take it off the asset list and price any replacement into your plan.
Questions to ask the seller
- Can I have POS data by hour for 24 months, and the staff schedules to match?
- Which shifts do you work, and who would cover them?
- What do you buy from each supplier each month (coffee, milk, cups, pastries)?
- Is any equipment owned by a roaster or leased?
- When does the lease end, what are the escalations, and is the landlord willing to assign it?
- How are tips handled and reported?
Frequently asked questions
How do I check a cafe's sales independently?
Compare drink counts from the POS with cup and lid purchases from suppliers, and milk purchases with milk-based drinks. Card sales should match processor statements and deposits.
What's the biggest cost in a coffee shop?
Usually labor, then rent, then cost of goods. Long opening hours with low afternoon traffic can make labor efficiency the key profit driver.
Does a drive-thru matter?
Often a lot, for volume and resilience. Check whether the drive-thru is permitted under zoning and the lease.
Is the espresso machine included?
Usually, but sometimes it's leased from a roaster under a supply agreement. Check ownership and any purchase commitments.
What should I check in a roaster supply agreement?
Volume commitments, price terms, the length of the agreement, what happens if you switch suppliers early, and who owns any equipment the roaster provided. Some agreements bundle the espresso machine with a minimum coffee purchase; ending the agreement can mean returning or paying for the machine.
Is buying a coffee shop a good first business?
It can be, if the numbers work without you behind the bar every morning, or if you want that job. The common mistake is buying for the lifestyle and discovering the shop only earns a wage for the owner's labor. Rebuild earnings with a market wage for every shift the seller works before you decide.
Sources
- IRS: About Form 1099-K
- FDA Food Code 2022
- IRS: Employment taxes (tip reporting)
- SBA SOP 50 10 8.1 (lease term)
Related guides
General information, not legal, tax, financial or investment advice. Rules and lender practices change; check the linked sources and talk to your attorney, CPA and lender about your deal. Examples with named numbers are illustrations, not real businesses. OKtoBuy's Deal Check does not value businesses or give price opinions.