Is this place going to eat me?
September 24, 2012 6:22 PM Subscribe
I have a day or two to decide whether or not to buy a recently closed restaurant. I have tons of experience running small retail businesses. The books look good and the price is right.
I live with two guys who worked there and have a lot of insider info that makes me certain it was a huge conflict between the partners that resulted in the closure. At this point, I can retain the staff.
I have been out of work since March, so this is very tempting. It will take most of my money. If I can keep it going at the current level, I'll make it back in 6 months.
What should I be asking about? Thinking about?
I'm that friend of yours who cooks like an angel, but I have never worked in a restaurant. That scares me most.
I don't need general business advice. I need eating business advice. Keep in mind that the restaurant has only been closed for 2 days and has a very positive web presence.
Help!
I live with two guys who worked there and have a lot of insider info that makes me certain it was a huge conflict between the partners that resulted in the closure. At this point, I can retain the staff.
I have been out of work since March, so this is very tempting. It will take most of my money. If I can keep it going at the current level, I'll make it back in 6 months.
What should I be asking about? Thinking about?
I'm that friend of yours who cooks like an angel, but I have never worked in a restaurant. That scares me most.
I don't need general business advice. I need eating business advice. Keep in mind that the restaurant has only been closed for 2 days and has a very positive web presence.
Help!
- Would you be keeping decor, theme, food style, chefs, everything as-is, or do they need a change?
- How long has it been open? (obviously the longer the better)
- Did it ever make profit in its lifetime?
- What's the staff turnover rate? How experienced are the staff there?
- Will you be handling all of the purchasing/food orders/etc, or do you have someone on staff with experience? A lot of the food stuff isn't just budget-keeping, it's also knowing your vendors and the food quality you're getting
- What meals do you serve? It's way easier if you're just open for dinner or breakfast and lunch than if you're open for all three
Obviously, the more self-supporting the restaurant is the better. That is, if you already have staff who are experienced at being a head of the house/chef/waiter/bartender/purchasing person you are WAY better off than if you have to handle all of it yourself. Similarly the more you want to change the restaurant the more difficult this venture is going to be (especially if the current staff is resistant to the changes).
Also, the level of cuisine is going to make a huge difference on how important the answers to the above questions are. Keeping a little coffee cafe open 5:00am - 9:00pm is a whole different animal than trying to run a three-star restaurant for lunch and dinner.
(disclaimer: I have worked in but not run restaurants. I was employed to one that crashed and burned in the most spectacular fashion though. An experienced chef who worked there narrated everything the owners were doing wrong during the entire process, and a lot of it had to do with not considering the above questions and overestimating their abilities to implement all of their ideas for the restaurant at once without building a base of customers and trained staff)
posted by Anonymous at 6:40 PM on September 24, 2012
- How long has it been open? (obviously the longer the better)
- Did it ever make profit in its lifetime?
- What's the staff turnover rate? How experienced are the staff there?
- Will you be handling all of the purchasing/food orders/etc, or do you have someone on staff with experience? A lot of the food stuff isn't just budget-keeping, it's also knowing your vendors and the food quality you're getting
- What meals do you serve? It's way easier if you're just open for dinner or breakfast and lunch than if you're open for all three
Obviously, the more self-supporting the restaurant is the better. That is, if you already have staff who are experienced at being a head of the house/chef/waiter/bartender/purchasing person you are WAY better off than if you have to handle all of it yourself. Similarly the more you want to change the restaurant the more difficult this venture is going to be (especially if the current staff is resistant to the changes).
Also, the level of cuisine is going to make a huge difference on how important the answers to the above questions are. Keeping a little coffee cafe open 5:00am - 9:00pm is a whole different animal than trying to run a three-star restaurant for lunch and dinner.
(disclaimer: I have worked in but not run restaurants. I was employed to one that crashed and burned in the most spectacular fashion though. An experienced chef who worked there narrated everything the owners were doing wrong during the entire process, and a lot of it had to do with not considering the above questions and overestimating their abilities to implement all of their ideas for the restaurant at once without building a base of customers and trained staff)
posted by Anonymous at 6:40 PM on September 24, 2012
No firsthand experience, but a close friend ran his own (moderatly successful) restaurant for 15+ years...
He has described it as having little to do with cooking, and everything to do with working your butt off every day (every day) until you collapse exhausted into sleep at night. Then get up way too early and do it again.
If running your own show means that much to you, perhaps you'll do well. If not... Well... Me, I like sleep. ;)
posted by pla at 6:42 PM on September 24, 2012 [1 favorite]
He has described it as having little to do with cooking, and everything to do with working your butt off every day (every day) until you collapse exhausted into sleep at night. Then get up way too early and do it again.
If running your own show means that much to you, perhaps you'll do well. If not... Well... Me, I like sleep. ;)
posted by pla at 6:42 PM on September 24, 2012 [1 favorite]
I think you need to go by the books. Was it making money before it went under? How much, and how does that compare to other local successful/unsuccessful restaurants?
Having not run a restaurant before, it's going to take a while to figure out in what ways the industry is unique (and it is very different than other industries from what I understand). You need enough cushion in profit to give yourself that time if you're going to make it work.
posted by zug at 6:42 PM on September 24, 2012 [1 favorite]
Having not run a restaurant before, it's going to take a while to figure out in what ways the industry is unique (and it is very different than other industries from what I understand). You need enough cushion in profit to give yourself that time if you're going to make it work.
posted by zug at 6:42 PM on September 24, 2012 [1 favorite]
If the business is closed, you're basically just buying the lease and capital equipment. Do not get talked into purchasing the goodwill for a business that is no longer operating, no matter how many days it has been closed.
posted by hot soup girl at 6:46 PM on September 24, 2012 [22 favorites]
posted by hot soup girl at 6:46 PM on September 24, 2012 [22 favorites]
Not having worked in the restaurant world should fucking scare you shitless about this. That being said:
What are their current expense percentages? How much have they been spending on food-cost? Labor? Bar? There are very well-known percentages you should aim to have.
What's the current inventory? When does it go bad?
What's the relationship with vendors (food, linen, etc.)? Will they give you credit?
