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  • #972439
    Bronte’s
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    Hi

    We are looking at buying an existing restaurant and changing the concept to cafe and retail. Retail will include books, providore items, and possibly liquor.
    The restaurant is in a very good location, but run down and the kitchen equipment would be at least 5+ yrs old. The other plant items appear in reasonable condition and we could utilise about 70% of items for sale. We would still need to spend about $20K further on equipment and fitout.
    We have been told the reason for sale is divorce, which is likely as the restaurant was getting good reviews upto 4 months ago.
    The rent is very cheap and the premises suits our needs perfectly.
    Although there are other cafe’s along the strip no one is offering a similar concept to ours. (We have done our research)

    The vendor is asking over 150K psav or WIWO. As we are not interested in goodwill, WIWO may be a better option. Our concern is the age of the kitchen equipment and the estimated (inflated) value the vendor is asking for each item (without proof of purchase).

    We would like some advice on how to estimate the value of a WIWO business,
    and is the equipment to old and thus, need to be replaced in the near future.

    If you were expected to pay on face value, what price would you offer given the variables?

    Any other comments on the above situation is also appreciated.

    Thanks

    #1056140
    victorng
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    Can’t help with the valuation point I’m afraid but do check to ensure that the lease allows the premises to be used for a non-restaurant purpose.

    Cheers,
    Victor

    #1056141
    JacquiPryor
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    Unfortunately, I am not certain there is a precise ‘formula’ to help work out an appropriate price but perhaps searches on sites/directories with businesses for sale could help find similar business in similar locations to get a feel for the average price, or at least give an indication of whether this particular business is reasonably priced or way off the mark.

    (A search in an internet search engine for Business for Sale will bring up a heap of links to sites that advertise businesses for sale, which could show similar businesses to determine ‘average’ type price).

    Alternatively, a business broker may be able to assist based on experience and knowledge of similar businesses sold; and there are certainly companies out there (including some accounts) who specialise in valuing businesses; I imagine they are often employed by the seller to value and determine a sale price, but logic says they should be able to help a buyer as well.

    In terms of the equipment – where there’s no proof of purchase, an accountant may also be able to offer some ideas as to their depreciated value if you were to find ‘as new’ costs for the same equipment to help determine their total ‘worth’ five or more years later. (Plus, searching in online classifieds for second hand equipment may give you at least a general idea of their current values before paying an account etc).

    Sounds like you have a good idea for your business so wishing you all the best with it!

    #1056142
    Bronte’s
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    Thanks Jacqui for your well wishes.

    Since my initial post we have done loads of comparisons on similar businesses. The vendor is asking far too much, the brokers are pushing quite hard and we feel there is something abit dodgy about the whole deal, so we are now looking elsewhere.
    cheers

    #1056143
    JacquiPryor
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    Bronte’s, post: 69601 wrote:
    Thanks Jacqui for your well wishes.

    Since my initial post we have done loads of comparisons on similar businesses. The vendor is asking far too much, the brokers are pushing quite hard and we feel there is something abit dodgy about the whole deal, so we are now looking elsewhere.
    cheers

    Sounds like one of those situations best to go with your gut instinct, as there’s obviously a reason you are left feeling its a bit dodgy! Fingers crossed somewhere else comes up for you soon!

    #1056144
    Golfing Director
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    Hi

    Regardless of where the restaurant is, they will all appear to have inflated prices on the equipment schedule as listed for sale on the contract. Typically this is because each successive new owner lists the equipment at the book price, or the price they paid for it. If that restaurant has changed hands many times then each new owner has paid the same book price as the original owner.

    One remedy for this is when you find another restaurant premises that you like in the location you want, take a second hand equipment dealer in one time and have them value the equipment as if they were to buy it from you.

    You could use this new valuation to drive the price down. Don’t forget they need you way more than you need them.

    Catering equipment is designed to last for approx 7 years in a busy environment. It can often look newer than it actually is. A good remedy for this is find the serial numbers and jot them down, along with the make & model. Ring the manufacturer or importer and ask how old that item is.

    If you are allowed a mix of retail and food, you need to make sure your business plan is right with respect to the percent of floor space allocated to each. One business I know has a floor mix of 60/40 retail over cafe space. Unfortunately profits are 80% from food and as the restaurant is full almost every day they are losing profit by not having enough tables.

    I hope this helps you with your planning.
    Neil

    #1056145
    Bronte’s
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    Thanks Neil
    It didn’t take us long into our research to figure that the cafe was going to have a higher turnover than the retail side. However, we loved our retail idea so much that it has taken us a bit longer to get our heads around the fact to have a viable business we need to focus more on the cafe than the retail.
    Thanks for the advice and having such an informative website.

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