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I just tried to buy my first pizza place

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whosurpopi

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I went under contract to buy my own place last week, and during due diligence, they told me I cant see the bank statements, cant see the quickbooks, but they gave me the food vendors stuff to show me what they purchased. They also told me I cant stay at the place during the day to see what it is doing, but can come in at night to see them count the money. I am so dissapointed, I had to ask for my deposit back since they wouldnt let me verify in any way what they are making.
 
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I wouldn’t let you see my QB either…no need…see their IRS Schedule C & the state sales tax receipts…

Due diligence does not mean you can hang out & see my secrets, despite your deposit…but the place & I’ll stay & train 4 2 weeks…

Just my 2¢…
 
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It depends. If I were buying the BUSINESS I’d require a complete audit of the ‘books’ and investigate all liabilities, including historical and future. Having said that, no way would I ever ‘buy’ a pizza ‘business.’ For the ones worth anything, no way I could afford it.
 
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The qb would not have been necessary if they let me look at the irs and sales tax reports, however, they are also off limits due to they have two businesses and claim they dont want me seeing both books. They are also saying that being a cash business a lot of the income wont be seen on any books. Keep in mind that when we signed the agreement, i was told by the sellers since i cant see the bank statements that i could see the quick books. Then the accountant told them somebody could go to jail if they fell into the wrong hands, and i cant see anything.
 
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So lets recap here: They want a deposit. They want non disclosure agreements…but wont show you anything anyway! Oh…and it is because someone might go to jail…hmmm… Ok I would run this by the delivery driver crew first but my business gut is saying “ARE YOU NUTS!” RUN DON’T WALK AWAY FROM THIS ONE. You are buying into an already illegally admited run operation. You really want to start off this way? I understand proprietary items and numbers to protect from potential competition…but unless you love Nancy Pelosi…and I quote “you just have to pass it to see what is in it!” OH…and those idiots did pass it…and now we are seeing it all come out! :roll:
 
Yup, sorry “whosurpopi” I gotta agree with Michael on this one, which come to think of it, isn’t all that unusual. If you dream of owning your own place, then don’t let this be it. “a lot of the income won’t be seen on the books…” that’s your final clue.

There are a TON of pizza shops available, if not…make one. IF this dream is in your heart to the point you’re ready to risk it all to do it, then find the right one, this is not it.
 
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All the ‘nay sayers’ raise valid points & I agree to a great extent…but, if they can only ‘prove’ xxx dollars via IRS/tax receipts, then you have a leverage point…running/fudging he #'s will only bite you in the a$$ in the long run…

That said, if the business has many other positive points & it’ll be cheaper to but this vs opening one from scratch, then reconsider…

My pref is to open vs buy…hard to swallow many deals out there…

We looked at several operations and I, too, came across the ‘underground’ money sceneraio, but passed on them all…
 
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Having watched and talked with lots of people here on the 'Tank who have opened and operated businesses, patience and prudence will mean the difference between success and flamboyant failure. Find the business that you know in your mind and heart is a good fit for you. I see all sorts of concerns and hijinks that could be problems if you acquire the business. IF they have no cashflow to document and verify, then it is worth the value of their used equipment. If you can get it for that price, and you still think the business is somehow viable, then it could be worth the gamble. It would be a gamble and not a verified stable business.

You gotta do what’s right for you and what meets your goals. Be sure you don’t end up kneecapping yourself by buying a pig in a poke. They tend to be hand grenades with pins already pulled.
 
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“a lot of the income won’t be seen on the books…” that’s your final clue.
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I love that Deacon! And usually, from what I’ve heard, that ‘extra’ income never seems to get on the new owner’s books either!! :mrgreen:

But, another thing about the ‘books.’ I have a couple of other businesses, and guess what? They each have their ‘own’ books. If its a viable business, they should have no problem showing you the books. A good business needs good books to obtain loans from banks for various reasons, but most importantly, to prove cash flow.

Pass on this deal, they’re looking for an easy con.
 
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The agreed purchase price was 200k. They claim to be doing 70k in business per month. With an absentee owned net of 160k. All fantastic numbers, but non of them are proven at this time. If it is making this, i would hate to miss out on this opportunity, but I also dont want to lose everthing because I didnt heed the warning signs. Vendors show food purchases of 26k per month, and rent is very reasonable at $2500.
 
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The sales numbers seem to add up for food costs of around 30% but I would still want to see the tax filings.
 
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“Books” can be “cooked” quite easily…IRS & sales tax figures carry consequences if “faulty”…

Grossing $840K & netting $160K absentee, now there’s a red flag…

As BodegaH might imply, the biz could or should sell for $320K if $160K was provable…

Bottom line his “net” is overstated…

IMHBCO
Semper Fi!
USMC Auditor, 3rd MAW, El Toro, CA
 
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Good move by running away from that “opportunity”! Talk about red flags! If you don’t mind me asking, what state/region is this shop? I just sold my shop that was doing the numbers you mentioned, back a few months ago.
 
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We will just say its in the south east. Again, they will not let me see any tax returns because they are combined with their other shop. They flat out tell me the irs stuff is meaningless because they dont claim the cash.
 
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I love this one… “Sorry, we WON’T show you the tax returns or books on our other three operations because everything we do is illegal and might get our a$$es thrown into jail”… and you should just TRUST us and buy this place on good faith. ARE YOU REALLY CONSIDERING THIS PURCHASE??? Is the sellers name Bill by anychance? :roll:
 
It’s possible they are hoping you might use the food cost to estimate gross but they could easily be shuttling the food delivered to that address to the other stores.
 
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Besides, if there’s ever an IRS investigation, or simple law enforcement investigation, they’re certainly going to want to take a look at your books too.

For 200k, the building had better be included too. Recipes are intellectual property, hard to place a value on them. Equipment + IP + “rights” to the lease…200k seems way out of line to me.

The legal shennigans is more than enough cause to run. Fast. And don’t look back.
 
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eupher61:
The legal shennigans is more than enough cause to run. Fast. And don’t look back.
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I think this is a joke topic…but if it isn’t, this is the best advice you could take in this situation.

I took over a place several years ago with some “iffy” books and an owner that was pretty open about his “tricks” to being successful/profitable. I can tell you that when you put that same business on a legitimate process, it just means a ton of extra work for you to be an honest businessman.

Move on. Dig around for vacant spaces, we found a pretty amazing space when we finally got sick of doing another persons poorly planned business and did what we wanted. $30K to open your own place with amazing food isn’t unrealistic at all, don’t pay for their mistakes.
 
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