You don't have domain knowledge, AKA, you don't know shit. Who would you hire who knows shit? Can you trust them? Do your percentages still work if you have to hire the functional equivalent of a COO?
posted by ifandonlyif at 6:47 PM on September 24, 2012 [7 favorites]
What are their current expense percentages? How much have they been spending on food-cost? Labor? Bar? There are very well-known percentages you should aim to have.
What's the current inventory? When does it go bad?
What's the relationship with vendors (food, linen, etc.)? Will they give you credit?
You don't have domain knowledge, AKA, you don't know shit. Who would you hire who knows shit? Can you trust them? Do your percentages still work if you have to hire the functional equivalent of a COO?
posted by ifandonlyif at 6:47 PM on September 24, 2012 [7 favorites]
I'm that friend of yours who cooks like an angel, but I have never worked in a restaurant.
I know you asked for restaurant advice, as opposed to just general business advice, but man, honestly. You're being asked to put your whole net worth into a business that has:
- already failed once,
- in a domain you have no expertise in,
- in a sector that's volatile on a good day,
- in the current (dismal) economy,
- on two days' notice?
Sounds iffy.
posted by mhoye at 6:48 PM on September 24, 2012 [26 favorites]
I know you asked for restaurant advice, as opposed to just general business advice, but man, honestly. You're being asked to put your whole net worth into a business that has:
- already failed once,
- in a domain you have no expertise in,
- in a sector that's volatile on a good day,
- in the current (dismal) economy,
- on two days' notice?
Sounds iffy.
posted by mhoye at 6:48 PM on September 24, 2012 [26 favorites]
My wife owned/ran/eventually sold a successful small restaurant and her advice to people starting out is always the same: try your hand at a few small catering jobs first and see how you like it. You don't have to worry about a location, non-recoupable expenses (like oven ductwork) , licenses or health/fire inspections and you can walk away from it at any time if you need to. If the idea of catering simply doesn't appeal to you, then running a restaurant is probably NOT something you should jump into head first.
You're going to manage by yourself what previously took too experienced people to run? When my wife sold her business, the new owners just weren't a good mix with the staff or the neighbourhood and the place went into a long, slow death spiral. Don't make any rush decisions.
posted by bonobothegreat at 6:51 PM on September 24, 2012 [1 favorite]
You're going to manage by yourself what previously took too experienced people to run? When my wife sold her business, the new owners just weren't a good mix with the staff or the neighbourhood and the place went into a long, slow death spiral. Don't make any rush decisions.
posted by bonobothegreat at 6:51 PM on September 24, 2012 [1 favorite]
Agree with the above. You're being asked to sink your life's savings on a whim. One doesn't enter a business venture like this on a snap decision made with two days notice. Why are you being given such little time to consider this? It sounds fishy. People with decades of restaurant experience go under every day. I mean, sure, it CAN work, but the odds aren't in your favour. Do with that what you will.
posted by Jubey at 6:54 PM on September 24, 2012 [2 favorites]
posted by Jubey at 6:54 PM on September 24, 2012 [2 favorites]
I think it sounds like it might be a good opportunity, if you can retain the staff, and believe they are decent and experienced. You'll need people who know what they're doing to guide you through the beginning.
Now hop onto Netflix and watch as many episodes as you can of Ramsay's Kitchen Nightmares to get some ideas of what can go wrong when running a restaurant. (This is his best show, the BBC version, not the American, and he is much less obnoxious than in other things I've seen him in.)
posted by catatethebird at 6:58 PM on September 24, 2012 [1 favorite]
Now hop onto Netflix and watch as many episodes as you can of Ramsay's Kitchen Nightmares to get some ideas of what can go wrong when running a restaurant. (This is his best show, the BBC version, not the American, and he is much less obnoxious than in other things I've seen him in.)
posted by catatethebird at 6:58 PM on September 24, 2012 [1 favorite]
(And you're planning on managing, right? Don't go in thinking you're going to be working in the kitchen.That would NOT be a good idea for someone with no restaurant experience. You need an experienced chef running the food side of things.)
posted by catatethebird at 7:02 PM on September 24, 2012 [2 favorites]
posted by catatethebird at 7:02 PM on September 24, 2012 [2 favorites]
Cooking in a restauraunt ≠ cooking at home. Not even close. not at all. So get that idea out of your head right now.
If you can retain the staff you won't need to cook unless former owners cooked anyway. And if they did cook, you don't want to be back there. It's bad enough having someone who can't hack it on the line. It's even worse when that guy is your boss.
Really, it comes down to two things.
1 - Why exactly did the place close? If it really was just partner disagreements then it's just a fluke thing that can really work in your favor.
2 - How successful was the thing before? If t was doing well then that works in your favor too. Especially if it was doing well despite partner problems.
I would even go against catatethebird a bit. Hopefully you're not going in managing, especially if you can keep the relevant staff. Let them do the job they know how to do. Sure, things like "Hit 30% labor cost" or "25% food cost" or other things like that. But the day to day stuff should be left to people who know what they're doing.
Which isn't to say that you can never do that stuff. But essentially you'll be a new restaurant and people can be picky about where they spend their money. The food business is pretty cutthroat.
posted by theichibun at 7:10 PM on September 24, 2012
If you can retain the staff you won't need to cook unless former owners cooked anyway. And if they did cook, you don't want to be back there. It's bad enough having someone who can't hack it on the line. It's even worse when that guy is your boss.
Really, it comes down to two things.
1 - Why exactly did the place close? If it really was just partner disagreements then it's just a fluke thing that can really work in your favor.
2 - How successful was the thing before? If t was doing well then that works in your favor too. Especially if it was doing well despite partner problems.
I would even go against catatethebird a bit. Hopefully you're not going in managing, especially if you can keep the relevant staff. Let them do the job they know how to do. Sure, things like "Hit 30% labor cost" or "25% food cost" or other things like that. But the day to day stuff should be left to people who know what they're doing.
Which isn't to say that you can never do that stuff. But essentially you'll be a new restaurant and people can be picky about where they spend their money. The food business is pretty cutthroat.
posted by theichibun at 7:10 PM on September 24, 2012
Consider talking to a couple of restaurant consultants as well as a few local restaurant owners/managers. Consultants charge but many give a free initial consultation but they can be an ongoing source of info. You don't know what you don't know.
