Need some advice

Author
577NitroExpress
Junior Burger
  • Total Posts : 6
  • Joined: 2006/01/19 10:24:00
  • Location: Fairfax, VA
  • Status: offline
2006/10/24 11:18:03 (permalink)

Need some advice

All:

I have been a lurker on this board for a long while as I planned and strategized for opening my own counter service BBQ joint.

Here is what I need advice on:

There is a restaurant for sale. It is an Indian restaurant and the owner wants to sell the business outright, but is also open to any offers. (He is a very motivated seller who wants to move back to India upon getting rid of the restaurant).

He wants the next person to assume his current lease (which is a very good rate of $3100/month for a 3300/sq foot building.

The configuration of the current place will meet my needs, if very few, minor, changes.

THe location is great, the market is ripe for what I want to do.

I have gone through his establishment and taken a list of the equipment I could use in my establishment. According to my equipment needs and what he currently has, I want to make an offer to him to assume the lease but to only buy certain pieces of equipment from him.

From my list, I estimated that for the equipment alone that he has, if I were to buy it new, it would cost me $27,684.00 without tax, shipping or installation.

My question to you is this: This is used equipment that is in good working order. If new equipment costs $27,684.00, how much should I offer him? Half? 3/4th?

ANy thoughts would be greatly appreciated. He knows up front that I am not interested in his name, reputation, clientel or proprietary information (recipes) and he is still calling me often about what I want to do.
#1

18 Replies Related Threads

    KAYLINDA
    Hamburger
    • Total Posts : 59
    • Joined: 2005/11/03 23:49:00
    • Location: CHERRYVALE, KS
    • Status: offline
    RE: Need some advice 2006/10/24 12:11:16 (permalink)
    Make sure you go over the lease papers with a fine toothed comb...or better yet with a lawyer. You want to make sure you can renew the lease...and that there is no clause in there stating that the previous leasor can't let a new person assume it. As far as equipment don't offer more than half. Equipment depreciates very fast. ( I would offer less than that to start.) His eagerness puts up a warning sign to me.. though I understand his wanting to get back home...check things out carefully!
    #2
    577NitroExpress
    Junior Burger
    • Total Posts : 6
    • Joined: 2006/01/19 10:24:00
    • Location: Fairfax, VA
    • Status: offline
    RE: Need some advice 2006/10/24 12:41:28 (permalink)
    Thanks for the relpies this far.

    Honestly, this guy opened a Indian Restaurant in an area where no one likes strange, ethnic food - VERY blue collar in this area.

    I'm shocked this place lasted this long!
    #3
    littlebites
    Junior Burger
    • Total Posts : 32
    • Joined: 2006/09/18 17:17:00
    • Location: Brooklyn, NY
    • Status: offline
    RE: Need some advice 2006/10/24 17:12:53 (permalink)
    Counter service in a 3300 sq. ft. bldg. Sounds like you could easily have a full blown Q.
    #4
    bassrocker4u2
    Double Cheeseburger
    • Total Posts : 534
    • Joined: 2003/11/12 07:59:00
    • Location: new holland, PA
    • Status: offline
    RE: Need some advice 2006/10/25 08:21:27 (permalink)
    i got a better idea for you.... i know this counter service bbq for sell. 69,500. its up, running, and fully operational. owner motivated, but not a smuck. owner(thats me) wants to move a thousand miles closer to the grankids. we are listed with sunbelt. our lease is what we call good, at 400 dollars a month. assumable, with a 5 yr extension. gives you nine yrs total.
    question,. is this indian place up and running, or closed. that makes a huge difference. your estimate on equipment costs is very low. does he have nothing?
    i mean , like a hood system, is 6g, a grease trap is 3g, one fridge is a couple g at least, some are 6, i mean it doesnt take much to get up to 50, just curious...
    #5
    577NitroExpress
    Junior Burger
    • Total Posts : 6
    • Joined: 2006/01/19 10:24:00
    • Location: Fairfax, VA
    • Status: offline
    RE: Need some advice 2006/10/25 15:08:44 (permalink)
    The Indian Restaurant is currently up and running. Before that, it was a pizza joint for at least 15 years.

    The business this guy is doing is horrible. I've checked on it a number of times, varying days and time when I check it out - never any customers.

