FDJustin

How many sq feet does he need? How many sq feet is he getting for 5K? Is it possible to lease part of the place for less? Is it possible to lease share with a business that would draw from a similar customer base? I think he would need to more than double his cost per item to make it work. Rent is not his only expense he will need security & employees & insurance and advertising & maybe property tax and business tax (not sure where you are) and lots of other misc expenses. My oldest son had a short lived skate shop experiment when he was a teenager (we fronted the money for him to try it out) He actualy never got big enough and had enough buying power to do a 100% markup but the main reason he did not make it was that he did not budget for help and he got burned out on working 60 hours a week at 15. He wanted a skate shop cause he liked to skate, he worked so much he did not have time to skate.
Why don't you guys split the place and have an internet cafe & skate shop in the place?

I don't know. Enough to hold whatever starting amount of equipment he has... He didn't say the square footage for the price, he said "Apparently (I forget the shop name) was leasing for 4,900 and it didn't get a lot of space."

Yes, employees come when the money is there to handle them. He'd probably be hiring students if it got to that, so it shaves off a couple dollars an hour and may afford subsidies...

Still, I doubt it's viability at even half the cost per square foot just because there's minimal potential customers, in a largely not-too-prosperous city.

And that leads me into the next bit... If I were still interested in opening the internet cafe, I'd do it more akin to the original plan. Find and purchase a mixed zoned property, to reduce living expenses, and possibly even gain rental income. Weather or not I'd take on a partnership with a different kind of store then would depend on the kind of property I can find. Space purposes mostly.

That said... I'd make him move on to greener pastures. There's another city nearby, closer to Quebec that, last I checked didn't have any internet cafes. It's population is about double ours, but I can't tell you the rough number of potential customers, since their census goes for 0-4, 5-19, 20-60, 60+. Means a lot more potential for French customers, which in my case is unfortunate. But it might also qualify as being northern Ontario, and that might avail different funding, or possibly even grant potential... Though I doubt it, they'll likely still classify it as eastern Ontario.

Anywhoo, trying to find out the leasing terms on the malls website (not available there), it turns out yesterday was "the scorpions lair". Where they offer "$5,000 business package" to the winner for a business idea. Too bad it's over. Maybe I could find out who the panel of experts were... And what they approved.

Thanks for the story about your son, sounds like he learned a lot!

So I told him why I don't think it would work. Actually, the way I opened it was pretty tactless, simply because I couldn't think of a good, not blunt way to open. So I said "Uhm, I really don't think your business will work." which got a quick and sharp WHAT!? WHY?! I laughed a bit and said I went over the numbers, if he had to pay 6k a month, which is what a 90 thousand dollar loan at 6.5% rate (what I'm guessing is pretty close to what they would want) over 10 years would cost... Plus the (Perhaps just rumored) highly expensive mall space. Anyway, I told him he'd have to get a dollar from every person who has a distant hope of falling into his demographic in this city, every month to perhaps stay afloat... Without including the cost of living or other expenses.

He got really disappointed and said "Oh... Well maybe in a different city."

I really hate to tell people "That won't work" because it kind of goes against my stubborn philosophy of "MAKE it work!"... Now, there are ways he can make it work I'm sure. Different location, smaller scale business, evaluating weather or not a franchise is really a good idea... Will having a store name draw in people from the bigger cities, or are they going to be content with their local stores? Making sure to attract people from outlying communities... There are three or four tiny communities within 20 minutes of my city. By tiny I mean total populations ranging from 3 to 4 thousand.

Justin instead of telling the fellow it "won't" work.

Ask him questions which clarify your reasoning and let him come to his own conclusion. This is basically what you already did.

Isn't it better to help people understand by asking a question instead of giving a answer?

Do you see what I mean?

Isn't it awesome?

Isn't it true we retain information better when we figure out a problem ourselves instead of somebody handing us the answer?

Indeed, and that's something I want to integrate into my personality. It'll take more time, active reminders, and opportunities though.

