Purchasing a closed store

Discussion in 'The Think Tank' started by npizza, Oct 30, 2008.

  1. npizza

    npizza Member

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    Recently Papa John’s closed in an area that I have been looking for a second location. The store is 4 years old, has been closed for about 5 weeks and still has all the equipment inside. In my current store I use the same layout as a Papa John’s, considering the costs of a build out and new equipment this is a great opportunity.
    I made an appointment with the landlord to look at the space next week. I haven’t talked to the franchisee yet but he told the landlord that he would sell at a fair price. I’m just not sure what a fair price would be considering the fact that I will be bailing the guy out. The franchisee would have to buy their way out of the lease, put the building back to the original condition and sell off all the equipment. Any input would be great.
     
  2. NicksPizza

    NicksPizza Active Member

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    1. inquire about the lease and whether it is worth assuming the lease . . . or even if it is an option.

    2. Purchase the business (failed business) for fair market value of the equipment. That's all it is worth.

    You checked into why it failed, right? Was it because of a lousy location?
     
  3. royster13

    royster13 Well-Known Member Moderator

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    And if it was a lousy location, was it "lousy" because the folks running it had zero personality and did not knwo how to market themselves and their business?.....
     
  4. npizza

    npizza Member

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    The store is in a prime spot in a major strip mall. It failed because of an out of state owner and Papa John's has not done well in this area. A lot of Papa John's have been closing around here.
     
  5. Charles

    Charles New Member

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    Don't buy them out. Just do an assets-only sale unless there is some compelling, very compelling, reason to assume the lease or other issues.
     
  6. Rick G

    Rick G Active Member

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    I would like to second that!

    We reopened a closed pizza shop, we bought the equipment from the finance company, got a new lease with the landlord, and opened as the same franchise as the prior operator but with a different legal name for the business..
    The bill collectors started calling and writing. fortunately we had no connectin whatsoever with the old owner and we were able to avoid liability for the debts. Everytime I call certain vendors I still have to provide our account # since they still have negative info in their computers for this dba name and address. There were outstanding balances at the phone company, electric company, gas company, trash collection, alarm monitoring etc.
    Don't buy the failed business, buy the equipment!! Keep as much separation as you can between you and the former operator.

    Rick
     
  7. npizza

    npizza Member

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    My plan is to buy just the equipment and change the name. I have purchased used equipment before but never as a package.
    Rick, what kind of a deal did you get on the store? I know there it depends on the condition but what % off should I expect to pay.
     
  8. Charles

    Charles New Member

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    Ask for an equipment inventory list showing purchase date, new or used, and maintenance performed. I would low ball.
     
  9. bodegahwy

    bodegahwy Well-Known Member

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    My first store was a failed PJs. They had been closed about two months. I got the equipment in place and even the phone number. The store was less than a year old. I paid - 35K (this was 10 years ago).
     
  10. Rick G

    Rick G Active Member

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    We paid 30K for the equipment, and it took about 6k more to get everything we needed to open.
    Obviously price would depend on the condition of the equipment, and the longer it sits, the more motivated the seller will become since it is costing him money.