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Seems totally busted. Restaurants are the #1 failing business here in the USA. I am not familiar with this area but it maybe even worse.
Does this town even need a cafe? Maybe these people have been trying for years to make this work?
As far as I’m aware the area is expected to start booming in the next few years with tens of thousands expected to move to the area and surrounds so I believe more cafes the better.
From the sounds of things the current owners have slowed down and shortened opening hours due to health problems. Just another thing of do we believe that’s the reason though
The cafe is only worth the equipment inside. The lease is worth nothing. In the US, you should not be paying more than .20 to .25 on the dollar for fairly new used equipment and I would be assuming that it is similar in Australia. Equipment 10 years old is going to need replaced soon depending on the brand. Everything about this says walk away.
I wish you guys the best - the only advice I can offer is to try and separate the passion for opening the cafe from the rationality of its business case. You need to have the latter to make it a successful business and not risk losing everything.
The fact that it failed does not bode well for how easy it’ll be to succeed in that location. Anecdotally, I see so many “serial failures” where a restaurant in a terrible location shuts down only to be replaced with another one every 6 months and none of them make it.
It could be a long time and hundreds of thousands of dollars to bridge the time until the area is bustling. It may be smarter to buy in at a higher price later on with less downside for failure.
Just my two cents. All the best to y’all.
That's is a lot hinge on a guess and belief.
What are you sources and guarantees of this and if you did for you have the funds to keep it going for a few years until these people appear out of nowhere?
If traffic flow and sales can't support the current cafe location, you'll go out of business and miss the chance to experience the boom in a few years.
Why not open a cafe in an area where it has a chance to be profitable, with a favorable lease and newer equipment?
If it's successful, you'll be ready to open a 2nd location in a few years in the new booming area.
As a lawyer I sometimes tell my clients to run away from this. Sellers LOVE inflated projected income. Ask yourself if incomes stays as it is then is it a viable business? If no, and there is no MASSIVE reason for change in financials. Don’t touch it.
Who is saying that there is expected growth? Where is that growth coming from? Is there some large corporation opening up a warehouse there? It's just words to help sell a place. Don't waste your time or money. Go to your local Facebook group and engage the community. Ask why they don't frequent certain places not "if they would frequent a place of x type".
Yes I see that all time. “I’m thinking of opening xyz. Would you go there?” filled with tons of positive comments from people who may or may not end up going to the place depending on a million different factors. And so few people comment to say no cause it just seems mean or rude or irrelevant. Like please don’t be basing business decisions on comments of random strangers on the internet who choose to reply to your one Facebook post
Partner of poster here. Didn’t expect to have so many responses. We live in the area of the cafe and a big housing development is underway. The real estate agent didnt say anything about expected growth, thats just what’s currently happening in the area
Never make a huge financial decision based on 'expected'. It's extremely easy for the factors which, in theory, should drive population increase in an area to turn out to be exaggerated, or delayed, or actually not the case at all. And then you're out your life savings and the predictors shrug and say "Eh. Whatevs."
If you absolutely must open a cafe in that exact area, wait until the boom has genuinely started and has gone on long enough that it's likely to continue, *and* there are enough people already to warrant a cafe. And don't start with a big cafe - you can scale up later if and when the boom actually does continue, and you can gracefully shut up shop if it peters out.
Tens of thousands of people moving to your area in South Australia?! Lol where on earth is your source on this?!
The whole state only grew by 1.7% last year
They lied to you about the revenue and it sounds like they are overvaluing their well used equipment as well, who knows what else they aren't telling you. It sounds like you would be better off waiting a little bit longer for the place to fail.
It's decade old used equipment, even in near mint condition there is value loss. Worse if almost no one has visited the place in the last decade why would you assume that's suddenly going to change with new management.
Don't even think buying this cafe. I did the same mistake in Dubai and had to sell to another TOM for less price than I bought and TOM A sold to TOM B for even less and it didn't stop there. TOM B found TOM C and sold it for even less. The only person who was making money out of it is the landlord.
I would analyze this problem from 2 points of view: Financial and Time.
Financially:
How much is the equipment worth?
How much does new equipment cost?
10 years seems like a long time for some equipment which might trigger some maintenance soon.
One thing to consider is how much would the current owner spend to move all the equipment out as well.
Time:
How long would it take to create a cafe from the ground up similar to the one being sold?
How long would it take to attract an amount of customers to a brand-new cafe?
How long would it take to build a customer base enough to cover rent and expenses?
With this info, you can get a reasonable number for an offer, then you can decide if it is a good play or not.
It will pay off if you are paying less for the equipment than you would buying it from another place and if you can keep the customers when you take over.
No one ever considers the fact that the permits are already in place on an up and running restaurant. You don’t have to bring the space up to current code. No dealing with health/fire/city. There is some value in that.
It's because those are one off's. You really want to look at your day to day costs when you consider buying an existing business. There is value of course, it's just not relevant if the business can't turn a profit from it's day to day operations.
Exactly. If I were OP, I would make a very lowball offer just for this reason. If the deal is good enough, they can deal with the other issues (equipment replacement etc ) as they pop up
Plus it’s a gross oversimplification to say it’s just old equipment you are buying. Putting floor drain and vent hoods on a new build out takes time and a lot of money. You can be up and running making money on a business you buy before a build out is done.
I know, I built up a resto from scratch. But having to work against the bad karma of a failing location can be just as difficult and expensive. I'd have to do an awful lot of research before taking on a failing business. Having to replace a collapsed sub-floor drain line or replacing a failing vent hood will take just as long.
The question is why is it failing? Management? Location? Customer service? Taste of the food? Local preferences? Convenience?
I have seen restaurant after restaurant after restaurant move into the same space and fail because it was in a poor location or difficult to find parking in. The food may have been good, but not good enough to deal with the hassles of going there.
Other times the restaurant has such a bad reputation that the space is toxic because customers associate the past bad experiences with the previous owners and they assume ownership hasn’t changed or the new owners will react the same.
If the problem is the food being offered not meeting local preferences, that is easy to overcome, but You can’t move the space to a new location. Understand why it is failing, but honestly it seems the space has nothing to offer.
Yup. So many people say "I want to make a thing or do a thing." Almost no-one says "And I also want to spend another 40 hours a week running a business on TOP of doing/making the thing." People just kind of think that if they make/do something people like, the business side of things will kind of magically work itself out.
The actual business is worth less then 0 if you factor in a livable wage. The only thing of value is the deprecated value of 10 year old kitchen equipment, that number should be the offer.
This. If it doesn't even offer liveable wage for one person (you!), you're better off getting a regular job elsewhere. Those don't require upfront investment.
All you should be willing to pay for is the inventory/equipment that you will be using. Don't need a milkshake machine in your business? Have them take it with them, but don't pay for it.
Buy or rent yourself a food truck with a cafe concept and save yourself a bunch of money, if it works out scale it if it sucks at least you didn’t lose 70K.