    Regarding the equipment, he doesn't have much that I want - a hood, fire suppression, grease trap, indoor walk-in fridge and freezer, stand alone fridge, some stainless steel work tables, sinks and small items.

    Based upon what he has and pricing the same exact item, or one very similar, I estimated I could by the same equipment, new, for $27K.

    What he doesn't have, that I want, is another matter.

    The thing that is nice is that the infrastructure is there and it would cost me very little money to configure the space to more than fit my needs.

    Yes, a full service 'Q joint may happen a little later, but for now, I'm doing what I know well. And, for $3200/month for this place, it is a a good price for what I'm getting in a high traffic area I am happy with.
    #6
    prisonchef
    Cheeseburger
    • Total Posts : 296
    • Joined: 2006/02/13 19:27:00
    • Location: st augustine, FL
    • Status: offline
    RE: Need some advice 2006/10/25 18:23:25 (permalink)
    bassrocker,
    i am going to try to email you direct.
    from what you wrote you have 400/month lease for another 4 years with another 5 optional.
    jack
    #7
    Kinsman
    Hamburger
    • Total Posts : 59
    • Joined: 2006/03/06 17:20:00
    • Location: Bitterroot Valley, MT
    • Status: offline
    RE: Need some advice 2006/11/06 16:10:50 (permalink)
    No kidding....if I found a deal like that I think I would take it.

    #8
    Voyageur
    Cheeseburger
    • Total Posts : 400
    • Joined: 2006/02/19 07:24:00
    • Location: Iowa
    • Status: offline
    RE: Need some advice 2006/11/06 22:23:58 (permalink)
    Based on experience coming on as a manager for a couple who had assumed a lease without legal overview, please obtain counsel who's experienced in the process to guide you through the due diligence needed and the protections that must be built into such a transaction. Otherwise, you could face a nightmare, as we did, making better a bad transaction. Also, keep in mind that once that Indian owner reaches India, you'll have absolutely no practical legal recourse should anything be wrong. Even if you deal with one of the nice people on this forum who is not leaving the country, it's far more expensive to undo a bad transaction than to set up a good one.

    As for used equipment, ask your local restaurant food salespeople for leads. They want to establish a good relationship with you. They'll point out places that have recently gone out of business, etc. These leads will give you a good idea of prices in your area.

    Good luck, 577NitroExpress! Let us know when you open.
    #9
    Raine
    Cheeseburger
    • Total Posts : 196
    • Joined: 2005/03/07 10:27:00
    • Location: Charlotte, NC
    • Status: offline
    RE: Need some advice 2006/11/06 22:38:17 (permalink)
    At an equipment auction, they get pennies on the dollar.

    I would get the health dept to do a walk through to see if the stuff will pass inspection. You may buy it, just to find out you have to replace it anyway.
    #10
    Sonny Funzio
    Double Cheeseburger
    • Total Posts : 912
    • Joined: 2006/02/13 15:21:00
    • Location: Detroit, MI
    • Status: offline
    RE: Need some advice 2006/11/07 16:08:02 (permalink)
    Yes, Health Department is an important thing. The degree of awfulness they can levy upon you depends on how strict they happen to be in your area.

    Actually, you should be drawing up and submitting (with the appropriate fees) your official kitchen plans IN ADVANCE of purchasing ANYTHING ... your submitted Kitchen Plans will likely require you include spec sheets for each appliance, and what you submit must be your final drawing (if you move anything after the plan is submitted you have to re-submit and might possibly have the inspectors back out).

    If you need some help on what the drawings should look like and the layouts you might consider, find a book on "commercial kitchens" at a local college with a Culinary Arts program, a bookstore or (possibly) a large library.

    Also, much of your equipment may have to bear the National Sanitation Foundation (NSF) or similar sticker somewheres on it.

    It is an expensive mistake to purchase equipment before you find out *exactly* what the health department is going to require of you.
    And make sure you find out for each piece of equipment exactly what they are going to want to see. (eg. whether your stainless 3-comp commercial sink must have drainboards, whether they must be attached seamless etc etc).

    Sometimes the requirements will seem to be, to all appearances, the arbitrary decision of the individual that is going to handle your application ... this is why it is important to really belabor the issue to get as many specifics (very, very nicely!) from that person as you can. And IMPORTANTLY just because the previous owner used a piece of equipment, that does NOT mean they will necessarily approve it for *your* operations.

