selling the business questions

C

califpizza

New member
Hi. We are selling one of our businesses and I have a few questions. Our first location is for sale and our second location is 20 miles away with a different name. Long story, but the city of the second location doesn’t allow “chain” businesses and since this was our second store, we had to change the name. Anyway… We took our recipes for the dough and sauce with us to the second place. The asking price does not include the recipes for either one. My question is this, whomever buys the first location, are they entitled to the recipes as our second location is under a different name and far away or are the recipies legally ours? If they are buying the name (business), do they get the recipies? Do they legally need to change the name if we don’t give them the recipies? I’m sure they’d want to change the name but then again, who knows. Thanks for your help.
 
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If you are not selling them the recipes then you are only selling them the equipment and leasehold improvements. Revenue and profits should not be considered in setting the price. If there is significant profit that you want to be included in the sale price, but you do not want to sell with the current recipes, I would suggest that you slowly star changing the recipes. Change the dough weight. Change the stretching style(from handtossed to sheeted or pressed). Change your cheese blend. Change the spice profile of your sauce. Do these changes one at a time and within a few months you will have a much different pizza than your second location, but hopefully you still have the customers ordering and the profit that you are selling.
 
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paul7979:
If you are not selling them the recipes then you are only selling them the equipment and leasehold improvements. Revenue and profits should not be considered in setting the price. If there is significant profit that you want to be included in the sale price, but you do not want to sell with the current recipes, I would suggest that you slowly star changing the recipes. Change the dough weight. Change the stretching style(from handtossed to sheeted or pressed). Change your cheese blend. Change the spice profile of your sauce. Do these changes one at a time and within a few months you will have a much different pizza than your second location, but hopefully you still have the customers ordering and the profit that you are selling.
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This sounds slightly misleading to the buyer if you are selling the store based on past sales but changing the recipes.
 
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Your buyer is not “entitled” to anything, including recipes, unless it is spelled out in the purchase agreement. That said, your buyer would be the biggest idiot in the world not to demand the recipes as part of the deal - unless he has plans that do not need your recipes to work. As for your biz in the other town, unless a “non-compete” clause is included in the agreement, and includes that other town, it is not involved in the deal. BTW, when you sell the recipes to someone, that does not mean you have to stop using them. (Unless you agree to it, as part of the deal). Non-compete clause’s usually say something like you can’t open a competing biz within a twenty mile radius for a period of ten years - not you can’t open anywhere, ever. And no, they wouldn’t have to change the name, if they don’t have the old recipes, any more than you would have to change your biz name if you changed your recipes.
 
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ahh hmmmm,

IF the buyer is buying your business… he’s buying everything your business owns. That includes menus, recipes, rusty items, liabilities, and everything else potentially attached to your business.

If he’s buying the space and equipment, then perhaps you can ‘sell’ him a recipe.
 
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Okay - we don’t own the property, we are renting the space. Our lease is up at the end of this year with a 5 year extension. So, I guess we are selling the lease and the equiptment since we don’t want to “give/sell” him the recipes. Thanks for your input.
 
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I think you need to make that the first thing you tell potential buyers as you probably just lost 90% of them with that last statement if you are basing this on past sales at all. How much is your equipment worth. Your lease is really worth nothing since it is up in a few months and the landlord now has a potential leasee in the works without you involved. So if this is a successful location and that is what you are selling, you need to sell the operation not the contents. You might find a buyer that will take the location and make his/her own ideas work but unless this is a really hot and ideal location…what are you selling? Also, if you sell them the name and do not include the recipes, how many people in this 20 miles knows they are both the same restaurants? How many that now get a bad meal at the sold location will now avoid the other because of their experience at the first? Will giving them the recipes really hurt the other location anyway? If you sell and do not include…I would require a name change as to not allow any connection with your other operation. You need to sit down with anyone that shows interest and talk out what their business plan is for buying you out. Which direction they are planning to go. Good luck.
 
Not sure you are going to get much value out of the sale if you “gut” it by taking away the recipes and do not have a good lease arrangement…If you so this, it becomes an asset sale and you can take a look on Craigslist to see how little pizza equipment sells for these days…
 
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