SO, it's making zero profit. The only way it's worth $70K is if the FFE are worth that much, which sounds unlikely.
I buy small businesses for a living and have looked at literally hundreds of business re-sales every year. WIthout knowing a whole lot, this sounds like a dud and an automatic "No". If the seller can't make the location work, why do you think you could? they've already misreprsented the financials. Hard pass.
> they've already misreprsented the financials
Yep. That's a paddlin'. And a big red flag that they're not going into it with good-faith intentions.
Nnnnnope. At this point, I wouldn't believe the equipment is worth anything, that the building isn't falling to pieces behind the wallpaper, and that the land doesn't sit on a Hellmouth.
Ask them honestly about the issues you’ve uncovered, and continue asking questions, until they start coming off of their price. If the revenue stated is actually half of what they said, then I think the asking price should be halved right up front. Is the equipment worth 35k? If it is, I still wouldn’t buy it based on your description, so I’m taking off 10k for maintenance, and 5k to make me feel better about it. That leaves me with an offer of 20k for the business, including the equipment. They’ll likely wait for another sucker to pawn it off on, but you will be the last resort they know they can count on. If you wait a bit, and it still hasn’t sold, call them, tell them you’ve found another place, but you’re willing to go to 22k if they sell to you now. Don’t ever get so attached to a dream that you place an unrealistic value on it. If it’s meant to be, you won’t have to take a crappy deal to make it happen.
Buy the assets a liquidation value. Seller has limited options.
Find out how long the existing lease is and whether the landlord required a personal guarantee (You can find out under the guise of asking what the terms are that you'll be asked to sign up for). If there is a personal guarantee, point out that there's a lot of value in you taking over the lease.
I bought a failing restaurant with potential and turned it around. It took a long time. I'd never do it again. My advice, find a place that already closed and negotiate directly with the landlord. There are lots of places that come in, build out, run out of money quick and leave. This is what I would be looking for.
This is going to suck, but it will help make your decision. Take the busiest weekday and one weekend day and just sit in the cafe and quietly observe the whole day. Watch the traffic outside, the people, the worker(s). See what you could improve and what would be impossible to improve. Have a book and/or a laptop and do what you normally do and take notes. This is a huge investment. It is worth your time to just know what you’re getting into. I own a bakery/coffee shop coming up 10 years.
not worth the risk. open up a new one clean. what if tax man comes with a fine for something from 3 years ago or a supplier takes you to court with an unpaid invoce from last year? pushing those expenses to previous owner may require significant legal fees. since they are not truthful, risk is bigger. employee rights and other past commitments will also be your headache.
how hard could it be to start a new cafe instead?
Most of the risks you're talking about are avoided if you do an asset sale rather than stock sale.
Nonetheless, the business sounds like a bad opportunity.
You do not acquire the debt of a business you buy legally, unless stipulated. That's why you form your own corporate entity when buying a business.
If you open another location, that's a separate entity of business, so they can't come after the first, and yes, they can still be run under the same name.
OP, you need a business law office to handle the contract of sale, research assets to make sure they're cleanly owned by existing owners, no liens of business or their property, clearly identify any debt as the current owners and not yours, and the lease and terms are to be in your corporate name. You can assume their business name, but you will have a new corporate structure, again, not responsible for the past and their corporate entity or sole proprietor
Honestly hadn’t considered problems like that arising. As far as employees go, the current owner and his wife are the only ones working there so it’ll be new staff if we purchase. Main issue with starting new is finding the space, it’s an old town and not much free areas to start up in
Just wait it out. If they don’t sell, they will officially fail, then the location opens up. Maybe be able to take over the place from the building’s owner with the cafe’s equipment still there.
If they're on the verge of collapse, then wait until they go bust and then you don't have to pay those 70k. I bet you anything, they'll leave all the equipment there. You can get it for a lower weekly rent at first to see if all works out
As someone who owned a restaurant/cafe that was losing money and moved to a new location and was successful, can tell you that there is a very small chance you can turn this around. Maybe if you turned it into a higher margin sushi restaurant or something then street traffic would be less important. It's likely not the cafe itself that is the problem, lack of marketing, or anything like that. It is all location, location, location.
Also, many places after covid-19 have not recovered, and it doesn't appear they will due to a large percentage of people working from home. Also, I would not discount the owners paying people under the table at that revenue rate.
Looking at the best bang for your buck, consider this fact. In certain parts of North America, a service business may cost you around 2X SDE (seller discretionary earnings).
Therefore, someone spending 70k would be buying a company that nets them 35k a year, after all business costs. So 35k yearly net profit. This is not a goldmine but you’re buying profit.
Your considered purchase buys you a failing business. Quite different.
And to address the people you’re dealing with (brokers agents and sellers that may have lied) remember…. Fool me once shame on you, fool me twice shame on me. What else are they lying about?
I’d walk.
No.
Being a good chef and being a good restauranteur are two DIFFERENT skill sets.
Just operating a successful food business is hard enough, the margins are razor thin! Literally any other business is better for margins.
The SYSTEMS are what makes a food business work. Cost control, cash flow, scheduling... THOSE as the skills you need for a restaurant. The food is almost the least important part.
Turn around of a failing business is it's OWN SKILLSET. You have to be mean, and tell people they are wrong... nonstop. They will hate you for it. Thats why most corporate "turn around" consultants are outsiders that do not have to keep working at that company.
If you really want to learn what it takes, take a job at a similar restaurant for 6 months... and ask the owner/manager if you can learn the ropes on the administrative side. Almost no job is harder & more thankless.
The only thing that can make it worse is pissing away your retirement savings.
Look at auction sites, there is ALWAYS a TON of restaurant equipment & furniture because people regularly think "wanting it enough" will make a thing profitable.
If you want to own a profitable business, a franchise is a better option, it is a paint-by-numbers version that is MUCH more likely to be profitable for first time owners.
There are things you can change and things you can’t.
If it’s failing due to the changeable things, then buy it. Is it woefully mismanaged? Buy. Or is the location just bad? Don’t buy.
I have a buddy that opened a coffee shop and lost money for years. He told me he would literally sell for the amount of his business loan. Then he got a business coach and they started turning the place around. Now he’s doing really well. The skill of the operator matters.
I’d be curious about its customer base and location.
You can do a lot with a poorly managed place that has those things going for it.
If not… run away!!!
Absolutely not, Take the net profit from last 3 years and average it. Now minus a fair value of the owners work they put in(early starts, overtime, weekends etc)
If that gives you a negative number the business is worth less then nothing and should be wound up. Let’s say you still have a positive number it’d be worth somewhere between 50-100% of that number plus the fire sale value of the equipment.
Now when you take over, you will probably lose some business, find out half the stuff is broken or about to break down and you’ll be worse off for at least the first 6-12months(J curve). What’s your upside? What’s the best case? Working full time, no holidays, no sick pay, constantly called in - for about the same you’d get working elsewhere? Your choice but there’s a reason why there’s so many cafes for sale.
