Hi Tom
I am comtemplating buying a small pizza resturant which cater to an upscale neigboorhood. The rest has an excellent quality pizza and menu. It has been graded the “best pizza in Houston” in 2003. It has a net proift of $80k/yr. The rest. has been in the same location since 1999. The facility is only 1000 square feet.
The seller accepted my offer of $173,000 with 45 days training.
I do not have any recent pizza resturant management nor I work in a pizza resturant lately. I have some exposure of the business many years again. My friend who is a chef, having no resturant management, agree to run the store for me. I am in real estate and mortgage business .
What is your advice ?
You are going to buy a business that you have no related experience in and have a friend run it who has no management experience?
I would accept a $173K offer for a business that reports $83K net profit, if I were selling it.
75%-plus of all businesses fail in the first year of operation. I believe NRA reports higher for restaurants. If you have a rock solid (WRITTEN) business plan, strong capitalization, and several consultants to advise how to operate a pizza shop in that large, competitive market, I would hesitantly say it may possibly be worth a shot.
If this is your life-long dream, you have done lots and lots of research, you have combed through with a restaurant competant accoutant every financial record that seller has in hand, including invoices. You are absolutely sure that the numbers are reliable and predict actual operation level of the company, you have a strong marketing plan already laid out-ready to implement-and mostly funded . . . then take the risk and make your best shot.
Sooooo many people hop onto the pizzeria train thinking all they need to know isd how to make a pizza and they can make a living. If you are flexible, creative and ingenious, then that can work if the market cooperates.
How many houesholds are the within 3 miles? 5 Miles?
How manypizza competitors are there in that same radius?
These two will give a very basic indicator of the potential pizza market:
# households x 17.50 = potential monthly sales in market Divide that by number of pizza competitors, and that is the simple shares if everyone gets even amounts. Compare to what the sales reported by seller are. It will give you a wild guess of the room for scoring customers and how much recruiting from other places you will have to do.
PS 2003 is a long time ago in pizza world, and you never know what criteria they used and who was in the running. Good pizza award does not EQUAL good business purchase risk.
I’m not an “operations” person by any stretch of the imagination, but from where I sit, this looks a bit like the “blind leading the blind”. I think you’ve got to get some operations savy right pronto if you are going to make this work, and it wouldn’t hurt to involve your chef friend too.
The one guy that I would suggest that you contact is BIG DAVE, Dave Ostrander is an operations guy that can provide you with the assistance and knowledge that you really need to make this work. You can reach Dave at <bigdaveostrander.com> or 1-888-BIG DAVE.
Good Luck,
Tom Lehmann/The Dough Doctor