You might also want to talk to the existing staff. Are they willing to stay and how experienced are they? If you plan on keeping everything the same for the time being (menu/decor/hours/etc/), having people who are knowledgeable would be really helpful while you come up to speed.
posted by shoesietart at 7:10 PM on September 24, 2012
You might also want to talk to the existing staff. Are they willing to stay and how experienced are they? If you plan on keeping everything the same for the time being (menu/decor/hours/etc/), having people who are knowledgeable would be really helpful while you come up to speed.
posted by shoesietart at 7:10 PM on September 24, 2012
It will take most of my money. If I can keep it going at the current level, I'll make it back in 6 months.
I have to second The World Famous' point: will it take most of your money just to buy it? Or are you factoring in 6-12 months of the restaurant not being profitable?
posted by aka burlap at 7:10 PM on September 24, 2012
I have to second The World Famous' point: will it take most of your money just to buy it? Or are you factoring in 6-12 months of the restaurant not being profitable?
posted by aka burlap at 7:10 PM on September 24, 2012
Response by poster: I left the meeting today thinking "who the frack am I going to ask about this?" You people are awesome. Here's some more info:
This place didn't fail. The partners can't work together anymore after 15 years. It was profitable. Annual payout to the partners was 6 times what they will sell it to me for. The time limit is because the landlord wants to get someone else in there quickly. All staff are experienced and some had their own places before. Turnover has been very low and they are rooting for me because they want their jobs back.
I only plan on managing the business end while staff trains me on the rest. That worked really well when I jumped into specialty retail and it made everyone feel like they were a team because I was very honest about what I didn't know.
posted by Mr. Yuck at 7:18 PM on September 24, 2012
This place didn't fail. The partners can't work together anymore after 15 years. It was profitable. Annual payout to the partners was 6 times what they will sell it to me for. The time limit is because the landlord wants to get someone else in there quickly. All staff are experienced and some had their own places before. Turnover has been very low and they are rooting for me because they want their jobs back.
I only plan on managing the business end while staff trains me on the rest. That worked really well when I jumped into specialty retail and it made everyone feel like they were a team because I was very honest about what I didn't know.
posted by Mr. Yuck at 7:18 PM on September 24, 2012
If it is such a good investment, why isn't one of the guys buying the other guy out?
posted by bottlebrushtree at 7:26 PM on September 24, 2012 [40 favorites]
posted by bottlebrushtree at 7:26 PM on September 24, 2012 [40 favorites]
Don't do it.
posted by Sebmojo at 7:33 PM on September 24, 2012 [3 favorites]
posted by Sebmojo at 7:33 PM on September 24, 2012 [3 favorites]
I have been out of work since March, so this is very tempting.
Two days to think about it + unemployment for 7 months could amount to a very skewed decision-making process. Think very carefully about the risks and decide if you are prepared for the possibility of being completely down and out if it fails.
posted by Sal and Richard at 7:36 PM on September 24, 2012
Two days to think about it + unemployment for 7 months could amount to a very skewed decision-making process. Think very carefully about the risks and decide if you are prepared for the possibility of being completely down and out if it fails.
posted by Sal and Richard at 7:36 PM on September 24, 2012
You say you have lots of experience with running a business, but did you own it? How much time is left on the existing lease? Unless you have the resources to dismantle and relocate, your landlord will have your nuts on a tray when it comes time to renegotiate the price.
Seems like giving up your life savings, on the spur of the moment, to make things peachy for everybody else.
posted by bonobothegreat at 7:48 PM on September 24, 2012 [1 favorite]
Seems like giving up your life savings, on the spur of the moment, to make things peachy for everybody else.
posted by bonobothegreat at 7:48 PM on September 24, 2012 [1 favorite]
You have no restaurant experience? Don't do it. Pleaaaaase don't do it. Sure, there's a chance that it will be successful. But from my experience working in restaurants, the owner is either there 24/7 (and quietly or loudly going a bit crazy in the process) or paying someone else to do it for him. Everyone I know who has owned/managed a restaurant and moved on would never do it again because of this.
posted by DoubleLune at 8:02 PM on September 24, 2012
posted by DoubleLune at 8:02 PM on September 24, 2012
I know of a very successful local businessman who opened a restaurant and lost his butt. This is one business that is unlike any other. Profit margins are low, and if you don't know what you are doing your staff can and probably will rob you blind.
The only person who should be buying this restaurant is someone who has already run a RESTAURANT.
posted by St. Alia of the Bunnies at 8:05 PM on September 24, 2012 [2 favorites]
The only person who should be buying this restaurant is someone who has already run a RESTAURANT.
posted by St. Alia of the Bunnies at 8:05 PM on September 24, 2012 [2 favorites]
Annual payout to the partners was 6 times what they will sell it to me for.
This is a con. Run away.
posted by unSane at 8:20 PM on September 24, 2012 [16 favorites]
This is a con. Run away.
posted by unSane at 8:20 PM on September 24, 2012 [16 favorites]
> Annual payout to the partners was 6 times what they will sell it to me for.
It doesn't matter any more. On top of the fact that the business is closed, and you shouldn't purchase the goodwill of a non-operating business, goodwill (i.e. the value of the business over and above the value of the capital equipment) is an intangible that is almost always tied closely to the original/previous business owners. In other words, no matter how good the books are, if the business is one which relies on a lot of hands-on, onsite work by the owners, a lot of the goodwill goes away as soon as the business changes hands. I have seen many, many hopeful new owners fail in the first year as a result of overpaying for their food business. If you are inexperienced, it is easy to underestimate how much the business's previous success and goodwill is tied to the previous owners' skills, industry knowledge, contacts, people skills, personality, i.e. all the things you aren't actually buying. This is much more true of the food industry than it is of retail.
posted by hot soup girl at 8:21 PM on September 24, 2012 [2 favorites]
It doesn't matter any more. On top of the fact that the business is closed, and you shouldn't purchase the goodwill of a non-operating business, goodwill (i.e. the value of the business over and above the value of the capital equipment) is an intangible that is almost always tied closely to the original/previous business owners. In other words, no matter how good the books are, if the business is one which relies on a lot of hands-on, onsite work by the owners, a lot of the goodwill goes away as soon as the business changes hands. I have seen many, many hopeful new owners fail in the first year as a result of overpaying for their food business. If you are inexperienced, it is easy to underestimate how much the business's previous success and goodwill is tied to the previous owners' skills, industry knowledge, contacts, people skills, personality, i.e. all the things you aren't actually buying. This is much more true of the food industry than it is of retail.
posted by hot soup girl at 8:21 PM on September 24, 2012 [2 favorites]
> If I can keep it going at the current level, I'll make it back in 6 months.
