Hey Folks:

I'm going to be running some numbers and creating a pro forma regarding purchasing a business that includes the real property (not just taking over a lease, that is a big no no most of the time) along with everything else in the bundle.

Property+Business in question is 4K sqft unit, vacant parcel on side, fully operating bar + kitchen, liquor license (the LL is worth about 80-100K by itself). I've been in there and can identify a ridiculous list of things they're doing wrong business wise, so improving at least some non-0 % would not be too difficult.

I was hoping I could bounce some questions off of someone who has experience in this? If you'd like - PM me or if its beneficial to the forum hold the conversation in this thread.

My BG I majored in philosophy (St. John's College grad, i actually went to college w/ GeorgiaAve.), worked in real estate for about 8 years commercial & non-comm., now I work in the music industry & have many night life contacts who i would be pilfering to work for me.

I have a partner* and possibly another individual who owns a bar in this city interested in maybe a partnership as well.

I'm worried my estimates for my pro forma wont be inclusive of enough variables to make solid decisions and would like to flesh out my analysis pre offer as well as discuss important steps to take once I get to a due diligence period (ie. after say an offer is accepted).

Basically a mentor in this situation would be awesome, but obviously someone willing to chat it up and share advice is much appreciated.

Thanks!

s_r

*My friend works in the beer industry and because of this we would be able to get ridiculous pricing saving us right off the bat a considerable amount/unit.

Sorry - couldnt edit the post any longer:
This may have been poorly written - wanted to provide a handful of details w/o explaining too much and upon re-reading it seems like I could have left out or arranged the explanation a little better. Apologies.

Well, how much does it cost and what's the current cash flow?

My friend's friend paid 1-2x earnings for a bar in LA and says owning a bar is the worst thing in the world. For him, managing the kind of people who want to work in a bar where his bar is is apparently a nightmare. It sounds like you would be in the bar a lot though, so if that's something you want to do, your experience would probably be better.

What's the cap rate on the building / is the purchase price broken out separately? I imagine they'll show you tax returns saying they make negligible amounts of money and then be like "but we actually make $X", which will obviously be way more, and who knows how accurate.

What ChipsAhoy said.

Never, ever, get into the bar business. You either need to actively manage it and understand how many receipts you should have at the end of the night given how much booze is left. Alternatively, you find a good manager who's going to cost so much that you don't make any money. It's a recipe to be robbed blind if you don't know what you're doing.

Further, you have to reinvent the concept every 4-5 years, which costs a lot of money.

I read an HBS study on Marquee once, and my take away was the highest grossing club in the US only makes 7-8 million a year. What other industry can you be the #1 in and make that little money??

wow thank you for the responses - in awaiting figures to give replies to cap rate and performance i only have vague figures from 1 bartender asking about average ring, min and max. ill respond with those numbers when i get them, but thank for the input and questions, i realize i may have asked my questions prematurely

that said price is 375K, includes 4k 2 story mixed use, 1 undeveloped parcel currently used as patio, business and liquor license. liquor licenses here valued at 90k as of 2013. i value structure at 200-225. leaving business valued not that high based on sales price.