Great, thanks. Will take a look.

I am putting together a business plan for a deli, in a strip mall in midtown Kansas City. I have people interested in investing. How is this typically done? What paperwork is needed? How are investors typically paid? Is there typically buy out clauses or is the negotiated at the time? I will be managing the operation.
Thanks for the great thread
Batman

There is nothing typical about the deal you are looking to make. Assuming your investors are silent, they are generally paid a profit share based on their equity position in the company. You should negotiate a reasonable salary for your time and as much sweat equity (assuming none of your money goes in) as they will give up. That number need to be reasonably worthwhile for you. Try to make your incentive more then a % of profits. You want some equity for what you are building and managing. Your lawyer can lead you through the paperwork.

Good to see you're still around A-5

I have an opportunity to purchase a coffee shop but I think the guy is the type to squeeze every nickel out of deal and not leave any meat on the bone for anyone else, so it probably won't work.

Having said that, I've been intrigued by it for years and I see a lot of untapped potential that isn't being exploited because he's basically a slum lord that bought a restaurant for his girlfriend (who is an attorney) and really knows nothing about the restaurant biz, but he has brought the place back to life after the previous owner drove everyone away by being an obnoxious B. He's a pretty good business man and very hard working.

It may have been asked already but is there some kind of standard multiplier of net income used to value a restaurant?

Seems like I hear 3-5x thrown out by people for various types of biz

Currently, he has a manager that may make 30K and he is trying to sell me on the idea if I become an owner operator, I'll make 75K a year by getting rid of him. This is probably close to true, even in its poor state. Therefore he has thrown out a figure of $200,000 to $300,000 which seems ridiculously high.

When valuing a business, is it correct to leave the manager cost in when determining a value or are there different multipliers used for owner operator vs a fully staffed restaurant.

Too many details and questions to cover in this thread so I'd like to talk to you about whether you are interested in consulting on this project and what depth of services you feel I might need to get you on board for.

Shoot me a PM on whether you have any time or interest and if so, add your number so we can talk specifics.

As always, thanks for a great thread and all you've brought to it.

PS...I left it with him that he needs to decide on a price because I can't begin to evaluate the value without knowing at least a starting price. I said once I have that, I'd like to work in the business for 2-4 weeks and have access to all the financials so I can build my own valuation. I also want to use this time to see how I feel working there because I know if I buy it, it will be a ton of work. He said no problem to this scenario, I'm just waiting on him to give me a price.

I have an idea for a restaurant or even a damn food cart that I think would be interesting, although it may not be that original. It's just such a daunting task that I don't know where to begin. I'm sure I can't just set up a food cart downtown--but do you have advice on where to begin? Should I just call city hall and ask what the deal is, and are the fees so variable that you couldn't tell me how much I would expect to pay to before I was set up and selling ****? I'm on the California coast.

There have been some 'I want to open a restaurant/bar' threads lately. I feel like this thread falling by the wayside is a really bad thing.

Cliffs: Bumpity Bump Bump Bump

good point,

OP, I am looking at a bar near where I live. It doesn't serve food but they have a good following and they have a great location. The owner is this old stingy Irishman who is an ex cop. He is asking for 60,000 and 6,000 rent which is ridiculous for the Sq ft and this area. I tried to get him to do 50,000 and 4,500 rent but he said no. I dont want to lose this opportunity. What do you think my next move should be?

Ditto!

Hey Op, if you're reading check your PM's I sent you one months ago and would love to speak with you directly

Here's an interesting scenario I'd like to hear opinions on.

Harry has very successful restaurant and does $850k/year in sales. He has a primo location but a small kitchen and needs more space. His current lease rate is $3440 for 3360 sq foot. He finds a spot directly next door that suits his needs. However, the landlord will only let him break the lease if Tom takes it over. (for various reasons )

Tom has a unique concept with strong growth in bigger markets, industry and market experience, but little capital. He will provide $25k and sweat equity being in charge of D2D operations. He will also pay himself a salary of $25k/year.