So, to clarify, your expectations are not realistic. It is more likely that you will struggle to maintain profitability in the first year of owning this business. A change of ownership and management can give an ailing food business a new burst of energy and draw the attention of new customers. However, the opposite is often true of a thriving food business—your unfamiliarity to staff and customers, and your lack of experience, will be a liability which will affect the takings, efficiency, and overall profitability of the business. You will almost certainly fail to maintain the 'current level'.
posted by hot soup girl at 8:39 PM on September 24, 2012 [1 favorite]
So, to clarify, your expectations are not realistic. It is more likely that you will struggle to maintain profitability in the first year of owning this business. A change of ownership and management can give an ailing food business a new burst of energy and draw the attention of new customers. However, the opposite is often true of a thriving food business—your unfamiliarity to staff and customers, and your lack of experience, will be a liability which will affect the takings, efficiency, and overall profitability of the business. You will almost certainly fail to maintain the 'current level'.
posted by hot soup girl at 8:39 PM on September 24, 2012 [1 favorite]
If you can't retain the kitchen manager and the floor manager, don't even consider it. If you're expecting to do one or both of those jobs yourself, you have absolutely no idea what you're getting into, and it's pretty much guaranteed you will fail.
posted by MexicanYenta at 8:41 PM on September 24, 2012 [1 favorite]
posted by MexicanYenta at 8:41 PM on September 24, 2012 [1 favorite]
"The books look good"? How sure are you that they are accurate?
I say this as a book keeper who once quit a job because the owner of a failing business threw tantrums when I refused to create false ledger entries to make the business look profitable to potential buyers.
posted by malibustacey9999 at 8:48 PM on September 24, 2012 [2 favorites]
I say this as a book keeper who once quit a job because the owner of a failing business threw tantrums when I refused to create false ledger entries to make the business look profitable to potential buyers.
posted by malibustacey9999 at 8:48 PM on September 24, 2012 [2 favorites]
DON'T DO IT.
Writing as one who lost a bundle on a similar restaurant scheme, my advice is to think of something else to do.
I had an experienced partner, who'd been in the business for ages, but I knew too little. The location was great, and the restaurant had been "a success" for over ten years, but it was a terrible experience and we lost everything.
posted by anadem at 8:53 PM on September 24, 2012 [2 favorites]
Writing as one who lost a bundle on a similar restaurant scheme, my advice is to think of something else to do.
I had an experienced partner, who'd been in the business for ages, but I knew too little. The location was great, and the restaurant had been "a success" for over ten years, but it was a terrible experience and we lost everything.
posted by anadem at 8:53 PM on September 24, 2012 [2 favorites]
Mr. Yuck: "Annual payout to the partners was 6 times what they will sell it to me for. "
Until you wrote this, I thought maybe it would be OK. But now it's clearly a clusterfuck. Don't do it!
posted by Perplexity at 9:10 PM on September 24, 2012 [2 favorites]
Until you wrote this, I thought maybe it would be OK. But now it's clearly a clusterfuck. Don't do it!
posted by Perplexity at 9:10 PM on September 24, 2012 [2 favorites]
Yeah, if you want to get into the straunt biz that bad, invest a few grand in someone else's shop. Leave this one for someone with some operational experience.
posted by vrakatar at 9:47 PM on September 24, 2012
posted by vrakatar at 9:47 PM on September 24, 2012
If you're looking at this as a "reasonable investment" then walk away. Way too much work and too many uncertainties.
Do you WANT to do it? It doesn't matter -- it really doesn't matter -- how much experience you have, or whether it would be smarter to start smaller, or or or. If something about it makes your heart say "YES!" then for heaven's sake, do it. It doesn't matter what the outcome will be.
This is from first hand experience, and seeing the same thing with other people. You'll make plenty of mistakes, you'll work your ass off, you may or may not succeed but if you DO IT with your whole heart for as long as it lasts you will never never regret it. (My experience wasn't a restaurant. I was a newly single mom with 2 tiny kids, sold my house - my only physical asset - and bought a church and turned it into a movie theater. Only lasted 3 years, bankrupt, debts, struggle. But until the day I die I will remember the feeling of satisfaction I had putting my hand on the wall of MY business.) The worst you can do is fail, and another chance may never come.
posted by kestralwing at 9:56 PM on September 24, 2012
Do you WANT to do it? It doesn't matter -- it really doesn't matter -- how much experience you have, or whether it would be smarter to start smaller, or or or. If something about it makes your heart say "YES!" then for heaven's sake, do it. It doesn't matter what the outcome will be.
This is from first hand experience, and seeing the same thing with other people. You'll make plenty of mistakes, you'll work your ass off, you may or may not succeed but if you DO IT with your whole heart for as long as it lasts you will never never regret it. (My experience wasn't a restaurant. I was a newly single mom with 2 tiny kids, sold my house - my only physical asset - and bought a church and turned it into a movie theater. Only lasted 3 years, bankrupt, debts, struggle. But until the day I die I will remember the feeling of satisfaction I had putting my hand on the wall of MY business.) The worst you can do is fail, and another chance may never come.
posted by kestralwing at 9:56 PM on September 24, 2012
Annual payout to the partners was 6 times what they will sell it to me for.This is a huge flaming red flag. So much so that it is impossible to believe that you are getting accurate information. If you were looking to purchase a viable restaurant, you'd expect to pay about 5 times the annual EBITDA to acquire the business. A fire sale price would be maybe double the annual earnings. In this case, they are offering to sell it to you for 1/6th the earnings? That is outrageous. If those books were accurate they could get 10 times that amount from anyone who already is in the business of owning restaurants. But they didn't and presumably couldn't because something is wrong.
Assuming that the investment is not a trivial amount, it also makes no sense that they would close the doors on a business that was throwing off profit of [half your investment] every single month without first securing a buyer. The fact that the partners don't get along is only part of the story. I can name a thousand businesses where the partners HATE each other, but they deal with it because they are printing money. There is no way that they light a huge amount of money on fire just because they don't like each other. Worst case, they suck it up for a few months while they find a traditional buyer.
