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looking to buy existing pizzeria?

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blvdpub

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im looking at a pizzeria in my town with about 15,000 housholds.major highways condos.first owners were there 10 yrs new owners are there 5 yrs and are now retiring.all i know so far is its 1600 sqft 36 sets,all equip is original at least 15 yrs old. dining room upgraded and all brought up to code when taken over by new owners 5 yrs ago.i know the landlord the lease is up for renewal so a lease is not a problem right now lease is 2200 month. gross sales 190,000. TOE 107,000, NOI 83,000.willing to show finacial statements. asking price 80,000. i think way to high.does anyone know what to base price on i hear 1.5 to 3.5 % of net profit is this accurate? im coming from a partnership that went bad 83 seat pizza pub left partner now going in by myself small place.i also have lived in this town for 30 yrs know area very.thanks for any info.
 
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I don’t know what TOE or NOI are, but that lease payment is enough to run me off the project. It is nearly 14% of gross sales, and that annual gross is buying you a job that will be hard to improve.

Tell us more about the marketplace, like competitors and the like.
 
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thanks nick.total operating expenses TOE.NOI net operating income.competition 4 pizzerias in 3 mile radius.avg incomes in area 86,000 per yr.lots of corporate ,commercial ,in between 2 major highways,loads of contractors i was one myself,homes from 300,000 to 2,000,000 range .lots of kids sports and local schools,rent in this area now in bad economy has dropped to $12-$25 sq.ft.up the mountian same town rent $31 sq ft. pizzeria i came from was surrounded by pizzerias and bars we were doing 300+ pies a week only open 4 months was told i had best pizza in area.place was poorly run to many chiefs not enough indians.
 
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Net operating income of 80K on 190K in sales? Tell me another one. Make sure you see several years books. I can make any one year look like whatever you want to look like.

On the other hand, if the business makes 80K, an asking price of 80K is a screaming deal. That is less than it would take to open from scratch.

I would expect a pizza store doing <200K to make 40-50K at best for an owner operator. Somewhat more for a slice joint with low overhead.

That rent figure does not work as pointed out above. I would be looking to pay more like $1400 - $1500 on that sales volume. That would generally mean $1200 rent plus triple net expenses.
 
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thanks guys for the quick responses.i forgot to mention this is a partnership looking to retire and they are the employees.so they will be leaving no employees left .i was thinking same thing 1500 month rent. the net operating income is not the net profit . i will find out net profit but what should i base the sale price on other then what real estate listing says it is worth this place has been here for years i feel the major draw back is the equip is very old. im looking at it today.so i hope to get more info.miss the pizza making business so much cant wait to get back in.can i assume with 190K gross sales that net profit to be in the 9%-11% range? thanks again
 
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I dont see how there will be any profit given those sales and general costs of operation.

200k is less than most here do and I am sure most wont make 50k, that would be a 25% bottom line return.

I bet that the “partnership” is running the place, there is little marketing going on, no debt service and if you were to bring the numbers here, most would be able to tear them apart.

Looking just at sales, I dont think this is worth 40k, maybe barely the value of the equipment, especially given the demand you have close by.
 
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can i assume with 190K gross sales that net profit to be in the 9%-11% range? thanks again
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Nope. You can assume, that if you equipped and marketed the business correctly, you’d lose $50K/yr with $190K gross. A pizza business that does $190K gross is not making $$$$s and isn’t worth a penny. *Assuming you do not own the property free and clear or have zero debt service. If that were the case, you could probably make a few $$s, but $190K/yr is nothing.

IF you saw the possibility of taking the store to $500K+/yr then maybe you have something to think about. But thats going to take more investment.
 
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thanks again guys you were all right on.i saw the place today not good its just like i remembered 5 yrs ago all equip old .needs work.owner gave me list of expenses the NOI was what they were paying themselves which left the business with a loss of 1200 per year just from what i saw.the owner told me he has other intrest wants to retrire and was here so he didnt have to work for anyone and was happy with just a paycheck lives very simple life.and since the numbers he gave me show a loss he is probably telling the truth. in my eyes the business is worth 0.00 the equip not much most potential 250K-300K sales.thanks again going to keep looking
 
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