Buying a Pizzeria-Need Advice and Help

Hi, I am looking at the purchase of a pizzeria.

The store does $17K a week in sales.
The rent is $4000. Electricity and gas is $1800.

It is a busy area (in a major city) with a medium
sized university nearby. The main competitors are Papa Johns and Dominoes. Independents do exist (two) but are a little farther
away.

They have stated that Fri/Sat nights can have as much
as 12 drivers, 4-5 people inside. Weekday lunches have
2 inside, 2-3 drivers.

The store is 85% delivery, no seating.

The store is open extremely late hours: til 2 or 3 am, 7 days a week.

The current owner has only owned for 9 months and thus
only has limited data as opposed to a proven track
record of 3+ years. Apparently, they have near tripled
sales in just 9 months-- 6K a week to 17K a week. To
me this is a big red flag.

I have my own doubts when it comes to verifying sales.
Although a 2 week due diligence period has been
allowed, can’t they just have their friends just call
in fictitious orders to inflate sales?

Should i have a misrepresentation/fraud clause written
into the contract so that i’d have the right to sue if
i have to?

I’ve scoped out the store and it seems pretty busy. My
personal estimate is 13-14K a week, although i really
doubt they use 12 drivers.

What do you calculate for the net profit/owner
benefit? (a range is fine)

How much is a fair value price for this business, in
your opinion.

This will greatly help in my proceedings in buying a
business. I would greatly appreciate any help. Thanks
in advance for your assistance.

Things you can do to start verifying their claims:

Ask for all food purchase receipts/invoices. Average food cost should be between 20-30% of sales depending on the quality of the food and how much cheese and toppings they use, so you should have food orders of $3500 to $5500 every week on average. Also ask for copies of their Federal 941 forms where they show their payroll amount. Also ask for state unemployment forms. Here in missouri they list each employee and the amount they earned. Back out their wage $$ to come to a number of labor hours.

Ask for copies of their monthly sales tax returns, verify their tax payments against the amount they claim they sold.

If they have a POS system ask them to run every report they can out of there, sales by day, sales by week, expenses by week, coupons redeemed, etc. Cross check everything in there with the paper copies. Crosscheck each week’s sales versus the amount of sales tax they paid to the state. Make sure that they’re not giving the food away either, just to drive up sales with no actual profit.

Just a few ideas. But, please, for gosh sakes, don’t do anything without a lawyer!

I am also in college town, open late nights, and could probably help you determine approximate sales with just a few #'s from the menu and a few #'s from recent invoices. Feel free to email me and I’ll happily give you some guidance here. If he’s not willing to share invoices with you, then the deals not worth getting into.

I could definitely use that help.

What if its fact that the guy owns multiple locations? Couldn’t he just buy food for 2 stores and charge it to the store that is for sale?

Will most sellers agree to let you get the info directly from the vendor?

Thanks for your help.

Only someone having something to hide hides their data.

If their numbers are true they’ll gladly show you them and all the supporting data.

Sit outside for a week and count the deliveries going out…Far from scientific but it will give you an idea…RCS…