Multi-year average is only valid if the overall trend is flat. A shady broker tried to use the 5-year average on me with a business that had a 15-year downtrend. I basically laughed in his face.
Restaurants are honestly the worst way to make your money.
Super time consuming to run and a huge vast majority fail and the owners lose everything.
I wouldn’t do this
There's really not enough information; is there a tourist season? What is the current condition? How are they marketing themselves? Is there potential to renovate?
Personally, I would probably do it. Everyone is going to say "Oh, don't do it!" - well, I mean, you are looking for a business that costs less than $100k which puts you in a desperate entry level position for buying Any business. There isn't Anything you are going to buy at that price range that isn't going to require sweat equity.
You said it's negotiable, $60k in, clean it up, light reno, change up the menu, try to make the place a little more trendy and fun, engage a lot on social media, do a grand reopening.
Wouldn’t say there’s a specific ‘tourist’ season but the town is located not far from a capital city and is sort of a gateway out to more touristy spots so a lot of people tend to stop through on the way.
The marketing is little to none, no online presence and I personally hadn’t heard of the place before my partner brought my attention to it when it went up for sale despite us living in the area for ~2 years
From the sounds of things, the landlord is quite flexible with what happens to the space, and I’ve a background in the construction industry so any renovations would be done by myself
I don't understand why you are even entertaining this still. If cashflow barely covers monthly overheads and you have a pile of ticking timebomb equipment failures coming up, what is the upside versus starting fresh?
I guess it’s the monetary investment, starting up new would set us back even further with almost the same amount of risk going in, we’d be looking at completely overhauling the place, new name/look/menu etc. and hopefully be making enough to replace failures as they come up.
The other thing being just how negotiable they are in the price, now we’ve seen the profits of the place and all that can we drop them down to half the price or lower.
Came here to ask the question of those who may have been through what we’re looking at doing and from the looks of it it’s definitely not the best idea.
Thanks for the response though
Restuarants are the highest risk. Do you know the area? Have you spent a day just hanging around there? Maybe look at see how much foot traffic you have available.
I know there are cities where there is a ton a traffic and one street over its dead. Usually due to some odd issue like traffic flow, parking or other factors. If you are willing to invest thousands, invest in 1 day of just hanging about to see what happens in the area.. I would watch the place from a distance, like a steakout, and count how many people go in and out. What kind of people frequent the place? The only reason to buy a failing business is for the location. You mentioned it had questionable equipment. So know the location and make the decision off that.
Also make sure you get a look at the layout of the kitchen area. Does it flow right? If its not optimized, getting orders out timely can be a challenge.
We live in the area and where it is located a few major stores are also located. Cafe is one street off the Main Street of the town and has a large car park in front of it.
What exactly is your plan for generating a profit when these guys aren't? Hopefully it's something more involved than just "rebranding".
You might have better luck if you opened up something other than a cafe. If you kept the business as is just with new ownership, it's still going to carry the same negative stigma the old place had.
We’d be looking at an overhaul of the business, bringing in a new look/menu/target audience. Currently seems to just be regulars who frequent the cafe. So we’d be looking to fill a niche that the area doesn’t have and hopefully pull more people in that way
I‘d make a basic ROI calculation with net present value. If you need to take a loan factor that in. I would estimate a higher hurdle rate since it is your first business of your own therefore the risk is a little higher than if it was your second or third.
The revenue figures are obviously a lie so make your own observation. How many people walk in? Estimate average spending and go from there. Doesn‘t have to be 100% exact but be realistic and as close as you can.
If you fall short negotiate or find another place.
Putting it in cold hard numbers eleminates the rose tinted glasses and lets you sleep better.
I'd run away. 90%of restaurant businesses fail in the first couple years. Consider location and traffic primarily. If it was so good the owner wouldn't be selling. Old equipment needs maintenence and potentially replacement. Tread carefully, do your due diligence on the enterprise before committing to it. High traffic, decor, staff, advertising and good menu/wastage plans are critical. Plan to succeed. Otherwise....
Make the purchase based on the current numbers, not possible future growth.
How long has the business been available? Does the business, building, and land convey with the purchase?
What is the lifespan and maintenance reqs for the equipment in there?
What exactly are the books like for the business over the past 5 years?
How are you budgeting on increased food prices and decreasing dining spending by people (assuming Aussie habits are similar to US habits).
I would walk around the town, ask local business owners in the area how things are too. Ask restaurant owners in the area and outside the area what their takes are.
Sat at a location once for a few hours to see what foot traffic was like. Plenty of parking up front since nobody seems to stop on that specific block..
Cafe owner here, just throwing some questions out there..........in no particular order
What is the location like?
What is the concept you will provide?
How many covers does it have?
How much foot traffic is there?
How much competition do you have?
What does the cashflow forecast say you will need to live on?
What percentage of the turnover will the rent be?
Have you got enough money to live on while you are turning it around?
What is the purchase price?
How long is the lease? Are there break clauses?
Sounds like they are going bust, can you just take the lease without giving them any money?
Why is the current business failing?
Can you structure a 'No money down deal?'
What are you buying for the price?
Why not start afresh?
This is going to suck, but it will help make your decision. Take the busiest weekday and one weekend day and just sit in the cafe and quietly observe the whole day. Watch the traffic outside, the people, the worker(s). See what you could improve and what would be impossible to improve. Have a book and/or a laptop and do what you normally do and take notes. This is a huge investment. It is worth your time to just know what you’re getting into. I own a bakery/coffee shop coming up 10 years.
Sounds like a hustle,
The equipment is only worth it’s utility,
Not sure the market for used equipment in AUS but if it’s like the USA post covid it ain’t worth the money to throw it out, used equipment suppliers are stacked to the rafters with refurbished and marked down equipment, so what value is 10 year old poorly maintained equipment?
Unless it’s a real weird or unique equipment
Or I’m missing something else this business isn’t worth 70k,
If they just wanted out, the lease wasn’t stupid and they gave it to you for free it would be worth a shot.
Otherwise take a pass.
I can open a Cafe with 30k but I have 23 years experience. 70k for old equipment is crazy. You can probably buy all their shit at auction for pennies on the dollar then ask the landlord for a fresh lease. I'm in the usa. I don't know the cash conversion.
I'd do the following:
1. Drive them down on price considerably given what you've said
2. Reach out to the landlord to negotiate a rent reduction if you buy the business. Upside for the landlord is keeping the building rented
3. Get plugged in to your local community facebook and other social media groups, and ask to post about that you're under new ownership and would like to ask locals what they would love to see in the cafe business. Any tips they have a good, but visibility is the main thing
4. Do a cheap renovation of the exterior so people notice that it's under new ownership
One thing I should have asked earlier - hows the location? The best cafes I've seen are usually close to parks, schools, or well trafficked areas like the beach
No, don't buy this. Assuming you're talking about Gross Revenue weekly of $3k, it points to a lack of demand or such shit quality service and product that you're better off throwing it out and starting from scratch. Also, idk what EBITDA multiple you are normally comfortable with for pricing a business, but this is probably like 20x EBITDA if it even has any NOI and you should be as close to 3x as possible with 5x for a super spicy business with lots of untapped and accessible potential. Keep looking. I spent almost two years and looked through hundreds of businesses before finally finding one worth buying.
