hey guys, I have been looking at doing my own store now for a while and need some advice. Im 24 , and have been making pizza’s since i was 12 and began running a small pizzeria by my house at the age of 15. Im tired of working for others and I have 2 options im debating on here… 1) a 3600 sq ft wood burning brick oven place is for sale by my house for 100k, I worked there for 2 years and then it was sold and since then the wkly business has dropped in half. (does roughly 7-10k ) i was going to make an offer of 80,000 and the store would need about 15k in new stuff I feel… the build out was done in 2003. major prob is the rent 8700 a mo. the landlord is willing to neg a new rent with a new tenant…i would feel 5,000 is a fair rent there… option 2… build a store from scratch in a differnt area in a bran new 6 tenant strip mall with rent cost of 15 a sq ft and spend about double the money i figured about 200k for a 2,000 sq ft store with a brick oven… What is a better way to go.? fresh everywhere or take a bleeding existing store and fix the problems and hope it works…
The rent is way too high even at $5K. That is like the rents we pay in Australia where we are way over the top of you guys and at the $7 - $10K sales area you wouldn’t make a dime - I can vouch for it at that price because that is what we pay per month and on sales of $11 - $13K we struggle.
Also, why is the existing store bleeding?
Do lots of homework and research and look deeply into all costs involved on opening a new store.
There is heap of threads archived here on the TT on new store openings.
Suppose it depends on your perspective but $5k a month is not bad for that much retail space. At $10k a week, you can “build” on $5k a month rent if you run it yourself. $7 to $10k a month is a big range – especially at that rent. Only you know the details of what happened but if they just ran it into the ground it sounds like it could be a good deal. I have a hard time believing, however, that the landlord would reduce the rent that much. They all say they are open to negotiating – doesn’t mean a good deal. How much time is left on the lease?
Sales price of a business is based upon the profits it is making. The business is not making any money at those sales levels and that rent factor. I was jus looking at a similar deal and they are asking for $80k with $7500 rent – under $40k mo. Thought about offering $60k but the landlord, who said he was negotiable, really was not when it came down to it.
Your deal is enticing because you know what its potential is and you know the business intimately but that rent is just a killer. There are so many deals out there so don’t get too attached to this one. Why spend the money on a new installation when you have so many existing places on the market?
Rent should be no more then 10% of sales.
If your store is doing $40K a month, then your rent should be no more then $4000.
There probably is room for improvement, but you’ll be operating in the red to start.
I wouldn’t walk from this one, i would run from it.
Buy it for $0, which is what it is worth.
Open from scratch. That’s a big rent and a big store for a beginner.
No offense at all but both of your ideas are totally ridiculous to me.
I would not do either of them ever. For example my slower store is 860 feet and the rent is 1600 a month no NNN fees in a 1 year old strip mall, it does about 35k a month.
My second store is 2000 feet and we pay 825 a month no NNN fees and it is almost doing 50k a month
In our strip mall there have been 4 other busniesses in 1.5 years that have failed due to high rent. ranging from 6k a month to 9k a month in rent.
They have all failed within 4 months.
Find a small little place to get your foot in the door and learn the ropes, then go big
I am in a similiar situation. I have a chance to lease a 3000 sq. ft. spot that was formally a pizza place for $5000 a month. Except for the tables and chairs in the dining room it has all the equipment in place. Except for some painting I wouldn’t have much construction costs to do. It is located right next to a Walmart and Sam’s Club which is another reason for the high rent. Plus I would have exclusive marketing rights to the hotel that the owners of the center also own.
thanks guys… can somebody point me to where i can find the threads on costs and what not that come along with opening a new store.? And when i said before the exsisting biz is bleeding its bc the owner died and his wife is taking care of it and has not a clue about whats going on. shes never there, she pays her pizza man 1300 a wk and we all know theres sticky fingers running around poorly managed places…she thinks the store is worth 150k… i offered 65k last month and was denied, her broker told me if i offered 80 he would push her to accept and walk away. I also forgot to mention, this store is in a strip mall with a A&P food store there for reasons behind high rent.
