Ok im about to go into contract and need som info. Im a little nervous but i think im doin the right thing, its always better to be your own boss. but anyway. I am about to buy and existing pizza place for 105,000. Obviously with a cash business they claim less then they actually make, but judging by his food bills which are about 1900 a week im guess he is doin about 7k a week give or take a little. This is without advertising with good food in a very saturated pizzaeria area on a VERY busy road with a large middle class population out in Suffolk County Long Island. rent is 2200 his labor is 1800 which i can cut cause he has to many people working at some bad times. the guy went into business with his brother in law. He wanted to open a sit down restaurant but his bro in law said i know the pizza biz lets open a pizzeria he agreed. THe pizza guy then got divorced and ditched him with the biz. now he wants to open a restaurant again becuase he doesnt know pizza. The place changed names many times and places have failed here becuase of the competiton, but this guy pulled it around from a 2000 a week store to he claim 7500 bottomline store. which might be possibly true. I have a lot of confidence in myself and my knowledge of pizza. His catering is astonishing i feel with my pizza skill i can tun it up to a 10k store. I just want to give you all the low down and see what your imput is. I know the price we agreed on does not go with the income the store is making and it should throw up a red flag but, like i said this was aproblem location and the area has about 5 indepentdant places pretty close by, all of which do well. feed back and lots of it will be greatly appreciated as i am about to go into contract very soon
I guess I don’t understand why “you” should have to “guess” at any of the numbers. The value of the business you are buying should be based on exactly what real numbers are being reported to the IRS. A business owner should not be allowed to cheat on the numbers on one hand and then to also get paid for cheating on the other. There have to be consequences somewhere. That you have particular insights on the business is fantastic…but start negotiating with the "real"numbers, not the ones you guess at.
so what your saying is i should negotiate on a price based on what he repors? he pays one distributor cash and one check and splits cheese orders, so its hard to track for the IRS thats just how pizza is done in NY. a lot of money is hidden. he reports a 700 food cost to the IRS then his other bill is 1300 he pays in cash.
i ahve looked at about 25 different places on LI and they all do this one cash one check thing, they all hide large amounts of cash and claim only some cash and all credit cards…
Just do what the IRS does when they audit these guys…stay there all week and keep your eye on the register…if the guy is doing the business and is serious about selling then they shoud not mind…
PS I have heard of guys having their friends come in to inflate sales
When we were looking to buy a place we had several owners allow us to spend a week and see how things run currently. Once negotiations got serious we were able to look at their books and see what kind of numbers they are reporting.
If you were to spend a weekend there you’d get a good idea of how things go. This would also give you time to talk to their employees, who in many cases keep better records than the owners do. I’ve had drivers that kept journals of our their sales, number of deliveries, tips and descriptions of each business day. They’re a good resource.
One of the other things we did is we’d drive around stopping people along the way and ask them where a good place to get pizza was. After asking about 100 people you get a good idea of how people in that area view the current selection of pizza shops in your area. What’s more important than your potential customers perceptions ??
Good luck to you ! Go Yanks !!
– I am about to buy and existing pizza place for 105,000. Obviously with a cash business they claim less then they actually make,—
This kind of crap ticks me off! If they are lying on their taxes, they are lying to you! BTW, turn them over to the IRS and you get a portion of the taxes they owe as a reward…
Be very careful. Someone that is so cavalier about being a liar a thief and a cheat will not have any problem cheating YOU. Don’t pay for anything they can’t prove. If the cash ain’t on the books, the money does not exist as far as you are concerned… As for expenses, demand the actual invoices to back up what they are telling you! TRUST NOTHING!!!
i have seen the actually invoices from their distribuers… they are spending between 1700-2200 a week in food
So at 25% food cost you can multiply this figure by 4 to determine sales right?
not quite that easy…sounds like the place is poorly managed so I doubt they are attaining proper food cost %'s…they might be piling on food and throwing so much stuff out that does not necessarily mean SALES…
bottom line is regardless of what he reports start negotiations based on what is on the books and work your way up to what you are confident his AVERAGE sales are…of course factor in what sort of equipment is included, lease terms, etc.
If your buying it threw a broker you should have 2 weeks to sit there and see the sales they are doing. Watch out. If he wont let you sit and see sales RUN!!!
Again, If you want a place in Queens, let me know. If you feel that you can increase sales then really get in touch with me. My problem is I never go out and try new accounts with schools etc… And I dont adevertise
People here are giving you good advice. When I look at an acquisition, I could care less if they report the whole truth to Uncle Sam, as long as we can build that picture back up. The current owner should allow you to closely monitor his business for a couple weeks. You should be with him when he makes orders, be with him when he closes out the drawers, etc. It’s hard and annoying work, but you can rebuild these numbers.
Nowadays, I don’t have time for that anymore, I only buy places that have good POS systems in place and solid tax returns. But my furst buy was similar to this one.
see if this all works i plan on putting a pos system in first week or 2 im there… and after this i would like to eventually build my own place… im not to fond of buying existing places… its just scary as hell this is a risky business and most business are run a little shady thats just how it is especially in NY… … I am going to speak with my lawyer and try to set up me ebing in there for a few weeks and see how it goes from there… i appreciate all the help … keep any advice you guys got coming
Couple of other issues:
If he is paying some vendors cash, and understating his revenue, he is obviously underpaying his taxes. Assuming you are going to play by the rules, be prepared to pay much higher taxes than he is. He is probably paying some employees cash also, so he can underpay his unemployment contribution…again, additional expenses you will incure. Finally, if you do get a chance to see the operation for a few weeks in advance…Just focus on Friday and Saturday night. Thats when everything important happens, and you can infer the rest of the week from that…if your time is valuable, don’t sit there on tuesday afternoon to figure out he only gets 1 order.
also, installing a POS system is very difficult. not installing the hardware necessarily, but training employees to use the software and installing the menu in the software…consider getting the “lay of the land” before that expense. If he’s really doing $7000 a week, his current system can’t be all bad.
If you are willing to move out west for $105K I could help you open up 4 stores, and if we rollover profits we could probably open upwards of 10 DEL/CO’s in 2 years. At the conclusion of year 2, you would be a 49% owner of 10 stores with a AWUS of $10,000, and you would be earning about 500k/yr+.
I know you live in NY. But what would you be willing to do for a 500K/yr income? I am from Seattle, I am totally out of my element in Northern Idaho but what the hell, I am making more money than I have ever made.
If you are doing those kind of numbers, cant you go to the bank for 100k? And why would you be the majority owner?
I cant see any town in N.Idaho supporting 10 stores, even Boise (I know that isnt N. Idaho)
Sounds a bit fishy…
Whats fishy is you don’t have a name guest.
I wouldn’t help him open four stores in one town. I would help him open 4 stores in 4 towns. There allot of small towns up here that don’t have delivery in them. I have found greater success in towns of 2,000 to 3,000 than in large metropolitan areas like Seattle.
I choose not to got to a bank for money cause, money isn’t the issue, manpower is. Its hard to find someone who will put his money where his mouth is per se.
I have gotten loans, but that requires me to seek out managers, and staff, and train individuals that don’t have a vested interest in the business. I have found that usually there is no turnover when you are vested in the business.