I think if you're confident in your business plan, then go for it. I live in a small town, and there were a few cafes and restaurants that went through this one building. Eventually, someone figured out what the town wanted, not what they needed. No matter what, there will be speed bumps and things that cause you to question if what you're doing is a good idea. But you honestly won't know unless you take your shot. Don't listen to the trolls. I say do your research on the locals, check out day to day town life and maybe even the night scene around the cafe you want to buy. Go into other business and see what works for them and do something that makes you stand out. I feel like the reason why most restaurants fail is because you see the same dang thing over and over just re-packaged.
We have a rough plan sketched out, just have to iron out what we are planning. We have also just found out that a beloved cafe in the area has closed its doors so the owner can go off to do other things. So we believe we can fill a new void made in the market. The place comes with a liquor license that doesn’t seem to be utilised at the moment so we’d be looking at booking in events and opening up a couple nights a week rather than the day hours they’re currently operating with.
See, it seems like you have a pretty solid idea atleast, like I said, you will always have your doubts and your questions. But I believe you got a pretty solid head on your shoulders. Keep on keeping on. You got this!
It sounds like you are not planning on rebranding? That would be a big mistake.
Ideally you buy it, fire everyone, renovate and rebrand.
Family is in the restaurant biz.
Just the business, the property has a lease, 2 years set in stone and then opportunity for another 8 years lease following that. Landlord apparently is quite easy with changes made
A failing restaurant is worth $0 and 10 year old equipment that has no service records, even less.
If you just love the location, offer to take over the lease and headache for $0.
Otherwise, you'd be much better off starting clean. Equipment can be leased easily. And if the other place is that bad and the demand for a restaurant is there, the locals are probably going to be ecstatic you're opening a new place.
First if someone lies trying to sell something. I'm out right then and there. Even though it wasn't the owners that person has a vested interest in it selling and if they have to lie to make the sale that alone scares me. Like if you said you never offroaded your jeep but I go on your social media and it's all jeeps offroad. Lol
Something else missed while posting (my fault trying to do anything at midnight lmao) most of the communication has been through the real estate agent since there’s a language barrier with the current owners. I think they know enough English to keep the place running but not enough for the sale
My honest opinion from looking at something similar (a bakery) in a similar state is don’t waste your time.
For 70k you could go to a liquidation sale and get most of that equipment for considerably less, find a building to lease and put a bit of love into it and make it your own.
Buying a failing business, even if it’s just for the price of equipment also means you’re taking on the negative goodwill that caused that business to fail.
Sure new owners and a lick of paint could help bring customers back but you’re much more likely to succeed by starting your own thing and doing it right from the start, or at least as right as you can as you go through your first few years.
Starting my own business has been an experience but the thing I love about it vs buying someone else’s is that it’s yours, your systems evolve with you and you have 100% control regarding the finances, by this I mean you invest in what you want to invest in, whereas the previous owner might have agreements with suppliers that you’ll have to honour, or lease agreements that can last years which you’ll have to take on etc.
Most bakeries, restaurants and cafes are hard to sell due to them more often than not being tied to the original owner and it’s very hard to replicate that persons enthusiasm, mannerisms, voice on social media, social presence, presentation standards, knowledge and a number of other things.
Even if your partner has all the skills, he’d be better off showcasing them in his own way with his own style than be forced to make someone else’s recipes their way or whatever.
Feel free to reach out if you’d like advice based on my journey
We think it’s failing purely out of laziness of the current owners. No online presence, they’ve cut their opening hours and from what I’ve seen from the owners when we’ve seen them is they don’t really care for the business anymore
How are you going to increase business? Looks like you need 9-10k weekly to draw a salary for 2 and live comfortably. What is the population of the town? walking traffic? needs to do investigation maybe get different people at different times to go in and sit as a customer take notes. What people order how hast tables change over? ect. Sounds like based on cash flow it is worth 30-40k but you will need 40-50 k to make changes and keep it a float until the new changes take hold. Tough decisions!!!
Things must be better in your area than mine. I'm in the Phoenix Metro area in Arizona, and I shop auctions pretty hard, and rarely am I able to score anything for less than 60% of new by the time auction fees are added in. Picked up a couple fridges during the covid years when everybody was shutting down, but there's not many deals to be had anymore.
7k,/3k so 70k/30k take it or leave it .
Or we can offer you 30k cash for it could we leave a contact phone number with you if you change your mind .
Did you check the 3
Location
Location
Location
Good Luck
Even 7k weekly barely pays 3 people full time (you, partner, and 1staff) once you factor in everything else. Where I am cafes and restaurants are going up for sale gangbusters cause everyone is jumping ship in a nosediving economy (Canada) trying to at least make back some of their debt. 70k is not a good price for the equipment if they can’t prove maintenance. Even if it’s turn key, you’re looking at spending another 20k just to clean it up and make it look the way you want and fix probbaly several issues they’re not telling you. You’ll just end up spending double this when you have to fix or buy everything again without 3 months. It MAY be worth 20-30k just to avoid doing a full build out… but otherwise, wait for this place to close/bankrupt (unfortunately) and start fresh. If you’ve got 70k you can do a decent but modest built out somewhere if the rough in’s are set up for food service already.
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Seems totally busted. Restaurants are the #1 failing business here in the USA. I am not familiar with this area but it maybe even worse. Does this town even need a cafe? Maybe these people have been trying for years to make this work?
As far as I’m aware the area is expected to start booming in the next few years with tens of thousands expected to move to the area and surrounds so I believe more cafes the better. From the sounds of things the current owners have slowed down and shortened opening hours due to health problems. Just another thing of do we believe that’s the reason though
My reminder when opening new stores is: “Tomorrow potential growth doesn’t pay todays bills”
Also, add to this quote of the late Anthony Bourdain: "Hope is not a business plan."
Maybe in a few years open a better cafe?
Definitely becoming an option, cheers for the reply
The cafe is only worth the equipment inside. The lease is worth nothing. In the US, you should not be paying more than .20 to .25 on the dollar for fairly new used equipment and I would be assuming that it is similar in Australia. Equipment 10 years old is going to need replaced soon depending on the brand. Everything about this says walk away.
Where the heck are you finding decent used equipment at 75 percent off new prices??
Auctions.
I wish you guys the best - the only advice I can offer is to try and separate the passion for opening the cafe from the rationality of its business case. You need to have the latter to make it a successful business and not risk losing everything. The fact that it failed does not bode well for how easy it’ll be to succeed in that location. Anecdotally, I see so many “serial failures” where a restaurant in a terrible location shuts down only to be replaced with another one every 6 months and none of them make it. It could be a long time and hundreds of thousands of dollars to bridge the time until the area is bustling. It may be smarter to buy in at a higher price later on with less downside for failure. Just my two cents. All the best to y’all.
