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Established Coffee Shop In Pretoria For Sale

Pretoria, Gauteng, South Africa
Asking Price:
R5,850,000
Sales Revenue:
R11,800,000
Cash Flow:
R2,400,000

1. BACKGROUND HISTORY
The business is established more than 20 years ago in a very prominent shopping mall in Pretoria. The focus on customer care and good service, combined with value for money in a clean and safe environment, differentiates the business with distinction. The business has a very simplistic menu that caters to everyone's needs and specialize in Breakfasts, Toasties, Tramezzini`s, Light Meals, Salads, Coffees, Teas, Soft Drinks and Cakes. The business hours are particularly very favorable for someone looking for comfortable working hours, between 8:00am and 7:00pm on weekdays. The owner is currently involved in the business on a limited basis, only in the mornings for approximately three hours, four days a week. There is reliable management in the business with many years of experience, which will remain in the business after the owner left the business. After many successful years in business, the owner decided to retire and exit permanently from the industry. He is willing to remain in the business after it has been handed over to the new owner for a negotiable period and to secure a seamless transition and handover.

2. STAFF AND WORK FORCE
The owner actively analyses the labour market and recruit more qualified and quality staff so that they would be able to provide their growing customer base a better service offering and more professional support with the best value proposition and solutions they could find in the industry. There are 16 permanent employees on the payroll of which most have many years of experience in the industry. There are two Managers and a General Manager, who carries out control and day to day planning and are target oriented to promote positive growth in the business and meet client’s needs to the best of their ability.

3. OPERATIONAL
The business is not linked to a franchise for the past couple of years but has been operated under a franchise concept and module for many years, which offers a tremendous advantage as there are no advertising fees and royalties of over 10% on turnover and which give the business a competitive edge over competitors because the business has the ability to generate much better margins. The operational systems and adaptability of the financial system are unique and very efficient when it comes to reporting and control. The business is small enough to deliver old-fashioned quality service, but definitely big enough to meet all the requirements and demands at all levels in the industry.

4. MARKETING AND CUSTOMERS
The business is established in one of the most famous and busy shopping malls in Pretoria. The Mall not only serves the local market but is also a shopping destination for neighboring towns and regions outside Gauteng. The local support and clients come from the surrounding neighborhoods in a radius of approximately 15 km around the business. Customers visit the mall for a variety of reasons and support the business because they are familiar with the good service and value package of light meals and breakfasts that they are used to. The client base is a loyal middle class to upper class income group with a combination of young, average working class to mature working class and retirees. There is no active marketing strategy currently for the business, except through exposure that the business obtains from the pass trade in the mall. The waters are well trained and very friendly, their client service skills are excellent.

5. SUMMARY
The business is not only a landmark in the mall but also for the whole area. It is a gathering place for families and friends, young and old as well as business people. The number of years that the business has been successful in the same location reflects the fact that the clients support the business on a loyal basis. Most clients feel that the value offer they experience at the business with exceptional service and friendly staff, they don’t get anywhere else. The influx of people and population growth in the area gives potential to the business to continue to grow from strength to strength. The business is aligned to handle the rapid pace of potential growth, with trained staff and management, excellent service and extensive knowledge of the industry.

6. FINANCIAL OVERVIEW
A comprehensive financial overview was carried out over the system documents from the financial system, latest Annual Financial Statements and Management Accounts. The relevant source documents were confirmed against operational expenditure. The current financial overview does include historical revenue on a monthly basis, latest management accounts, cashflow projections, 60 months profit and loss projections and a stress module to analyses the price valuation, proposed financing and risk analysis.

6.1. Analysis

6.1.1 Sales
Average annual sales revenue has increase dramatically over the past three years with more than 20%. The growth in sales revenue can be attributed to the growth in population in the area with new residential areas and the mall which is constantly revamping and upgrading. The last addition to the mall is a complete, constant power supply during load shedding.

6.1.2 Gross Profit
The gross profit represents a solid income for the business and generated a gross margin between 56% to 58%. Control over Food Cost and two menu increases per year, contribute to keep Cost of Sales under control and write-offs and shrinkage are kept to a minimum. The maintenance of proven systems and control systems is applied daily by management to ensure minimum losses.

6.1.3 Operational Expenses (OPEX)
The operational expenses of the business are relatively low at a 38% benchmark, Premises lease cost, Water & Electricity and Salaries are some of the highest expenses.

6.1.4 Net Profit (EBITDA)
The EBITDA was calculated after deducting certain Non-Operational Expenses (NOE’s). The combined adjusted monthly EBITDA average more than R200,00 per month and the small amount NOE’s was not even adjusted to this number.

6.2 Price Valuation
The proposed price valuation was calculated against industry benchmarks and considering that the business has a good historical growth trend and successfully well-established over so many years.

6.2.1 Acquisition Value
R5,850Million: Business Value (Selling Price)
R 150,000: Stock (Provision)
R6Million: Total Acquisition Value

6.2.2 Profitability
R2,439,786: EBITDA per Annum
R 203,316: EBITDA per Month

6.2.3 Investment Returns

2.39 x: PE Ratio (Price Earnings Ratio, Before Tax)
41.70%: ROI (Return on Investment, Excluding Stock)
28,77x: MPB (Months’ X Pay Back)

7. IMPORTANT NOTE
There are certain terms and conditions and requirements in terms of our agreement with the seller under which we are restricted to introduce a potential purchaser/investor, no detailed operational/financial information will be disclosed without the required documentary and source documents being processed according to the seller's criteria.

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