There is no better way to go broke than to try to run a restaurant, even when you have significant experience working in one. When you don't, its really only a good choice if you hate money.
posted by Lame_username at 10:37 PM on September 24, 2012 [15 favorites]
You can get business advice from the local branch of the Small Business Administration, and a referral to SCORE. You need technical business advice.
posted by theora55 at 11:12 PM on September 24, 2012 [2 favorites]
posted by theora55 at 11:12 PM on September 24, 2012 [2 favorites]
Well, if it sounds too good to be true... Maybe find a safer business to invest in, one that doesn't have so many red flags? There are plenty more businesses out there that need investors to choose from, ones that you can take your time to scrutiny them properly. Don't forget what you stand to lose if they're lying to you.
posted by Aliera at 1:37 AM on September 25, 2012
posted by Aliera at 1:37 AM on September 25, 2012
I think almost any time someone puts a huge amount of pressure on you to make a really big decision about something really fast, then that is a sign that there is something majorly wrong with the whole situation that they're hoping you'll overlook because of the time pressure.
In this case, even if the landlord does want to get someone else in there quickly, 2 days sounds like an artificially small time window. For example, why can't you have a week to consider this offer and do some more research on the restaurant and talk to some people who run resources for small businesses? Most leases start on the first of the month anyway, and all of those people who want their jobs back probably won't starve if they have to wait a week and a half rather than 4 days.
If I were you, I would ask myself very carefully: "What have I got to lose if I rush into this and miss some major problem in the process? What have they got to lose by giving me more time to think it over?"
posted by colfax at 3:09 AM on September 25, 2012 [1 favorite]
In this case, even if the landlord does want to get someone else in there quickly, 2 days sounds like an artificially small time window. For example, why can't you have a week to consider this offer and do some more research on the restaurant and talk to some people who run resources for small businesses? Most leases start on the first of the month anyway, and all of those people who want their jobs back probably won't starve if they have to wait a week and a half rather than 4 days.
If I were you, I would ask myself very carefully: "What have I got to lose if I rush into this and miss some major problem in the process? What have they got to lose by giving me more time to think it over?"
posted by colfax at 3:09 AM on September 25, 2012 [1 favorite]
This has every sign of a con job.
1) some silly little problem means a golden opportunity for you!
2) the seller just wants to wash their hands of it all, so you get a fantastic price!
3) these documents, produced by us, prove everything we've said!
4) and by the way there's enormous time pressure to make a decision!
The only thing missing is the Nigerian phone number.
But really, the biggest red flag is this: you've never managed a restaurant before. That is one of the classic blunders, with success rates about the same as starting a land war in Asia.
Now I will give you an alternate suggestion which you can think about if the "want to sell food for money" bug has bit you hard (which can happen to even the sanest, most stable person): look into creating your own food truck business. Much lower investment, much lower risk, much more flexibility and versatility. You don't need a huge staff, and you can make good money with your own cooking.
posted by seanmpuckett at 4:52 AM on September 25, 2012 [10 favorites]
1) some silly little problem means a golden opportunity for you!
2) the seller just wants to wash their hands of it all, so you get a fantastic price!
3) these documents, produced by us, prove everything we've said!
4) and by the way there's enormous time pressure to make a decision!
The only thing missing is the Nigerian phone number.
But really, the biggest red flag is this: you've never managed a restaurant before. That is one of the classic blunders, with success rates about the same as starting a land war in Asia.
Now I will give you an alternate suggestion which you can think about if the "want to sell food for money" bug has bit you hard (which can happen to even the sanest, most stable person): look into creating your own food truck business. Much lower investment, much lower risk, much more flexibility and versatility. You don't need a huge staff, and you can make good money with your own cooking.
posted by seanmpuckett at 4:52 AM on September 25, 2012 [10 favorites]
I was once chatting with the owner of a local pub and after a few beers mentioned how nice it'd be, if I won the lottery, to buy a place like his. He looked at me like I sprouted two heads and asked, "Why buy trouble?"
He went on to explain that his family had owned pubs and restaurants for generations, that he grew up helping run his parents' place in Ireland, and that if he knew he could do anything else, he'd do it in a heartbeat. And that's coming from a guy who was practically bred to be a restaurant owner!
posted by robocop is bleeding at 5:45 AM on September 25, 2012 [3 favorites]
He went on to explain that his family had owned pubs and restaurants for generations, that he grew up helping run his parents' place in Ireland, and that if he knew he could do anything else, he'd do it in a heartbeat. And that's coming from a guy who was practically bred to be a restaurant owner!
posted by robocop is bleeding at 5:45 AM on September 25, 2012 [3 favorites]
Decision deadlines are a big big red flag. Have you actually talked to someone who is objectively verified to be the landlord to see what the deal is?
Seriously. If you want to run a restaurant, prepare yourself for running a restaurant and find the one that works for you. Don't buy up a shiny trinket from a guy in a trenchcoat on the corner who says its gold.
posted by RandlePatrickMcMurphy at 6:07 AM on September 25, 2012
Seriously. If you want to run a restaurant, prepare yourself for running a restaurant and find the one that works for you. Don't buy up a shiny trinket from a guy in a trenchcoat on the corner who says its gold.
posted by RandlePatrickMcMurphy at 6:07 AM on September 25, 2012
Don't.
Just don't.
This affair our culture is having with food/eating/chefs/restaurants/etc. is really getting out of control. If you have no prior experience managing a restaurant, you have no business buying one. If you've never worked in a commercial kitchen, you have no business buying a restaurant. I've heard it said that, if you want to make a little money in the restaurant business, start with a lot of money.
You'd be better of just setting fire to whatever money reserves you have, and then telling your friends to fuck-off and never come back. That way, you get it out of your system immediately without wasting a year of your life.
posted by Thorzdad at 6:17 AM on September 25, 2012 [1 favorite]
Just don't.
This affair our culture is having with food/eating/chefs/restaurants/etc. is really getting out of control. If you have no prior experience managing a restaurant, you have no business buying one. If you've never worked in a commercial kitchen, you have no business buying a restaurant. I've heard it said that, if you want to make a little money in the restaurant business, start with a lot of money.