Joe has capital but prefers to be a silent investor. He will inject $65k and only be involved in major financial decisions.

What's a fair equity split? More detail is probably needed but curious to hear opinions. FWIW, breakeven sales is $420k/year.

50/50? Just a complete guess. Possible even more to the new guy Tom...

OP

I have some questions about building trial. I have a new concept that I am bringing to my market and would value your advice on what you have seen as the most effective methods. This product is completely new to the area and unfamiliar to the palates of locals. I am as you are aware with another concept that does no real marketing, and our strengths are operational. We don't really want to spend massively on broadcast advertising and Im wondering with your experience can you offer any advice on the most effective methods for building trial?

is this thread still around? i read the first ten pages and it is good stuff... does OP still answer questions???

The real answer is "it depends". On the product, how refined your operations are, the perceived price/value from the consumer pov etc..etc..

I do understand-but I have to be a little circumspect unfortunately due to we are the only people with both models.

We have a very competitive price point with a high quality product-This is a regional brand that has been around for 20+ years i believe that we have a strong operation, with solid, well trained staff. This unit has been open for about 6 months now. I can share the brand with you in PM but need it to stay private for the stated reasons of course. It has been our experience so far that once we get guests to try this product they are converted to us going forward. We recently did a direct mailer with coupons that has seemed to drive traffic pretty well, but like broadcast, this is very expensive.

I'm in the 6th month of operating an inde restaurant that focuses on craft beer. I've made so many mistakes I don't know where to start. Currently making marginal profit with a 600k topline but I've reinvested every penny. If we didn't have a great location we'd be closed already. Had some free consulting with OP that was tremendously helpful but I couldn't afford his full services. (they weren't exhorbitant by any means)

It's been incredibly frustrating. My biggest mistakes were opening too early (out of necessity) and disproportinately focusing on FOH. First 5 months I bartended open to close every single day. (5 days/week) It's impossible to run the day to day while staying on top of everything else.

We have a 50/50 sales mix but the FOH profit accounts for BOH losses. I'm finally content with FOH staff so I've moved to BOH to try and right the ship but am a complete novice in that regard. Kitchen staff can be incredibly frustrating but 75% of the blame is on me for allowing it to devolve. We have solid reviews online but I can sense our honeymoon period is ending soon if things aren't turned around.

So yeah, being first to market with our concept and a great location has been our saving grace but if anyone else comes along and does it better we'll be in trouble.

@apocalypse_fives

Do you offer consulting - Do you have a website / email?

I'm based in Australia - currently opening a themed concept that's successful overseas.

I own a successful company and brand that manufactures the themed product, and will be the main supplier to the new venture.

New business will be with a partner who currently owns a profitable 1.5 year old cafe and has 10+ years experience in commercial project management fitting out food service venues.

I have the existing brand to leverage and will handle marketing side for new venture. I've also got 10 years+ hospitality experience as a chef/cook/waiter in cafe's - so am well aware of the pitfalls / failure rate in the industry.

I lack knowledge of finances with food service though and looking for advice.

Let me know how to get in touch with you - if you feel you could be of value to an Aus based venture as much as a USA one.

Thanks

Hi I am starting a small meat smoking operation just on the weekends for my community. This is a niche market as there is no kosher smoked meat in the area. I am wondering what are some unforseen issues I should look for to help cut costs right from the get go. I am starting by smoking meat in my backyard and am planning to grow from there.( also testing out what people want to eat)

Any thoughts on opening or buying a subway? I know its outside the restaurant/bar criteria but still the food business with more of a proven concept I guess. I am part-owner of an Italian restaurant which has been open 7 years now also. This is the first year we are open for lunch and its been breakeven (lunch) but hoping to generate some customers for long-term during lunch and even are considering catering to some local businesses.