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Pizzeria for Sale; Visiting Tomorrow

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Benedetto

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I guess I’ve gone nuts, because I’m planning to drop by a pizzeria tomorrow, to see if I want to make a bid on it.

The owner is asking 20K. That includes all the equipment. It’s a little joint about like a Domino’s, but it has a few seats. This is exactly what I’d like. A place that can function with two workers plus a driver.

Rent, gas, power, phones, garbage, water, Internet and phones max out at around $1600 per month. Hard to communicate with the owner because his English is not good, but as I understand it, he has two prep tables, a cooler, a freezer, a slicer, and one two-deck oven. I want to see if he has a mixer and all the little items I would need, like pans and so on. He has the credit card stuff and phones. If I understand him correctly, there is no lease. It’s month-to-month.

The location is interesting. It’s close to a heavily populated, affluent area, including a huge mall and a bunch of high-rise apartments, but it’s one street over from US 1, which is the main drag, so it will get no foot traffic from the mall or apartments. I don’t know how much location matters. The two busiest pizzerias I know have wretched locations and zero foot traffic, but I suppose good is always better than bad.

What should I look for? What should I ask? The main question that’s on my mind right now is, “Do you own the equipment outright?” It would be upsetting to have the oven repo’d during a busy evening.

A buddy suggests I go to neighboring businesses and ask if he sold any pizzas and whether they were worth eating.
 
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Whether his pizza was any good is not relevant. At 20K you are not buying his pizza, you are buying the equipment and that is all. (Yes, you do need to assure yourself that the equipment is owned, not leased and not subject to any leins or security agreements)

I would be more concerned about the lease. I would never be willing to go into a month to month arrangment. Month to month works both ways. The LL can call you up one day and tell you that you have 30 days to vacate or that the rent is doubling next month.

At 20K, your questions should be
  1. Is this a business I want to be in?
  2. Is the equipment worth at least that much?
  3. Is the build-out suitable to the kind of business you want to run?
  4. Is the location acceptable?
With regard to the lease, talk to the property owner NOT the seller of the business. Ask for a new lease and TAKE IT TO YOUR ATTORNEY before you sign it.

After that, you do your own thing. Come up with your own menu, pricing, marketing… etc If they are willing to sell for 20K, you are going to want to change the name. If the place was any good AND making money, the price would not be 20K!
 
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You’re right about me not buying his pizza. If I didn’t have my own way of making it, I would have no desire to get into the business. But it would disturb me if this guy was making wonderful pizza at a good price and still failed.

The thing that would cheer me up most would be to hear people say, “Man, I would have gone there all the time, but the pizza SUCKED.”

Funny thing about Miami; Cubans (i.e. most entrepreneurs here) almost invariably make terrible pizza. The only exception I know of was a little place that failed due to lame business practices and (probably) undercapitalization. An Italian guy bought them out, and he does fine, selling the exact same product. Weird.

The month-to-month concern is a real one. Fortunately, it’s very hard to find tenants for commercial property here.
 
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Sounds like a decent deal for all that equipment especially if he does have a mixer and all the small wares. As long as he owns everything outright of course.
 
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I took a look at the place. Here is the story.

It’s a tiny rathole. That’s fine; I did not want to start big. It used to be a Jerry & Joe’s. This is a fairly good chain.

Equipment:
  1. Blodgett oven, two-deck, 650°. Stones cracked. It will handle three 16" pies per deck. I’d say the decks are about 48" by 36". It’s ancient, but I suppose it will make pizza as long as the gas flows.
  2. Three-door refrigerator. Did not spot a brand name. It’s about eight or nine feet wide, and it’s maybe seven feet tall.
  3. Three-door prep station with a polyethylene (I think) surface for pizza. Did not see a brand name.
  4. Household fridge.
  5. Two small microwaves.
  6. Hoover planetary mixer. I think it got the name because it was made during the Hoover administration. Could not tell the size in quarts, but it will accept a batch of dough requiring 22 lbs. of flour.
  7. Gural 120V slicer.
  8. Two big stainless prep tables.
  9. One small prep table, occupied by slicer.
  10. Two-door beverage cooler, probably the property of Coca-Cola.
  11. Phone system.
  12. Three-compartment sink.
It has two small round tables with two seats each. No beverage fountain. No range. No conventional oven. The only thing he does not own is the Coke cooler.

Here is the deal with the lease. I misunderstood. It does have a lease, but the lease is locked at $975, provided I take over. The problem with this plan is that it has seven years left on it.

The place is in unincorporated Dade County, so I don’t have a lot of city regulation to drive me crazy.

Minimal parking, although there is unlimited public land across the road, and people use it.

There is really no dry storage, but the refrigerator is so outlandishly huge, I could keep a lot of stuff in it.

I have not seen the books, but they claim they grossed around $650 per day. The cost of the gas will probably be higher than the figure they quoted earlier; they got a 20% discount as a franchise.

Here is my take. This is not a fantastic deal for $20K. If the business tanks, I’m stuck with a seven-year lease, and it’s very hard to find new tenants these days. The equipment is not worth $20K. The goodwill is virtually nonexistent; it basically amounts to local knowledge that pizza is available at this address. I’d be starting from scratch.

I think the real story here is that this guy wants out of a lease, and he doesn’t want to sell the equipment piecemeal. I suppose the lease would not be a problem if I incorporated and the business died with no assets, but that seems like a cheesy way out.

I’d say this deal is worth more like $5K, purely for the cost of the dubious equipment.

The up side is that the potential for a financial catastrophe is pretty limited.

One thing I learned: a business in an unincorporated area is a good thing. This place delivers to all sorts of over-regulated, posh areas, but it does not have to answer to their politicians and bureaucrats.
 
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