A1: Yes, as long as you manage to do it properly.

A2: Yes.

A3: Honestly, I see the value. It has to contend with my impulse and enjoyment of explaining.

A4: With few exceptions.

The last two comments on this old blog post http://www.thefastlaneforum.com/blog...-thinking.html

Will the information change you?

Very rare is the man who will take action. I hate to sound negative since I'm aspiring to be a motivational speaker but I doubt he'll get out from behind that clerk counter and make it happen ;-)

I would double those expenses and venture to guess it would cost close to 14-15k to run a retail location like that per month.

Nice story FD, I like how you see opportunity!

I would delete this if I could.

Hey, thanks!
Hmmm. I'm not sure what to think of your cost theory, Steve. I can see it getting that high if you have employees, and include the cost of living and maybe owe Vinnie a 200% loan premium... Here's why: At an average range of 10 - 15/sf (which I assume is annual price). 1,000 - 1,100 square feet is about average, so this gives a range of 834 - 1375. We can double those (as they're usually NNN) and add the 1k/month loan payments, so that gives us 2668 - 3750. Does that seem reasonably accurate? I'm sure the accuracy depends greatly on what the 90k loan actually gets him. I think it's for a franchise, and I don't know what that entails. Of course, hiring people would vastly increase costs. One minimum wage employee working 4 days a week, 8 hour days would be $1,312/month. This, is if what you pay them is all you wind up paying for them... Which I think it isn't, but I don't really know.

... While I was doing research for this, I found someone looking to open a sheet metal workshop, and I found a location that's $5.25/square foot. (No other details offered, including size.) Probably an absolutely horrible location for a skateboard outlet (It's basically in the industrial park.) but may be good for what this guy wants. Suppose I'll point it out to him.
(Disregard the above; I just looked into it. The person is actually located pretty far away. I forgot to change the new distance bar on Kijiji so the local search just shows local results.)

Anyway, I don't know what kind of action the clerk will take. Going to college for a business course seems like a good indicator he might do something, but who knows. Most likely he wanted to open a business, and either decided himself, or someone else decided for him that taking courses is the best way to get started. *Shrugs*. There are just too many variables, I don't know what, or even more importantly, how they teach. I don't know if he's enjoying the course, or just sticking with it because he's already invested time and money. He mentioned something about partnering with a friend, so that adds a whole new layer of if's.
... But most importantly, I'm not sure what his bounceback potential is. He seemed really disappointed when I gave him the numbers I had (Basically his likely market potential against the mall lease and loan combined) I had available, but at least relented to the idea of making it work where the odds are more favorable.

Well, thanks for the chance to be long winded. I got most of my need to chat out of the way, and will be able to concentrate better on my tasks!

Justin you're on to something. Even $525 is too much. I'll bet that somewhere out there is a commercial owner who is possibly desperate and willing to negotiate. Why not get a large building in an industrial park (key) and not only have a skate shop, but also a skate park AND an internet cafe with a pool table that makes money, video games that make money, vending machines that make money (perhaps that sell things like flash drives and the like). Make it the talk of the town for it's market. Create a buzz, use shock value in the name and the slogans. Get people to talk about it through shock value. Make it so people have got to check it out. Put a couple rooms in there for bands to practice. Put a stage in there. How much money AND FUN can you possibly make/create from this cheap little industrial building.

Then think about things like how high the ceiling is. If it's 18-30 ft, it'll use a ton of energy to heat so this is a bargaining chip w/landlord. Is the lease a gross or a net? (I'd prefer a gross) How many rest rooms are in it, and will the place make code for an assembly type of use. How much will an architect cost? How many parking spaces? Is there a drinking fountain in it? How much power is needed and how much does it have? What are the codes for the use? How much will it cost to get it up to code? How flexible is the city? how much will the inspectors let you get away with? How much will they help you with?

how many times are you going to need to revise the lease contract? What are the legal fees going to be?

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