The biggest worry for aspiring café owners is rent. This is in spite of retail rents having dropped by 25-30% since 2008, and in spite of the widely-held view that landlords must soon be forced to offer lower rents and flexible deals to bring tenants into their empty properties.
The finding has come in a survey from BusinessesForSale.com, who took opinions from 250 prospective tenants, all of whom were intending to go into the café business. Their fears about rents and rent increases far outweighed what might have been thought to be more pressing problems – would-be café operators were not worried about increases in the cost of supplies. They were however very concerned about competition from chain operators.
The matter of high-street rent has recently been taken up in high places. In the Portas report, the shopping guru told the government that the high cost of retail property rents is stopping the ‘organic growth’ of the high street. Her argument, a familiar one in the café world, is that even in hard economic times, landlords are asking unrealistic terms.
This brought a terse response from the British Property Federation, who replied that retail rents have dropped by 22% in the past 22 years, and the most notable drop of all has been in the last four years.
However, it is now reported that there has been a perceptible decline in the length of retail leases, thought to be one probably-overdue reaction from landlords to the economic situation.
The British Property Federation and Investment Property Databank says that on average, lease lengths are down from 6.2 years in 2007 to 4.8 years in 2011. The average lease to a small enterprise is now 4.1 years, and the IPD’s senior research manager has commented that landlords are indeed accepting ever-shorter leases, just to have their premises occupied. Furthermore, it is said, rent-free periods are reported to be ‘quite commonplace’ on even relatively short leases.
When interviewed, Matthew Hopkinson of the Local Data Company, the specialist on high-street research, confirmed to us that these findings bear out his own recent observations on the general state of the high street.
And yet, the worries about rent reported by BusinessesForSale.com do appear to be well founded in the café sector.
There are still cases of coffee shops being forced out of business by unrealistic demands from landlords such as one café owner who was hit, out of the blue, with a demand for a 66% increase, backdated for a year… the total demanded was £23,000. The café operator closed immediately.
What is the general level of rent in the café trade?
In the recent survey of café operators, carried out by the Caffè Culture show and presented by the Coffee Boys at the exhibition, the majority of operators, over 30%, reported that their rent is between £10,000 – £20,000 a year. 19% of respondents said their rent is £20,000-£30,000, and 13% are between £30,000 and £50,000.
On the other hand, 11% reported rent under £10,000 a year, and a happy 15% are paying rent below £5,000.
Elsewhere in the BusinessesForSale.com research, it is reported that nearly half of budding café proprietors have relevant experience of the business – which, perhaps worryingly, suggests that over half do not. A quarter of them want to build a chain, 28% think they can expect to ‘enjoy the lifestyle’, and perhaps equally worryingly, 9% think they will make a lot of money from a café.
The average age of people considering buying a café is 46, and nearly half of them are over 50. The average budget they have for buying a café business is £66,000.