You'd be better of just setting fire to whatever money reserves you have, and then telling your friends to fuck-off and never come back. That way, you get it out of your system immediately without wasting a year of your life.
posted by Thorzdad at 6:17 AM on September 25, 2012 [1 favorite]
Fuck No!
Absolutely NO ONE is advocating this for you. There's a reason.
If you think that owning a restaurant is something you want to do, or if you think that you're a good cook. Awesome. Get a job in a restaurant and see where it takes you.
My friend's Mom owned a bookstore/cafe once. It wasn't even hard, just do some barista stuff, steam an egg, etc. She had regulars who would hang out and play bridge. Sounds perfect, doesn't it? Well it was a giant pain in the ass every day.
Waking up at 5 am, doing barista stuff, on your feet all day, putting up with assholes, no vacations, no holidays, no sleep.
After about 5 years she sold it, not because it didn't make money, it made a modest sum, but because it was a grind and after all was said and done, "I just made coffee." It was boring.
I love eating in restaurants, but working in one would be horrible.
If you are still, remotely, thinking about this, hire a forensic accountant to really review the books, ask for the owner's 1040's for the past 5 years (not the business's records, but thiers.) If they won't provide them, I think you have your answer.
posted by Ruthless Bunny at 6:35 AM on September 25, 2012 [2 favorites]
Absolutely NO ONE is advocating this for you. There's a reason.
If you think that owning a restaurant is something you want to do, or if you think that you're a good cook. Awesome. Get a job in a restaurant and see where it takes you.
My friend's Mom owned a bookstore/cafe once. It wasn't even hard, just do some barista stuff, steam an egg, etc. She had regulars who would hang out and play bridge. Sounds perfect, doesn't it? Well it was a giant pain in the ass every day.
Waking up at 5 am, doing barista stuff, on your feet all day, putting up with assholes, no vacations, no holidays, no sleep.
After about 5 years she sold it, not because it didn't make money, it made a modest sum, but because it was a grind and after all was said and done, "I just made coffee." It was boring.
I love eating in restaurants, but working in one would be horrible.
If you are still, remotely, thinking about this, hire a forensic accountant to really review the books, ask for the owner's 1040's for the past 5 years (not the business's records, but thiers.) If they won't provide them, I think you have your answer.
posted by Ruthless Bunny at 6:35 AM on September 25, 2012 [2 favorites]
The two day deadline is a huge red flag. We have been negotiating to buy an existing restaurant for 9 months. It is not a quick process, certainly not one to be rushed in to.
That said:
- I haven't been there myself, but my understanding is that Asheville is a competitive market with lots of dining options. Keep that in mind.
- talk to the landlord yourself. Ask for the lease. If there's no long term lease (at least 5 years with a 5 year option), walk away.
- is the liquor license transferable? How long will it take to get a new one? Alcohol may be a huge part of the revenue and you can't sell without the license.
- talk to their vendors. Have they been paid? Were there any delays in paying?
- home cooking will not make you a good line cook. Home cooking will not make you a good chef. Your fears are well placed.
posted by donpardo at 9:09 AM on September 25, 2012 [2 favorites]
That said:
- I haven't been there myself, but my understanding is that Asheville is a competitive market with lots of dining options. Keep that in mind.
- talk to the landlord yourself. Ask for the lease. If there's no long term lease (at least 5 years with a 5 year option), walk away.
- is the liquor license transferable? How long will it take to get a new one? Alcohol may be a huge part of the revenue and you can't sell without the license.
- talk to their vendors. Have they been paid? Were there any delays in paying?
- home cooking will not make you a good line cook. Home cooking will not make you a good chef. Your fears are well placed.
posted by donpardo at 9:09 AM on September 25, 2012 [2 favorites]
A related perspective: this era reminds me of a corresponding time during the late 80s/early 90s recession. Unemployment benefits had run out and people were starting up a food businesses as a way of buying themselves a job. These new businesses popped up in the vicinity of successful existing restaurants and diluted the local business volume. They competed by undercutting prices to the bone. Everybody lost. The current owners may be experiencing this and are getting out before the process gets any further along.
Restaurants can't be turned off. You need to keep buying supplies even when sales are nonexistent. The only thing worse than not having a job, is working like a dog while you watch your life savings bleed away.
Like others have said, you have been bitten by a bug and now want to grab this opportunity before it slips away. This is exactly how people get horribly ripped off. (also how people wind up buying cars they can't really afford)
posted by bonobothegreat at 9:55 AM on September 25, 2012 [1 favorite]
Restaurants can't be turned off. You need to keep buying supplies even when sales are nonexistent. The only thing worse than not having a job, is working like a dog while you watch your life savings bleed away.
Like others have said, you have been bitten by a bug and now want to grab this opportunity before it slips away. This is exactly how people get horribly ripped off. (also how people wind up buying cars they can't really afford)
posted by bonobothegreat at 9:55 AM on September 25, 2012 [1 favorite]
Response by poster: I think I have more time. Some things I am now certain of:
1 The equipment alone is worth more than the sales price.
2 They made all their profits in the Spring and Summer.
3 They are 3 months behind on the rent.
4 Nepotism was a very costly problem for them. Closing the restaurant seemed to them to be the best way to end a family drama that was tearing them up. They were just going to put everything in storage until I asked.
Also I have not watched much TV this century, so I am barely aware of "this affair our culture is having with food/eating/chefs/restaurants/etc." Had to google Bourdain.
posted by Mr. Yuck at 11:02 AM on September 25, 2012
1 The equipment alone is worth more than the sales price.
2 They made all their profits in the Spring and Summer.
3 They are 3 months behind on the rent.
4 Nepotism was a very costly problem for them. Closing the restaurant seemed to them to be the best way to end a family drama that was tearing them up. They were just going to put everything in storage until I asked.
Also I have not watched much TV this century, so I am barely aware of "this affair our culture is having with food/eating/chefs/restaurants/etc." Had to google Bourdain.
posted by Mr. Yuck at 11:02 AM on September 25, 2012
They are 3 months behind on the rent.
How can they possibly be behind on the rent if they just finished their money-making season?