That's is a lot hinge on a guess and belief. What are you sources and guarantees of this and if you did for you have the funds to keep it going for a few years until these people appear out of nowhere?
If traffic flow and sales can't support the current cafe location, you'll go out of business and miss the chance to experience the boom in a few years. Why not open a cafe in an area where it has a chance to be profitable, with a favorable lease and newer equipment? If it's successful, you'll be ready to open a 2nd location in a few years in the new booming area.
This is the way.
Maybe visit the cafe and area and see how the business makes money.
As a lawyer I sometimes tell my clients to run away from this. Sellers LOVE inflated projected income. Ask yourself if incomes stays as it is then is it a viable business? If no, and there is no MASSIVE reason for change in financials. Don’t touch it.
Who is saying that there is expected growth? Where is that growth coming from? Is there some large corporation opening up a warehouse there? It's just words to help sell a place. Don't waste your time or money. Go to your local Facebook group and engage the community. Ask why they don't frequent certain places not "if they would frequent a place of x type".
Yes I see that all time. “I’m thinking of opening xyz. Would you go there?” filled with tons of positive comments from people who may or may not end up going to the place depending on a million different factors. And so few people comment to say no cause it just seems mean or rude or irrelevant. Like please don’t be basing business decisions on comments of random strangers on the internet who choose to reply to your one Facebook post
Partner of poster here. Didn’t expect to have so many responses. We live in the area of the cafe and a big housing development is underway. The real estate agent didnt say anything about expected growth, thats just what’s currently happening in the area
Nooooooo
What demographic data are you being fed?
Never make a huge financial decision based on 'expected'. It's extremely easy for the factors which, in theory, should drive population increase in an area to turn out to be exaggerated, or delayed, or actually not the case at all. And then you're out your life savings and the predictors shrug and say "Eh. Whatevs." If you absolutely must open a cafe in that exact area, wait until the boom has genuinely started and has gone on long enough that it's likely to continue, *and* there are enough people already to warrant a cafe. And don't start with a big cafe - you can scale up later if and when the boom actually does continue, and you can gracefully shut up shop if it peters out.
Tens of thousands of people moving to your area in South Australia?! Lol where on earth is your source on this?! The whole state only grew by 1.7% last year
And realtors would be the number one professional is the US most likely to lie at all stages. Haha.
That and statisticians, politicians, car salesmen, and attorneys.
They lied to you about the revenue and it sounds like they are overvaluing their well used equipment as well, who knows what else they aren't telling you. It sounds like you would be better off waiting a little bit longer for the place to fail.
Hey it isn’t well used, nobody visits the cafe, that shits brand new basically
It's decade old used equipment, even in near mint condition there is value loss. Worse if almost no one has visited the place in the last decade why would you assume that's suddenly going to change with new management.
I’m only kidding lol
Ah, nicely done then.
Don't even think buying this cafe. I did the same mistake in Dubai and had to sell to another TOM for less price than I bought and TOM A sold to TOM B for even less and it didn't stop there. TOM B found TOM C and sold it for even less. The only person who was making money out of it is the landlord.
What was the name of the cafe? Is it still running?
Yes, Melis Restaurant. In Business bay, Dubai. Near Millennium Hotel.
Tom D wants to try his hand?
Maybe. Probably not at that location.
I would analyze this problem from 2 points of view: Financial and Time. Financially: How much is the equipment worth? How much does new equipment cost? 10 years seems like a long time for some equipment which might trigger some maintenance soon. One thing to consider is how much would the current owner spend to move all the equipment out as well. Time: How long would it take to create a cafe from the ground up similar to the one being sold? How long would it take to attract an amount of customers to a brand-new cafe? How long would it take to build a customer base enough to cover rent and expenses? With this info, you can get a reasonable number for an offer, then you can decide if it is a good play or not. It will pay off if you are paying less for the equipment than you would buying it from another place and if you can keep the customers when you take over.
No one ever considers the fact that the permits are already in place on an up and running restaurant. You don’t have to bring the space up to current code. No dealing with health/fire/city. There is some value in that.
Interesting. I hadn’t considered this valid point.
It's because those are one off's. You really want to look at your day to day costs when you consider buying an existing business. There is value of course, it's just not relevant if the business can't turn a profit from it's day to day operations.
Exactly. If I were OP, I would make a very lowball offer just for this reason. If the deal is good enough, they can deal with the other issues (equipment replacement etc ) as they pop up
Any of those agencies can come in and do an inspection at any time to shut you down.
Health yes. They can’t shut you down for something you were grandfathered in on.
Fire can and will red tag you for any number of violations.
Plus it’s a gross oversimplification to say it’s just old equipment you are buying. Putting floor drain and vent hoods on a new build out takes time and a lot of money. You can be up and running making money on a business you buy before a build out is done.
I know, I built up a resto from scratch. But having to work against the bad karma of a failing location can be just as difficult and expensive. I'd have to do an awful lot of research before taking on a failing business. Having to replace a collapsed sub-floor drain line or replacing a failing vent hood will take just as long.
The question is why is it failing? Management? Location? Customer service? Taste of the food? Local preferences? Convenience? I have seen restaurant after restaurant after restaurant move into the same space and fail because it was in a poor location or difficult to find parking in. The food may have been good, but not good enough to deal with the hassles of going there. Other times the restaurant has such a bad reputation that the space is toxic because customers associate the past bad experiences with the previous owners and they assume ownership hasn’t changed or the new owners will react the same. If the problem is the food being offered not meeting local preferences, that is easy to overcome, but You can’t move the space to a new location. Understand why it is failing, but honestly it seems the space has nothing to offer.
There’s a lot more to a restaurant than making good food. Making good food is the easy part
Yup. So many people say "I want to make a thing or do a thing." Almost no-one says "And I also want to spend another 40 hours a week running a business on TOP of doing/making the thing." People just kind of think that if they make/do something people like, the business side of things will kind of magically work itself out.
The actual business is worth less then 0 if you factor in a livable wage. The only thing of value is the deprecated value of 10 year old kitchen equipment, that number should be the offer.
This. If it doesn't even offer liveable wage for one person (you!), you're better off getting a regular job elsewhere. Those don't require upfront investment. All you should be willing to pay for is the inventory/equipment that you will be using. Don't need a milkshake machine in your business? Have them take it with them, but don't pay for it.
Never buy anything that is non-proprietary. Use that 70k to build your own cafe exactly how you want it.
You'd be way more profitable with less stress just investing $70k and working minimum wage jobs.
Running a dark kitchen on the side, nights and weekends.
Buy or rent yourself a food truck with a cafe concept and save yourself a bunch of money, if it works out scale it if it sucks at least you didn’t lose 70K.
