Ideas for purchasing closed pizzeria

Been out of the pizza business for 3 years and have been presented with the opportunity to take over a closed pizza location. It is in a strip mall with Target and a Grocery store for the ancors. 2500 square foot and fully equipped.

This location has been closed for 3 years, so I am sure the equipment needs some sort of attention.

This location is good but not as visibale to the road as I would like. It is on the end of the strip mall but is also the 1st place cars pass when coming in off a secondary road, and there are plenty of them as I have set there waiting for the lease agent to get there to let me in.

They want 15.00 per square foot and another 2.90 for cam and this includes the equipment. Seems a bit much they are willing to negotiate but to what extent I don’t know.

Just want to know what everyone thinks on here.

Would a percentage of the sales be a good idea to get things rolling?

Thanks in advance!!

Is the equipment what you want? What’s the monthly rent? Why not just buy the equipment and start over?Why buy “the business” that failed? Is the counter where you want it? Do you need to move walls?

2500.00 sq ft is big, so you’re going to have to sell a lot of pizza. We’re looking at our 2nd place and the monthly rent and triple net has been our guide to what we can get into. Can’t believe how many people around here started yogurt shops with rents at 5000.00 or more a month and yearly sales were 50K. Everyone is selling and they’re stuck with leases.

Ok equipment is included in the rent.

Rent would be about 3800.00 including cam. But rent is negotiable.

Has good size walking cooler, 60qt hobart, ps360 ovens with hood, make table, everything would work ok. Seating is in great shape, as is all leasehold improvements.

I would say the place failed because of poor management, or lack of management.

The town is about 65000 population in the midwest.

thanks for the comment that is what I am looking for good or bad it all helps

thanks in advance

The rent isn’t bad and the equipment is good quality. Now you need to figure out wages, which is the other killer. If you can afford to put out around 8 to 10 K/ month for rent, food, wages, insurance, taxes, gas, electric, boxes, plates, etc. that isn’t bad. You do 250K or more a year gross and you could probably make it.

Keep in mind, that Rent should be no more then 10% of your sales. If your rent is 3800 a month, then your store better be doing 38,000 a month in business. if your gunna give it a go, i would try to knock down the rent… It takes alot of time to build a business…

Thanks.

Looking into it further it has 16 tables that seat 4 each so it is not huge.

Nosed around the town Saturday night and places seemed busy, Dominoes, Pizza Hut, Papa Johns, etc plus all the other sit down restaurants seemed to be fairly busy.

I am pretty sure they will deal on the rent as it has been non occupied for 3 years. The landlord has the equipment due back rent.

I have been in the business since 1978 so it is not new, just sold out 3 years ago but it seems harder today, as is everything i guess.

Thanks again

Hi coupepizza

Hi coupepizza:

You Indicated the establishment has been closed for three years but you did not indicate for how many years the place had been in operation prior to closing.

My advise to those intending to purchase an existing pizza shop is always the same.

Do not assume that the shop will be grand fathered in as concerns the vast multitude of Building, Health Department and fire codes. These codes can be very different from what was in force when the place first opened.

Get all three of the above departments inspectors in to check for any violation of the current codes. It could cost you a bundle to correct violations. If you know what those potential violations are are you could perhaps get the landlord to correct them before you sign on to the deal.

George Mills

Hi George,

Thanks I will check into it. I know it was open as a different pizza and sandwich shop before, they opened another high dollar location and lost both. Then someone took them over thinking they could keep the name and for some reason they couldn’t. The 2nd owner was open for 1.5 years had another location 75 miles away and couldn’t run both so he closed the this location. His sales were 3000 to 3500 per week with no management in place. He is content with the one location and is doing well, i suspect that if he did have management both would have been successful.

Thanks again everyone.

Coupe

I am in the same situation you are. The realtor I was dealing with just informed me of a place that had closed down maybe 2 years ago. Although it wasn’t a pizza place,they still have all the basic eguipment needed including hoods,vents,grease traps. The rent there is almost the same 3,700 a month and seats about 50. I did talk the the realtor and he said he would knock the rent down by $1000 for the first 4 months to help me get started. I took George’s advice and had the inspectors come in and check things out and they all gave a thumbs up. I would suggest if you do take that spot that you market it heavily and let your customers know that it is under new management with better food to get them back in.

In some material I have seen in the past, it was suggested that the rent be multiplied by a factor or 15 to 20 times to arrive at a sales figure that will sustain that rent (and other building costs)…So 3,700 per month in rent needs 55,000 to 74,000 per month in sales…So will that location get to that in sales?..

I believe so. The location is on the major in town highway. It is about one mile away from the local mall. It is in a shopping center next to Target,Home Depot,Best Buy,Marshall’s and other smaller stores. Right across the highway is Walmart,Sam’s,Lowes,Staples. It is about 4 miles away from the stateline and also on the side where most of the people are heading home to that state. The closet pizza place to us would be a Papa John’s which is about a mile away. The other places are at least 5 miles away.

This seems pretty high to me. It all depends on specifics of each shop, but if I got my mortgage payment to 10% of my sales, I would be making a good chunk of cash every month.

Yeah, 15 to 20 % seems steep. Maybe if it’s a full blown restaurant, but probably not needed for just a pizza shop. 10% is probably doable unless you have an extravagant lifestyle.

That’s necessarily always true. The rents at both of my stores run above 10% and both do very well. Both stores are in affluent areas with high property values and therefore high rents.

With that type of demographic, my prices can be high enough that I run 24-25% food cost and 17% labor, offsetting the higher rents. My high rents also have me in high traffic areas, so while I may be giving up a few percentage points in rent the location makes up for it with high sales.

The goal is to have a high net profit in dollars, not percentages. Would you rather have a $1 million store that drops 15%, or a $300,000 store that drops 30%?

I never said 15% to 20%…I said sales should be 15 to 20 x the rent…

Excellent point Piper! If someone is gonna’ make a go of it with 40% FC, rent had better be cheap. *Oh yeah, who is making 30% profit on a store doing $300K?? (I’d be losing $$s at that sales level).

True, sorry for mis-reading it. Still seems high though.

This gives you 5% to 6.7% of your sales as base rent…By the time you add in all your other building costs it probably ends up 7% to 10% of sales…Most profitable restaurants will be right in this range…