None of this makes any sense. Listen to The World Famous, and everyone else, please.
posted by unSane at 11:35 AM on September 25, 2012 [2 favorites]
How can they possibly be behind on the rent if they just finished their money-making season?
None of this makes any sense. Listen to The World Famous, and everyone else, please.
posted by unSane at 11:35 AM on September 25, 2012 [2 favorites]
1 The equipment alone is worth more than the sales price.
So offer to pay the asking price just for the equipment then sell the equipment (like retail, where you already have experience)? Why buy the more risky part?
posted by WeekendJen at 12:20 PM on September 25, 2012 [1 favorite]
So offer to pay the asking price just for the equipment then sell the equipment (like retail, where you already have experience)? Why buy the more risky part?
posted by WeekendJen at 12:20 PM on September 25, 2012 [1 favorite]
If they haven't paid the rent, what makes you think they've paid the other suppliers? A few phone calls is all it will take to find out what's really going on.
posted by unSane at 12:26 PM on September 25, 2012 [1 favorite]
posted by unSane at 12:26 PM on September 25, 2012 [1 favorite]
3 They are 3 months behind on the rent.
4 Nepotism was a very costly problem for them.
To me this sounds like a veiled "someone was fiddling the books"; and that should make you worry about what other problems you might unearth after the deal is done.
Who will be paying the back rent? Who will be paying the liabilities which -- as on preview unSane suggests -- might exist with other suppliers?
(Oh, and also: "the landlord wants to get somebody else in quickly" combined with "3 months behind on the rent" sounds like "they're about to get evicted".)
posted by We had a deal, Kyle at 12:31 PM on September 25, 2012
4 Nepotism was a very costly problem for them.
To me this sounds like a veiled "someone was fiddling the books"; and that should make you worry about what other problems you might unearth after the deal is done.
Who will be paying the back rent? Who will be paying the liabilities which -- as on preview unSane suggests -- might exist with other suppliers?
(Oh, and also: "the landlord wants to get somebody else in quickly" combined with "3 months behind on the rent" sounds like "they're about to get evicted".)
posted by We had a deal, Kyle at 12:31 PM on September 25, 2012
1 The equipment alone is worth more than the sales price.
That cannot possibly be true, unless buying the restaurant also means buying all the debts and obligations of the restaurant. In which case, no, avoid.
They made all their profits in the Spring and Summer.
They are 3 months behind on the rent.
Both of those cannot simultaneously be true if the business isn't hemorrhaging money. Dude. You don't know who Anthony Bourdain is. That's how far away you are from that industry. When I read those first three points of yours, my brain interprets them as "(1) The restaurant is racked with outstanding debt, but we want you to spend your life savings on it (2) when the profitable part of the year has just passed, (3) at the moment that they're about to get evicted."
Listen to what people here are telling you. Avoid, avoid, avoid.
posted by mhoye at 12:45 PM on September 25, 2012 [2 favorites]
That cannot possibly be true, unless buying the restaurant also means buying all the debts and obligations of the restaurant. In which case, no, avoid.
They made all their profits in the Spring and Summer.
They are 3 months behind on the rent.
Both of those cannot simultaneously be true if the business isn't hemorrhaging money. Dude. You don't know who Anthony Bourdain is. That's how far away you are from that industry. When I read those first three points of yours, my brain interprets them as "(1) The restaurant is racked with outstanding debt, but we want you to spend your life savings on it (2) when the profitable part of the year has just passed, (3) at the moment that they're about to get evicted."
Listen to what people here are telling you. Avoid, avoid, avoid.
posted by mhoye at 12:45 PM on September 25, 2012 [2 favorites]
No no no no no. Just no. If they are three months behind on the rent, then "an interpersonal problem" is NOT the only problem that restaurant has. The more you talk about this, the more even I think it sounds like a con job. If you still feel like it sings to your soul, ask for the name if their lawyer and their accountant, and hire a lawyer and an accountant of your own to check the place out. If they can't give you those names IMMEDIATELY, then this is a con beyond a doubt.
posted by KathrynT at 12:55 PM on September 25, 2012
posted by KathrynT at 12:55 PM on September 25, 2012
Just a note that if you it "for the equipment" you will find out they're behind not just on rent but on suppliers, payroll, taxes, contractors, licenses AND utilities as well as any outstanding penalties, liens and judgements for all the bullshit that's been going on already.
Your idea of selling off the equipment and turning a tidy profit will have instantly put you at least five figures, and probably six, in debt.
You can't just buy the equipment, you have to buy the business that OWNS the equipment and with the equipment you get a balance sheet which is 100% going to be the balance sheet from hell.
Good lord, I almost want you to go ahead with it so I can watch the slow motion train wreck, but that would just be cruel.
posted by seanmpuckett at 2:41 PM on September 25, 2012 [1 favorite]
Your idea of selling off the equipment and turning a tidy profit will have instantly put you at least five figures, and probably six, in debt.
You can't just buy the equipment, you have to buy the business that OWNS the equipment and with the equipment you get a balance sheet which is 100% going to be the balance sheet from hell.
Good lord, I almost want you to go ahead with it so I can watch the slow motion train wreck, but that would just be cruel.
posted by seanmpuckett at 2:41 PM on September 25, 2012 [1 favorite]
If you're really itching to run a food business, just buy their bargain-priced capital equipment without buying the business itself, register a business name, and find yourself a new location. Hire some of the old staff if you want, but make a fresh go of it yourself. You'll probably still fail, but your initial investment will probably be smaller, you'll have more control over your overheads, and you won't get ambushed by any extant debts.
posted by hot soup girl at 3:32 PM on September 25, 2012
posted by hot soup girl at 3:32 PM on September 25, 2012
I tend to think that World Famous has this — you need more than the internet telling you what to do, you need people who actually are experts in this business in your jurisdiction.
posted by klangklangston at 4:04 PM on September 25, 2012
posted by klangklangston at 4:04 PM on September 25, 2012
Response by poster: I have been self-employed most of my working life and have long standing business relationships with both a lawyer and a CPA. I have not involved them yet because I still have preliminary questions that require answers before I even need that kind of advice. I will not buy the LLC, just equipment, inventory, and the name while I assume the renewable lease.