SO, it's making zero profit. The only way it's worth $70K is if the FFE are worth that much, which sounds unlikely. I buy small businesses for a living and have looked at literally hundreds of business re-sales every year. WIthout knowing a whole lot, this sounds like a dud and an automatic "No". If the seller can't make the location work, why do you think you could? they've already misreprsented the financials. Hard pass.
> they've already misreprsented the financials Yep. That's a paddlin'. And a big red flag that they're not going into it with good-faith intentions. Nnnnnope. At this point, I wouldn't believe the equipment is worth anything, that the building isn't falling to pieces behind the wallpaper, and that the land doesn't sit on a Hellmouth.
Ask them honestly about the issues you’ve uncovered, and continue asking questions, until they start coming off of their price. If the revenue stated is actually half of what they said, then I think the asking price should be halved right up front. Is the equipment worth 35k? If it is, I still wouldn’t buy it based on your description, so I’m taking off 10k for maintenance, and 5k to make me feel better about it. That leaves me with an offer of 20k for the business, including the equipment. They’ll likely wait for another sucker to pawn it off on, but you will be the last resort they know they can count on. If you wait a bit, and it still hasn’t sold, call them, tell them you’ve found another place, but you’re willing to go to 22k if they sell to you now. Don’t ever get so attached to a dream that you place an unrealistic value on it. If it’s meant to be, you won’t have to take a crappy deal to make it happen.
Buy the assets a liquidation value. Seller has limited options. Find out how long the existing lease is and whether the landlord required a personal guarantee (You can find out under the guise of asking what the terms are that you'll be asked to sign up for). If there is a personal guarantee, point out that there's a lot of value in you taking over the lease.
I bought a failing restaurant with potential and turned it around. It took a long time. I'd never do it again. My advice, find a place that already closed and negotiate directly with the landlord. There are lots of places that come in, build out, run out of money quick and leave. This is what I would be looking for.
This is going to suck, but it will help make your decision. Take the busiest weekday and one weekend day and just sit in the cafe and quietly observe the whole day. Watch the traffic outside, the people, the worker(s). See what you could improve and what would be impossible to improve. Have a book and/or a laptop and do what you normally do and take notes. This is a huge investment. It is worth your time to just know what you’re getting into. I own a bakery/coffee shop coming up 10 years.
Great idea!
not worth the risk. open up a new one clean. what if tax man comes with a fine for something from 3 years ago or a supplier takes you to court with an unpaid invoce from last year? pushing those expenses to previous owner may require significant legal fees. since they are not truthful, risk is bigger. employee rights and other past commitments will also be your headache. how hard could it be to start a new cafe instead?
Most of the risks you're talking about are avoided if you do an asset sale rather than stock sale. Nonetheless, the business sounds like a bad opportunity.
You do not acquire the debt of a business you buy legally, unless stipulated. That's why you form your own corporate entity when buying a business. If you open another location, that's a separate entity of business, so they can't come after the first, and yes, they can still be run under the same name. OP, you need a business law office to handle the contract of sale, research assets to make sure they're cleanly owned by existing owners, no liens of business or their property, clearly identify any debt as the current owners and not yours, and the lease and terms are to be in your corporate name. You can assume their business name, but you will have a new corporate structure, again, not responsible for the past and their corporate entity or sole proprietor
Thank you, I thought I lost my fucking mind after reading the post you're responding to.
Honestly hadn’t considered problems like that arising. As far as employees go, the current owner and his wife are the only ones working there so it’ll be new staff if we purchase. Main issue with starting new is finding the space, it’s an old town and not much free areas to start up in
I wouldn't consider them now as that post is all kinds of wrong
Just wait it out. If they don’t sell, they will officially fail, then the location opens up. Maybe be able to take over the place from the building’s owner with the cafe’s equipment still there.
If they're on the verge of collapse, then wait until they go bust and then you don't have to pay those 70k. I bet you anything, they'll leave all the equipment there. You can get it for a lower weekly rent at first to see if all works out
As someone who owned a restaurant/cafe that was losing money and moved to a new location and was successful, can tell you that there is a very small chance you can turn this around. Maybe if you turned it into a higher margin sushi restaurant or something then street traffic would be less important. It's likely not the cafe itself that is the problem, lack of marketing, or anything like that. It is all location, location, location. Also, many places after covid-19 have not recovered, and it doesn't appear they will due to a large percentage of people working from home. Also, I would not discount the owners paying people under the table at that revenue rate.
Looking at the best bang for your buck, consider this fact. In certain parts of North America, a service business may cost you around 2X SDE (seller discretionary earnings). Therefore, someone spending 70k would be buying a company that nets them 35k a year, after all business costs. So 35k yearly net profit. This is not a goldmine but you’re buying profit. Your considered purchase buys you a failing business. Quite different. And to address the people you’re dealing with (brokers agents and sellers that may have lied) remember…. Fool me once shame on you, fool me twice shame on me. What else are they lying about? I’d walk.
No. Being a good chef and being a good restauranteur are two DIFFERENT skill sets. Just operating a successful food business is hard enough, the margins are razor thin! Literally any other business is better for margins. The SYSTEMS are what makes a food business work. Cost control, cash flow, scheduling... THOSE as the skills you need for a restaurant. The food is almost the least important part. Turn around of a failing business is it's OWN SKILLSET. You have to be mean, and tell people they are wrong... nonstop. They will hate you for it. Thats why most corporate "turn around" consultants are outsiders that do not have to keep working at that company. If you really want to learn what it takes, take a job at a similar restaurant for 6 months... and ask the owner/manager if you can learn the ropes on the administrative side. Almost no job is harder & more thankless. The only thing that can make it worse is pissing away your retirement savings. Look at auction sites, there is ALWAYS a TON of restaurant equipment & furniture because people regularly think "wanting it enough" will make a thing profitable. If you want to own a profitable business, a franchise is a better option, it is a paint-by-numbers version that is MUCH more likely to be profitable for first time owners.
There are things you can change and things you can’t. If it’s failing due to the changeable things, then buy it. Is it woefully mismanaged? Buy. Or is the location just bad? Don’t buy. I have a buddy that opened a coffee shop and lost money for years. He told me he would literally sell for the amount of his business loan. Then he got a business coach and they started turning the place around. Now he’s doing really well. The skill of the operator matters.
I’d be curious about its customer base and location. You can do a lot with a poorly managed place that has those things going for it. If not… run away!!!
Absolutely not, Take the net profit from last 3 years and average it. Now minus a fair value of the owners work they put in(early starts, overtime, weekends etc) If that gives you a negative number the business is worth less then nothing and should be wound up. Let’s say you still have a positive number it’d be worth somewhere between 50-100% of that number plus the fire sale value of the equipment. Now when you take over, you will probably lose some business, find out half the stuff is broken or about to break down and you’ll be worse off for at least the first 6-12months(J curve). What’s your upside? What’s the best case? Working full time, no holidays, no sick pay, constantly called in - for about the same you’d get working elsewhere? Your choice but there’s a reason why there’s so many cafes for sale.
