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Tearoom 3

How to Buy a Tea Room

Read on to discover how to buy a tearoom!

Given Canada’s historic ties with the UK, Canadians have a good understanding of tea drinking. But it’s only in more recent times that tea has been considered a social beverage on par with the nation’s coffee drinking culture.

But if you’re targeting this market in particular, you’ll need to know that tearoom owners believe it’s the tea-drinking experience and the perceived health benefits which are the primary drivers of this tea renaissance.

Buyer’s profile

Buyers interested in purchasing a tearoom are often interested in various aspects of millennial culture. This may be from the health angle, where the focus may be on varieties of pure teas and blends which are known for their beneficial effects.

Alternatively, your focus may be on different tea-drinking cultures (e.g. British high tea, or Japanese and Chines tea-drinking ceremonies) and the atmospheres and tastes associated with such rituals. 

Like any other business owner, you must have or be prepared to develop, a sound knowledge of broader business disciplines such as small-business finance, marketing and business planning.

If you plan to attract the top-end consumer market by creating a distinctive consumer experience, you may want to consider gaining a Tea Sommelier qualification as offered by the Tea and Herbal Association of Canada (THAC). Their site explains: ‘A Tea Sommelier is a trained and knowledgeable tea professional who has successfully completed the certification examination and is well versed on all aspects of tea as it affects the consumer.’ 

In terms of personality, as a prospective tearoom owner, you must clearly have a friendly, welcoming disposition, and should be well-organised and approachable.

Finance and statistics

Existing tea room businesses for sale may sometimes combine their tearoom facility with related services such as a cafe/ restaurant or a health/ lifestyle business. 

Typical businesses on offer at BusinessesForSale.com include: a Vancouver tea room with expansion potential at $18,000 (CAD), a cafe/tea room in Richmond going for $180,000 (CAD), a prime site in Wolfville, Nova Scotia asking $1,648,000 (CAD), or a Tea Express With Coffee opportunity in Toronto (price on request).

When you acquire an existing tearoom business, it may be difficult to get lenders to offer loan finance because you will not have any supporting trading performance figures of your own.

In these circumstances, the Canada Small Business Financing Program can make it easier for small businesses to acquire loans from financial institutions by sharing the risk with the lender. Those eligible (small businesses in Canada, with gross annual revenues of $10 million or less) can apply for loans up to a maximum of $1,000,000.

Elsewhere, it may be worth applying to the government-backed Business Development Bank of Canada whose specific brief is to offer consultancy advice and to provide loans to buy an existing business in Canada.

With some listed businesses, you may find that seller finance is offered as part of the deal. But if you are considering such a move, it’s essential to seek legal advice about the terms of any offer before you sign up.

What to look for in a business

When looking over any tearoom business, your primary objective should be to understand precisely how the features you observe actually contribute to the trading performance. This might include, for instance, noting what proportion of premium-quality and speciality teas are sold as compared to standard blends, as well as how often luxury menu items like a ‘royal’ high tea with champagne are ordered in preference to a normal cream tea – the more run-of-the-mill offering.

You will naturally have considered the location of your target business to confirm whether the trading performance is underpinned by a regular footfall, or whether the exclusive menu, or some character of the setting itself aligned to a strong marketing strategy is what makes it a premium destination.

In any event, you should expect to find a business with a highly visible and attractive frontage which conveys a positive impression to all who pass by.

If your prospective tearoom business is set in a Canadian tourist location, this may be advantageous. But it may also signal a seasonal trade. That, in turn, begs the question of whether you can do anything to develop your out-of-season trade.

On the other hand, it might also suggest that, when the income is averaged across the year, the tearoom may not be quite the goldmine it appears.

Licences and permissions

Canada’s food, hygiene and health and safety regulations are stringent. Therefore, it is wise to check with the relevant government authorities to make sure you understand your regulatory responsibilities. There will also be fire regulations to comply with, and when you employ staff you must also observe Canadian employment law.

Due diligence 

Prior to any negotiations with the seller, your due diligence team will examine the trading records and supporting paperwork. This exercise will report on the state of health of the enterprise and give you a clearer picture of whether the asking price represents good value for money.

Is the business right for you?

Provided your enquiries have given you a general understanding of the sector requirements, and a thorough understanding of how your target tearoom business can be run at a profit. You are now in a good position to decide if you want to become a tearoom owner and make your mark in one of Canada’s growing leisure and lifestyle business sectors.

Look through some of the tearooms that are on the market and find one that is perfect for you!



Bruce Hakutizwi

About the author

USA and International BusinessesForSale.com Manager for BusinessesForSale.com, a global online marketplace for buying and selling small medium size businesses. The website has over 60,000 business listings and attracts over 1.5 million buyers to the site every month.

@BizForSaleUS

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