    Like my grandfather used to say ... "There's never time to do it right the first time, but there's always time to go back and do it again".

    #11
    adbunting
    Hamburger
    • Total Posts : 72
    • Joined: 2006/04/07 08:14:00
    • Location: Pahrump, NV
    • Status: offline
    RE: Need some advice 2006/11/07 23:34:19 (permalink)
    OK, IMHO
    First off, you're not really buying the business. He doesn't own the building and you aren't buying anything having to do with what constitutes selling a "business" if you are planning to change everything.

    That leaves the lease (which I'm not convinced he can legally ask for money to assume) and some of the equipment. You're not buying Goodwill, Name, established clientelle or anything. All of that constitutes selling a 'business'. All of the parts of it that you're not really interested in.

    You definitely need to talk with a lawyer. The seller may not go for it, but if his books look as bad as you're implying NObody is going to buy it as it stands anyway. He might be best just getting something out of his equipment and that, as they say, is that.

    I appreciate all of the perks of the property, however you also need to take a deep breath and not get caught up with the excitement of your 'plans'. In other words: You don't need to be a caloused jerk, but don't feel sorry for him and give him your hard earned money for nothing. Look at the half full/half empty glass realistically as a glass with water in it.

    The only thing I'd be willing to pay for is the equipment and starting offer probably 1/3 of the asking price depending on the inspection.

    If I were in your position I also would find out who owns the building. This falls well within the realm of finding out if the lease is even assumable. Don't trust what the seller says. Get it from the horse's mouth.

    I don't mean to come off sounding like a cold brioche but you have to protect yourself.

    And I DO want to make a disclaimer that I'm not a business lawyer BUT I've been involved with many different businesses over my decades...

    April
    #12
    Sonny Funzio
    Double Cheeseburger
    • Total Posts : 912
    • Joined: 2006/02/13 15:21:00
    • Location: Detroit, MI
    • Status: offline
    RE: Need some advice 2006/11/08 14:27:32 (permalink)
    quote:
    Originally posted by 577NitroExpress


    (He is a very motivated seller who wants to move back to India upon getting rid of the restaurant).

    This really is a case of buyer beware. Especially if he has a big head of steam to get out of the country.
    In any regard, if I was in your position I would absolutely look into having a criminal background check done, however possible.
    Whatever diligence you can bring to bear is worth doing.
    And absolutely, positively, 100% have a good attorney with adequate experience oversee the deal.
    quote:
    Originally posted by 577NitroExpress


    ... used equipment that is in good working order. ...

    Make sure it is in fact wholly owned equipment ... not on lease and not on payments. A credit check with the three credit agencies might in fact turn up clues about any such account.
    And when you finally get ahold of the landlord regarding the lease, also ask that person for any knowledge they may have about the status of the equipment.
    #13
    pdxyyz
    Cheeseburger
    • Total Posts : 411
    • Joined: 2003/05/30 09:39:00
    • Location: not here, OR
    • Status: offline
    RE: Need some advice 2006/11/08 16:30:52 (permalink)
    An expired green card means nothing. The holder does not lose his status as a permanent resident of the US. The 10 year expiration was created to reduce the amount of counterfeiting of green cards. The holder simply has to renew the card every 10 years. He will not be hunted down and kicked out of the country, but may have problems re-entering the country without a card or other proof of residency.



    #14
    Sonny Funzio
    Double Cheeseburger
    • Total Posts : 912
    • Joined: 2006/02/13 15:21:00
    • Location: Detroit, MI
    • Status: offline
    RE: Need some advice 2006/11/08 21:49:33 (permalink)
    I meant to suggest that the seller may be up against the expiration of his legal status for whatever reason. But like you say ... it's not like they're hunting down people who are illegal to deport them. I agree, that potential status might not be so significant ... I'm going to strike that suggestion. However I'd still be certain to do a criminal background check and credit investigation.
    #15
    adbunting
    Hamburger
    • Total Posts : 72
    • Joined: 2006/04/07 08:14:00
    • Location: Pahrump, NV
    • Status: offline
    RE: Need some advice 2006/11/09 09:45:18 (permalink)
    quote:
    Originally posted by Sonny Funzio

    I meant to suggest that the seller may be up against the expiration of his legal status for whatever reason. But like you say ... it's not like they're hunting down people who are illegal to deport them. I agree, that potential status might not be so significant ... I'm going to strike that suggestion. However I'd still be certain to do a criminal background check and credit investigation.