Wait it out.
IF those numbers are anywhere near being right, she’ll be broke within 12 months.
For resources, look on the FAQ.
I think when you post such deals on here you should give some details on the location. Many of the operators on here come from areas where the costs of living are much cheaper than others and so such rent factors would appear outrageous. However, the purchase price really is not the issue here. It is the rent. Talk with the broker/landlord and see what can be done. Is there open space in the center or is it filled to capacity with long standing businesses? At least that will give you an idea of where the landlord is coming from.
The situation is ideal as far as knowing its already established potential and the reasons for its demise. Worth pursuing, imo, to see what you can negotiate. Regardless of whether you do the deal or not, the experience of going through this is invaluable.
Maybe you get the rent reduced a bit, you put a small down and she carries the papers on it. Then if it doesn’t work out, you are only out your small down payment and she takes it back.
Keep looking for other deals – in the least it will keep you from thinking too emotionally about this one. Focussing on one deal tends to cloud your judgement.
sorry ya i shoulda posted my location… im in north NJ about 25 minutes from PA… as far as the mall goes being fully leased… its not. theres about 4 or 5 empty spots which have been empty since 1995 when the building was build. theres a MacDonald’s on a pad site, A&P food store, a pets mart,(used to be block buster) dry cleaners, verizon, nail place, and a chinese take out.
Ok so the numbers here are a pizza place for sale that does 7-10k a week right now in a strip mall that was built in 1995 and has had 4-5 open spots since day one? On top of that the rent is $8700 a month or $29 sq ft. Is this a triple net lease? What are the additional lease fees / tenent costs your are responsible. God I hope you have a concrete parking lot for that extremely large and vacant strip mall. Spliting the paving cost is going to be a dozy! This has RUN AWAY FROM written all over it. This operation will be closed in 3-4 months if they are lucky. Their lease expense is 25-35% of gross right now. I would wait for the place to close then offer to buy her out for $50k and only if the landlord will give you 6 months zero lease payments till you get up and running and then a locked in longterm option of something a bit more reasonable than the $29 sq ft he has in place. If he has 4-5 open spaces… I bet keeping one filled at $4500 a month would be better than another one added to the vacant list. Wait this one out and then go after the place. Other option would be to negotiate with the owner to take over on a purchase contract…something more realistic than she thinks… but again only if the landlord come on board with something at the table. Good luck.
The mall strips- landlords are in need to get a there spaces leased. Even though you have good BIG box business around you that does not mean that space requires high rent. The landlord will use it but, the space requires foot traffic. If you next to someone that is empty or low foot trafic like a GNC. it will not bring customers in to inquire intially. I was in between a super walmart and a home depot. The only ones in town. But, I had 4 empty spots by me with no foot traffic. Customers would go to the walmart and by pass do to the empy spots. The land lord said your rent is higher do to the wal/depot. Well this does not help your sales, if traffic is focused on them. The other folks, are right! I am in Michigan and you can blow a cannon off here. But, they still are charging high rent even though half of the Mall strips are empty… Keep the fix cost down! Rent is one of the three. Sometime a deal is to good to be true. Its business not emotions.
i forget the exact lease terms ill have to re look… I know its 8700 right now 3600 sq ft … that price includes all your cams and snow plowing ect ect. You are however required to pay a percent of the property taxes… Back to the thought of building a new store, what should i expect for the build out with NO equipment. just the fit out including hood/plumbing/floors/ gas / electric ect. I was figuring 100k?
That part of jersey…neither of those rents are out of the question. it costs big money to be in business around here. where is it…morristown?
its atually the boarder line of warren county and hunterdon county… the new build out would be on rt 46 in bud lake which i think is morris county
In my case all the spots in the plaza are filled and have been for years all by the same stores. They have only had one turn over.