I’ve been looking into purchasing a pizzeria. I’m looking a few that are in the 1-1.3million/yr sales range. If a business was doing around 1.3mil a year and had a on staff chef, what type of margins would be expected? I know this is very broad, no lease information, other employees, etc. I’m just wondering what you guys would guess an average operation of this scale would pull profit wise. Most for sale list 20-30%, my research online shows that that number should be more 8-10%. Are they inflating their numbers? Thanks!
I would highly doubt 30% but a place doing 1.3 should be higher than the 8-10% . With the volume generally comes lower % of occupancy costs and many other fixed costs. I would generally think that at that volume, somewhere between 15 and 20% should be realistic but as you said, there’s way too many variables to apply a general rule to businesses across the whole spectrum that this website covers.
In the end of the day it will never be what the figures they tell you say, and with so many variables you can only really find out when you start.
And remember you will be paying a lot of “Fool’s Tax” no matter how good your due dilligence is. It’s just a fact of business life.
My best guess would be that those listings are showing “operating margin” and not profit margin. And an operating margin of 20-30% would be good reason to want to get out of a restaurant. Ask to see their corporate tax returns. You might uncover a profit margin bouncing around and/or below 0% with an operating margin that small.
Let’s not forget…net profit is indeed important, but also, what is the ROI%?
Yes, restaurants traditionally yield less than a 10% profit, but 10% on 1.3M is a mouthful!
Especially if you have less than a few 100K invested…
My net is quite small (when compared to, say Paul’s massive operation) but my cash investment is quite minimal…
Some day I hope 2 b as successful as Paul’s operation, then my ROI% will be unreal!
I’m saying, 20-25% in the owners pocket @ the end of every year. If the owner were the one who managed everything, and there was a chef on staff.
I’m curious… what’s the average listed sale price for those shops averaging 1.3mil/yr? According to material I’ve read, there’s nothing average about a 1.3mil/yr pizza shop - they are way above average!
Hmm…usually around 700,000-1mil
since we are on the topic, how are these purchases structured, 1/2 down 1/2 owner-financed