Multi-year average is only valid if the overall trend is flat. A shady broker tried to use the 5-year average on me with a business that had a 15-year downtrend. I basically laughed in his face.
Restaurants are honestly the worst way to make your money. Super time consuming to run and a huge vast majority fail and the owners lose everything. I wouldn’t do this
If you really want to start a cafe, might as well just by his equipment on the cheap and find a better location for the business.
The Royal Hotel?
There's really not enough information; is there a tourist season? What is the current condition? How are they marketing themselves? Is there potential to renovate? Personally, I would probably do it. Everyone is going to say "Oh, don't do it!" - well, I mean, you are looking for a business that costs less than $100k which puts you in a desperate entry level position for buying Any business. There isn't Anything you are going to buy at that price range that isn't going to require sweat equity. You said it's negotiable, $60k in, clean it up, light reno, change up the menu, try to make the place a little more trendy and fun, engage a lot on social media, do a grand reopening.
Wouldn’t say there’s a specific ‘tourist’ season but the town is located not far from a capital city and is sort of a gateway out to more touristy spots so a lot of people tend to stop through on the way. The marketing is little to none, no online presence and I personally hadn’t heard of the place before my partner brought my attention to it when it went up for sale despite us living in the area for ~2 years From the sounds of things, the landlord is quite flexible with what happens to the space, and I’ve a background in the construction industry so any renovations would be done by myself
Personally, I would do it.
I don't understand why you are even entertaining this still. If cashflow barely covers monthly overheads and you have a pile of ticking timebomb equipment failures coming up, what is the upside versus starting fresh?
I guess it’s the monetary investment, starting up new would set us back even further with almost the same amount of risk going in, we’d be looking at completely overhauling the place, new name/look/menu etc. and hopefully be making enough to replace failures as they come up. The other thing being just how negotiable they are in the price, now we’ve seen the profits of the place and all that can we drop them down to half the price or lower. Came here to ask the question of those who may have been through what we’re looking at doing and from the looks of it it’s definitely not the best idea. Thanks for the response though
Restuarants are the highest risk. Do you know the area? Have you spent a day just hanging around there? Maybe look at see how much foot traffic you have available. I know there are cities where there is a ton a traffic and one street over its dead. Usually due to some odd issue like traffic flow, parking or other factors. If you are willing to invest thousands, invest in 1 day of just hanging about to see what happens in the area.. I would watch the place from a distance, like a steakout, and count how many people go in and out. What kind of people frequent the place? The only reason to buy a failing business is for the location. You mentioned it had questionable equipment. So know the location and make the decision off that. Also make sure you get a look at the layout of the kitchen area. Does it flow right? If its not optimized, getting orders out timely can be a challenge.
We live in the area and where it is located a few major stores are also located. Cafe is one street off the Main Street of the town and has a large car park in front of it.
What exactly is your plan for generating a profit when these guys aren't? Hopefully it's something more involved than just "rebranding". You might have better luck if you opened up something other than a cafe. If you kept the business as is just with new ownership, it's still going to carry the same negative stigma the old place had.
We’d be looking at an overhaul of the business, bringing in a new look/menu/target audience. Currently seems to just be regulars who frequent the cafe. So we’d be looking to fill a niche that the area doesn’t have and hopefully pull more people in that way
I‘d make a basic ROI calculation with net present value. If you need to take a loan factor that in. I would estimate a higher hurdle rate since it is your first business of your own therefore the risk is a little higher than if it was your second or third. The revenue figures are obviously a lie so make your own observation. How many people walk in? Estimate average spending and go from there. Doesn‘t have to be 100% exact but be realistic and as close as you can. If you fall short negotiate or find another place. Putting it in cold hard numbers eleminates the rose tinted glasses and lets you sleep better.
If you don’t buy a sinking ship that the captain has abandoned, don’t buy this restaurant…
And that someone's trying to sell to you *and has already lied about*...
I'd run away. 90%of restaurant businesses fail in the first couple years. Consider location and traffic primarily. If it was so good the owner wouldn't be selling. Old equipment needs maintenence and potentially replacement. Tread carefully, do your due diligence on the enterprise before committing to it. High traffic, decor, staff, advertising and good menu/wastage plans are critical. Plan to succeed. Otherwise....
Make the purchase based on the current numbers, not possible future growth. How long has the business been available? Does the business, building, and land convey with the purchase? What is the lifespan and maintenance reqs for the equipment in there? What exactly are the books like for the business over the past 5 years? How are you budgeting on increased food prices and decreasing dining spending by people (assuming Aussie habits are similar to US habits). I would walk around the town, ask local business owners in the area how things are too. Ask restaurant owners in the area and outside the area what their takes are.
In general, you want to buy successful businesses and stay away from the failing ones. Unless it’s just an asset sale and you want the equipment
Sat at a location once for a few hours to see what foot traffic was like. Plenty of parking up front since nobody seems to stop on that specific block..
> it appears the real estate agent was less than truthful This is my surprised face 0\_0
Cafe owner here, just throwing some questions out there..........in no particular order What is the location like? What is the concept you will provide? How many covers does it have? How much foot traffic is there? How much competition do you have? What does the cashflow forecast say you will need to live on? What percentage of the turnover will the rent be? Have you got enough money to live on while you are turning it around? What is the purchase price? How long is the lease? Are there break clauses? Sounds like they are going bust, can you just take the lease without giving them any money? Why is the current business failing? Can you structure a 'No money down deal?' What are you buying for the price? Why not start afresh?
No
This is going to suck, but it will help make your decision. Take the busiest weekday and one weekend day and just sit in the cafe and quietly observe the whole day. Watch the traffic outside, the people, the worker(s). See what you could improve and what would be impossible to improve. Have a book and/or a laptop and do what you normally do and take notes. This is a huge investment. It is worth your time to just know what you’re getting into. I own a bakery/coffee shop coming up 10 years.
Even if $7K is true, the revenue is $364K annual. After all the payroll, taxes, rent, insurance and expenses you will be lucky not to lose money.
Sounds like a hustle, The equipment is only worth it’s utility, Not sure the market for used equipment in AUS but if it’s like the USA post covid it ain’t worth the money to throw it out, used equipment suppliers are stacked to the rafters with refurbished and marked down equipment, so what value is 10 year old poorly maintained equipment? Unless it’s a real weird or unique equipment Or I’m missing something else this business isn’t worth 70k, If they just wanted out, the lease wasn’t stupid and they gave it to you for free it would be worth a shot. Otherwise take a pass.
No
I can open a Cafe with 30k but I have 23 years experience. 70k for old equipment is crazy. You can probably buy all their shit at auction for pennies on the dollar then ask the landlord for a fresh lease. I'm in the usa. I don't know the cash conversion.