    A green card or even a credit or criminal check seems like a waste of time and money to worry about. He's not buying a watch on a streetcorner and he's not lending him money. (like getting a credit check to open a bank account? That totally pisses me off that I would need good credit to have a bank hold onto MY money?)

    The validity of his owning the equipment in order to sell it is an excellent point thought.

    He may very well come up a not very sterling individual, (It sounds like just bad business decisions from what was said about putting an ethnic restaurant in an area that clearly won't support such a thing) but if the paperwork is good for the equipment, and that I would definitely validate with serial numbers, and he can get the lease from the owner of the property then everything is good.

    It would seem to me that the only real issues are equipment and the current tenant getting out of his lease. Which the owner would probably not mind to get someone profitable in. It's all about the money.

    I wouldn't complicate it too much and just focus on those issues as well as making certain the building passes health and fire codes. From it's history I would guess yes and that can also be discussed with the owner.

    April


    #16
    Sonny Funzio
    Double Cheeseburger
    • Total Posts : 912
    • Joined: 2006/02/13 15:21:00
    • Location: Detroit, MI
    • Status: offline
    RE: Need some advice 2006/11/09 16:39:45 (permalink)
    The seller is leaving the country immediately ... and probably permanently. There is a limited window of opportunity to make sure that there will be no residual conflicts of interest ... one of the ways of doing this is to find out about the opposing party prior to committing oneself in any transaction. This is in part what attorneys are for.

    If the seller had work done by contractors who remain unpaid ... the assets are attachable by lien.
    The lien follows the assets.
    A credit report is a prime place to find out about a seller having had chronic problems that would indicate a pattern of not having paid his bills.

    If the seller is in default on his taxes ... the business assets are attachable. ....It does not make one whit of difference that a transaction has taken place ostensibly transferring ownership of the assets. Don't believe me? Call a tax attorney.
    Get it wrong and the State Police will be there with movers hauling away all "your" equipment.

    Maybe you wouldn't bother to cover those bases ... like you say you "wouldn't complicate it too much" ... but then again you would be the person who is out their money when problems arise and the seller has left the country.

    Because the seller is leaving the country and the potential problems are an unknown, the diligence a buyer in such a situation should put forth should be more than just a couple things and a handshake. The buyer should take the time to try and uncover the larger picture. Get it right the first time.
    Tax issues ... contractors ... criminal history as possible ... title to equipment ... the "seller" actually being the titled business owner, and whose name appears on all business documents (not his father's or cousin's or brother's name).
    I can't stress it enough, have a good attorney, especially in a situation like this.

    My suggestions come from personal familiarity with just such circumstances that occurred in the purchase of a chinese restaurant in 2001. Not my restaurant, but I was involved. In that situation, it was lucky the sellers had not left the country.

    The investment in a restaurant adds up very quickly; the cost of the initial purchase of assets is just a portion of the money you commit. It is a hard lesson to have something come back and bite you and put you out of business.





    #17
    Voyageur
    Cheeseburger
    • Total Posts : 400
    • Joined: 2006/02/19 07:24:00
    • Location: Iowa
    • Status: offline
    RE: Need some advice 2006/11/09 21:53:22 (permalink)
    Sonny, you don't know how much I agree with you. The situation I mentioned above was really a nightmare, and your post touched on several issues that made it that.
    #18
    Sonny Funzio
    Double Cheeseburger
    • Total Posts : 912
    • Joined: 2006/02/13 15:21:00
    • Location: Detroit, MI
    • Status: offline
    RE: Need some advice 2006/11/10 12:42:12 (permalink)
    quote:
    Originally posted by Voyageur

    Sonny, you don't know how much I agree with you. The situation I mentioned above was really a nightmare, and your post touched on several issues that made it that.

    Ouch, that sounds like a very unhappy gig, Voyageur.
    Yup, it's more common than people think.
    It's a big pain in the butt to go thru a bunch of extra work, but it's definitely a bigger pain if things go wrong.
    #19
    Jump to:
    © 2014 APG vNext Commercial Version 5.1