I am not itching to own a food business, but the job market is terrible here. I'd rather not apprentice as an Orwellian plongeur. This is the first thing I've seen that is in my range and I have been looking. I am not sold on it and I do appreciate all the cautions.
Some people that had an eatery down the street from my last business rec'd an offer that they couldn't refuse and now they have nothing to do either...maybe...
You don't know who Anthony Bourdain is. From what I read on Wiki, I like his taste in music. No heroin in my kitchen, though. I think he got lucky. Reserved book at library.
posted by Mr. Yuck at 5:01 PM on September 25, 2012
I am not itching to own a food business, but the job market is terrible here. I'd rather not apprentice as an Orwellian plongeur. This is the first thing I've seen that is in my range and I have been looking. I am not sold on it and I do appreciate all the cautions.
Some people that had an eatery down the street from my last business rec'd an offer that they couldn't refuse and now they have nothing to do either...maybe...
You don't know who Anthony Bourdain is. From what I read on Wiki, I like his taste in music. No heroin in my kitchen, though. I think he got lucky. Reserved book at library.
posted by Mr. Yuck at 5:01 PM on September 25, 2012
Even if you are just buying the equipment, inventory and name, and are determined to do this thing with no experience in the business (really? seriously?) you still need to establish a few important things.
-- that the books aren't cooked
-- that they have title to the things they are trying to sell (ie they're paid for, there are no liens and so on)
-- that their suppliers will deal with you. If they've been stiffed by these guys they may not simply write off their losses and start again with the new guy
Above all, something is missing here. You either aren't getting, or haven't given us, the whole story.
posted by unSane at 6:38 PM on September 25, 2012 [4 favorites]
-- that the books aren't cooked
-- that they have title to the things they are trying to sell (ie they're paid for, there are no liens and so on)
-- that their suppliers will deal with you. If they've been stiffed by these guys they may not simply write off their losses and start again with the new guy
Above all, something is missing here. You either aren't getting, or haven't given us, the whole story.
posted by unSane at 6:38 PM on September 25, 2012 [4 favorites]
Response by poster: I didn't do the whole hog. Started this askme when the initial adrenaline was going. I still think this is a great web community. But frack, the bias for high dollar experts around here has probably closed off many opportunities for askers. Get a doctor, get a lawyer, get an accountant, get a gerontologist and just die from info overload already... We can't possibly understand things on our own and we will certainly poison the very atmosphere with our uneducated musings.
I do require some expert help when I file my taxes, but I did not need an expert to compare the discrepancies between the point of sale reports and the reports that went to the existing accountant. Most of the employees were demanding 1099's because of something they heard on the radio. Now they have liabilities and no unemployment. Those people needed the paid advice.
Like all pre-existing businesses that I have bought, income was understated, not overstated. Embezzlement, tax avoidance, or incompetence. Sales were above what was reported. Assets that I did buy were targeted buys that were easily resold and legally held, and I did not need a lawyer to discern that.
That was all in my favor, but every day that the eatery was closed while I did due diligence meant loss of both core customers and staff I would have kept on.
My son is having a rotten time in 1rst grade, largely because his mom and I split in March. That is also why I am unemployed. There are very few good jobs around here. I can wait, knowing that I have enough to live on for a few years. Or I could jump on something like this.
I could not find a path that would put me in both of the necessary positions at once. You need to be there all the time for a new business or a child. I chose the little guy who makes no money for the household and throws wet paper towels at me. Thwack!
It's not over yet. They have a food truck.
posted by Mr. Yuck at 5:11 PM on September 30, 2012 [2 favorites]
I do require some expert help when I file my taxes, but I did not need an expert to compare the discrepancies between the point of sale reports and the reports that went to the existing accountant. Most of the employees were demanding 1099's because of something they heard on the radio. Now they have liabilities and no unemployment. Those people needed the paid advice.
Like all pre-existing businesses that I have bought, income was understated, not overstated. Embezzlement, tax avoidance, or incompetence. Sales were above what was reported. Assets that I did buy were targeted buys that were easily resold and legally held, and I did not need a lawyer to discern that.
That was all in my favor, but every day that the eatery was closed while I did due diligence meant loss of both core customers and staff I would have kept on.
My son is having a rotten time in 1rst grade, largely because his mom and I split in March. That is also why I am unemployed. There are very few good jobs around here. I can wait, knowing that I have enough to live on for a few years. Or I could jump on something like this.
I could not find a path that would put me in both of the necessary positions at once. You need to be there all the time for a new business or a child. I chose the little guy who makes no money for the household and throws wet paper towels at me. Thwack!
It's not over yet. They have a food truck.
posted by Mr. Yuck at 5:11 PM on September 30, 2012 [2 favorites]
I'm glad you decided not to do it -- it just sounded like bad news. But the food truck? That sounds like the kind of thing to jump on, especially if you live near a university. The food trucks near my school do mad business between like 10am and 4pm, and only operate on the school's schedule. I don't know how much they make, but new ones keep popping up and none of the old ones go away, so it much be sustainable (and that's at both my current city-based school, and my previous one in the suburbs).
posted by DoubleLune at 5:22 PM on September 30, 2012
posted by DoubleLune at 5:22 PM on September 30, 2012
That was all in my favor, but every day that the eatery was closed while I did due diligence meant loss of both core customers and staff I would have kept on.
Tell yourself that if it makes you feel better but I know of too, too many fine businessmen that lost their rear ends-and in one case their parents' investment money as well as maxed out all their credit cards-because they thought their general business sense would serve them in the restaurant business.
I am not talking about fools or idiots, either. These were wellrespected businessmen who had earned that respect in other businesses.
The thing they had in common is they had NO experience in the RESTAURANT business.
posted by St. Alia of the Bunnies at 8:08 PM on September 30, 2012
Tell yourself that if it makes you feel better but I know of too, too many fine businessmen that lost their rear ends-and in one case their parents' investment money as well as maxed out all their credit cards-because they thought their general business sense would serve them in the restaurant business.
I am not talking about fools or idiots, either. These were wellrespected businessmen who had earned that respect in other businesses.
The thing they had in common is they had NO experience in the RESTAURANT business.
posted by St. Alia of the Bunnies at 8:08 PM on September 30, 2012
This thread is closed to new comments.
posted by lunasol at 6:38 PM on September 24, 2012 [1 favorite]