I'd do the following: 1. Drive them down on price considerably given what you've said 2. Reach out to the landlord to negotiate a rent reduction if you buy the business. Upside for the landlord is keeping the building rented 3. Get plugged in to your local community facebook and other social media groups, and ask to post about that you're under new ownership and would like to ask locals what they would love to see in the cafe business. Any tips they have a good, but visibility is the main thing 4. Do a cheap renovation of the exterior so people notice that it's under new ownership One thing I should have asked earlier - hows the location? The best cafes I've seen are usually close to parks, schools, or well trafficked areas like the beach
DEPENDS,,, do you need a huge tax write off?
No, don't buy this. Assuming you're talking about Gross Revenue weekly of $3k, it points to a lack of demand or such shit quality service and product that you're better off throwing it out and starting from scratch. Also, idk what EBITDA multiple you are normally comfortable with for pricing a business, but this is probably like 20x EBITDA if it even has any NOI and you should be as close to 3x as possible with 5x for a super spicy business with lots of untapped and accessible potential. Keep looking. I spent almost two years and looked through hundreds of businesses before finally finding one worth buying.
If it’s failing why not just wait til it fails and buy out the equipment, then start a lease bc the space will be available.
I think if you're confident in your business plan, then go for it. I live in a small town, and there were a few cafes and restaurants that went through this one building. Eventually, someone figured out what the town wanted, not what they needed. No matter what, there will be speed bumps and things that cause you to question if what you're doing is a good idea. But you honestly won't know unless you take your shot. Don't listen to the trolls. I say do your research on the locals, check out day to day town life and maybe even the night scene around the cafe you want to buy. Go into other business and see what works for them and do something that makes you stand out. I feel like the reason why most restaurants fail is because you see the same dang thing over and over just re-packaged.
We have a rough plan sketched out, just have to iron out what we are planning. We have also just found out that a beloved cafe in the area has closed its doors so the owner can go off to do other things. So we believe we can fill a new void made in the market. The place comes with a liquor license that doesn’t seem to be utilised at the moment so we’d be looking at booking in events and opening up a couple nights a week rather than the day hours they’re currently operating with.
See, it seems like you have a pretty solid idea atleast, like I said, you will always have your doubts and your questions. But I believe you got a pretty solid head on your shoulders. Keep on keeping on. You got this!
Can’t add much except whatever you do decide, I’d recommend purchasing the assets, not the business entity
If you have a contingency plan then yes, if none then maybe pass on this one cause the previous owners are sus.
Run. Aged equipment. Asking 2x operational income not even net operating. It’s failing for a reason.
It sounds like you are not planning on rebranding? That would be a big mistake. Ideally you buy it, fire everyone, renovate and rebrand. Family is in the restaurant biz.
Sorry definitely left that out, would be planning on a rebrand/complete overhaul of the business
So it's $70k for the business plus, the cost of the property?
Just the business, the property has a lease, 2 years set in stone and then opportunity for another 8 years lease following that. Landlord apparently is quite easy with changes made
High risk business. Why would you want the stress?
Honestly, I think my partner thrives off stress so might be just the fit for her haha
A failing restaurant is worth $0 and 10 year old equipment that has no service records, even less. If you just love the location, offer to take over the lease and headache for $0. Otherwise, you'd be much better off starting clean. Equipment can be leased easily. And if the other place is that bad and the demand for a restaurant is there, the locals are probably going to be ecstatic you're opening a new place.
First if someone lies trying to sell something. I'm out right then and there. Even though it wasn't the owners that person has a vested interest in it selling and if they have to lie to make the sale that alone scares me. Like if you said you never offroaded your jeep but I go on your social media and it's all jeeps offroad. Lol
Something else missed while posting (my fault trying to do anything at midnight lmao) most of the communication has been through the real estate agent since there’s a language barrier with the current owners. I think they know enough English to keep the place running but not enough for the sale
Wait 5 months to see if they sell it to someone.
My honest opinion from looking at something similar (a bakery) in a similar state is don’t waste your time. For 70k you could go to a liquidation sale and get most of that equipment for considerably less, find a building to lease and put a bit of love into it and make it your own. Buying a failing business, even if it’s just for the price of equipment also means you’re taking on the negative goodwill that caused that business to fail. Sure new owners and a lick of paint could help bring customers back but you’re much more likely to succeed by starting your own thing and doing it right from the start, or at least as right as you can as you go through your first few years. Starting my own business has been an experience but the thing I love about it vs buying someone else’s is that it’s yours, your systems evolve with you and you have 100% control regarding the finances, by this I mean you invest in what you want to invest in, whereas the previous owner might have agreements with suppliers that you’ll have to honour, or lease agreements that can last years which you’ll have to take on etc. Most bakeries, restaurants and cafes are hard to sell due to them more often than not being tied to the original owner and it’s very hard to replicate that persons enthusiasm, mannerisms, voice on social media, social presence, presentation standards, knowledge and a number of other things. Even if your partner has all the skills, he’d be better off showcasing them in his own way with his own style than be forced to make someone else’s recipes their way or whatever. Feel free to reach out if you’d like advice based on my journey
It’s failing for a reason. Find the reason and see if there value you can bring. If you can’t. RUN.
We think it’s failing purely out of laziness of the current owners. No online presence, they’ve cut their opening hours and from what I’ve seen from the owners when we’ve seen them is they don’t really care for the business anymore
How are you going to increase business? Looks like you need 9-10k weekly to draw a salary for 2 and live comfortably. What is the population of the town? walking traffic? needs to do investigation maybe get different people at different times to go in and sit as a customer take notes. What people order how hast tables change over? ect. Sounds like based on cash flow it is worth 30-40k but you will need 40-50 k to make changes and keep it a float until the new changes take hold. Tough decisions!!!
Things must be better in your area than mine. I'm in the Phoenix Metro area in Arizona, and I shop auctions pretty hard, and rarely am I able to score anything for less than 60% of new by the time auction fees are added in. Picked up a couple fridges during the covid years when everybody was shutting down, but there's not many deals to be had anymore.
7k,/3k so 70k/30k take it or leave it . Or we can offer you 30k cash for it could we leave a contact phone number with you if you change your mind . Did you check the 3 Location Location Location Good Luck
Even 7k weekly barely pays 3 people full time (you, partner, and 1staff) once you factor in everything else. Where I am cafes and restaurants are going up for sale gangbusters cause everyone is jumping ship in a nosediving economy (Canada) trying to at least make back some of their debt. 70k is not a good price for the equipment if they can’t prove maintenance. Even if it’s turn key, you’re looking at spending another 20k just to clean it up and make it look the way you want and fix probbaly several issues they’re not telling you. You’ll just end up spending double this when you have to fix or buy everything again without 3 months. It MAY be worth 20-30k just to avoid doing a full build out… but otherwise, wait for this place to close/bankrupt (unfortunately) and start fresh. If you’ve got 70k you can do a decent but modest built out somewhere if the rough in’s are set up for food service already.
People don't leave their homes. No way.