Okay…The original place I was looking at. We had a price situated; however, I just didn’t feel entirely comfortable with it.
Somewhat of a rural are, few neighborhoods here and there but about 4 miles away are a lot of houses and businesses. It’s rural so the rad to get there is 55mph…no big deal as far as delivery goes. We settled at last meeting on 18k and 3300 a month. 1600sf with 16 dine in seats. Rent’s high but business is cheap, kinda. Told owner I couldn’t swing it so now he’s asking if he lowered price and/or rent if I’d be interested. Currently says he’s doing about 6k a week. Been open about 2.5 years. What scenarios could I bring to him as far as working there for a while. I’m currently a server at another restaurant. I could scale down my hours there but I don’t want to quit entirely just yet. Any advice would be appreciated. I think working there for a while would be a good idea. I could use that time to get all the inspections done that I need and also see if he REALLY does 6k a week. Let me know what you guys think. Thanks in advance. Also, It’s a free standing building with a 10X16 Drive through kiosk type building in the parking lot. I was thinking in the summertime I could turn that into a ice cream type place. Rope off some of the parking lot for picnic tables etc…During winter, maybe use it for LC Hot-N-Ready type set up. We’ll see how it goes. There’s no POS and NO marketing as such.
imathieu,
How can you negotiate a price when you don’t know what the business is worth? YOU CAN’T! Do some research and review his books and tax returns (hire a CPA). I will bet you that HE HASN’T DONE A TAX RETURN, OR EVEN PAID SALES TAX! Check his insurance coverages. I bet this guy doesn’t even know what ‘books’ stand for.
Unless he can provide certified docs for your CPA to review, including vendor invoices, don’t waste your time talking any further with him. He’s a con, in trouble, and see’s you as a SUCKER! (that may be harsh, but I don’t have a good feeling about this).
Okay,
Can anyone just give me a clear 1, 2, 3 type list of what to ask him for to give to my accountant? Also, any help on my original post would help as well.
All Corporation Tax Returns.
All Sales tax returns with cancelled checks.
All 941’s
And run a background check on him (his corp) to look for court judgments, etc.
We were always instructed to get access to his vendor files to verify his purchases too. It was seen as a way to verify his sales, cash on hand etc… I know the IRS manual on auditing a restaurant one of the first things the agents are instructed to do is grab the files from food vendors.
This is a good, easy way to see how he is doing. A properly run, independent shop is generally around 25%-30% cost of goods. So he should be spending $1500-$1800 a week with his food vendor. If all he can show you is that he is spending $1,000/wk on inventory, then he isn’t telling you everything. If he’s spending $2,500/wk, then he has a improperly run shop and is probably hemorrhaging money.
My store was 54% cost of goods the year before we bought it because of employee theft and inefficient operation, we are now around 28% with a high end product (the best around if you ask me) and competitive pricing.
There’s no POS
I can set up a reliable POS for less than $1.5k.
What scenarios could I bring to him as far as working there for a while. I’m currently a server at another restaurant. I could scale down my hours there but I don’t want to quit entirely just yet. Any advice would be appreciated.
- Work during rush hours.
- Work during truck delivery.
- Offer to do prep for him.
Those two will give you a quick and dirty view of the business by witnessing the rush hours after several weeks, and also by tracking order inventories arriving weekly on the truck. In a busy store, prep is critical.
The guy claims 6k weeks: dangers signs are: truck orders are $1K, and 1 guy can handle the rush. No prep required.