Not looking to expand necessarily, but saw an opportunity today. It’s a 2 year old pizza place I know very well. I like the area and know why the business wasn’t successful based on my experiences there and a pretty good knowledge of their operation.
It needs a divider wall built and I would replace the majority of the seats and, of course, a sign. Other than that, it is turn key. The operators walked away one week ago with product on the shelf. The ovens, mixer, prep table, refrigeration, etc are all acceptable for my operation and in great shape. Everything is included (TV’s, POS (would need programmed), glycol system, equipment, furnishings, smallwares, shelving, EVERYTHING). I figure I’d have to invest less than $20k-$30k into the 4200 square foot space to make it just how I want it. So my question is, how much can I figure all that is worth in rent, if any? Should I look to prorate the value of all of that over a 3 or 5 year lease? I figure the auction value of the equipment is $25-30k (two y-600 stacks and an 80qt hobart alone are worth 12-15 at auction).
The asking rent is very high ($20/foot +cam so $27+/foot) but could be negotiated substantially. But even at $15/$22 a foot, I’d have to $1.2 mill just to get to the 8% cost of occupancy ballpark. I think it could be done, but that’s not my conservative estimate (and I like to be conservative). But do I factor in the equipment and turnkey nature in my rent consideration?
Any help from the experienced would be appreciated.