Buying a restuarant

[wannabegriffey]

Hey

So I am in a situation in which I can purchase a restaurant/martini bar in the downtown area of my city (toronto). I would be fronting the cash. My cousin would be doing ALL the hard labor (she has much experience in management and in restaurant'ing).

The place has done ~ 1.3 million in alcohol and food in each of the past two years.

I have seen the books. The expenses are 'no doubt' inflated. It opens at 5 pm each evening, has good price points, and turns into a dance type of place on Friday and Saturday evenings.

It is well established (20 years) and we are getting the name.

The chef is staying. The lease is good for another 15 years.

But I worry because I am a worrier when it comes to putting a large amount of cash out.

What kind of terms do I need to cover with my partner, ie. buy out...shot gun...what ever I am suppose to cover?

I trust her but when it comes to money, I trust nobody explicitly (except, maybe, my wife).

Looking at the selling party, what are some good points to use to DE-value their position?

Thanks

[joncarlos]

Liquor licenses, building inspections, food permits, etc. Make sure you know they're current, when they expire, etc. I assume if the chef is staying, a decent amount of the staff will stay too, but it's worth trying to confirm.

What's coming down the pike in that area? New competition opening up? Any major construction projects that are going to block your sidewalk for a year? Something across town that will suck up all the nightlife?

If your cousin has a lot of experience then presumably she has already thought of these things.

[revo]

Do either of you have experience running a restaurant?

[Hornsby]

Employees can rob you blind...

[Lucky]

Studies show that an amazing number of new restaurants fail. Yours wouldn't be "new", so those stats might not apply.

I'd get that obnoxious restaurant guy to come in and video all the employees first.

[Erik]

People who work in bars/restaurants are, shall we say, a different breed. If you expect them to behave like office employees, you'll be in for a rude awakening.

[TranaGreg]

if it's not confidential can you say which, or at least what neighbourhood? we're downtowners & are pretty familiar with many martini bars. I can provide you with at least a couple of regular clients, as long as you have wybrova.

I have a really good friend who waited in many of the city's top resto's (tho he's now out of the biz thanks to the crazy real estate market ) - I can ask him if he has any inside intel.

one question you might want to ask yourself - if the whole thing went south, how would you feel if the relationship with your cousin goes bad?

At some point one of you will want to leave the partnership - you need some specificity going in re: how that will play out.

[Mithrandir]

Studies show that an amazing number of new restaurants fail. Yours wouldn't be "new", so those stats might not apply.

I'd get that obnoxious restaurant guy to come in and video all the employees first.

I second this.. get John Taffer ASAP!!!!

[johnnya24]

Not sure why I'm posting this, as Toronto is clearly a big city. But I wouldn't dream of opening a restaurant / bar is anything other than a big city. Unless there is a niche that can be exploited (large minority population etc), restaurants just cannot compete with chains. In the UK, smaller towns (and cities) are overflowing with chain restaurants, and most have crazy online deals (2 for 2 mains etc) that no independent operator can compete with.

I'm guessing since we imported all this crap from you guys, that it's pretty much the same over there.

[swampdragon]

Also - what is the liquidation value? How much could you lose? The lease si good for 15 years (but can you get out of it)?

I the liquor license itself valuable - some are obscenely valuable - some are easily and cheaply acquired

Also, do you have time to be involved?

Lastly - why? why this investment over others?

[TranaGreg]

Not sure why I'm posting this, as Toronto is clearly a big city. But I wouldn't dream of opening a restaurant / bar is anything other than a big city. Unless there is a niche that can be exploited (large minority population etc), restaurants just cannot compete with chains. In the UK, smaller towns (and cities) are overflowing with chain restaurants, and most have crazy online deals (2 for 2 mains etc) that no independent operator can compete with.

I'm guessing since we imported all this crap from you guys, that it's pretty much the same over there.

I don't understand why you posted this ...

In Toronto there is a really vibrant restaurant/bar culture that involves tons of smaller neighbourhood type places. I live near a strip where there are a couple dozen small non-chain restaurants (mind you they have serious investors behind them) that all have their own angle and are extremely successful. It ties into your niche comment - we have such a diverse population that is becoming pretty sophisticated when it comes to food & drink, so restos can really tailor to specific genres and still draw from a large population.

[Fresno Bob]

we don't really have chain resturants in SF, other than local ones that maybe have 3 or 4 venues across the city. (frak, forgot about the crap by fisherman's wharf like Bubba Gumps or the Cheesecake Factory, this just in, when you come to SF, don't go to Fisherman's Wharf)

[mjl]

we don't really have chain resturants in SF, other than local ones that maybe have 3 or 4 venues across the city. (frak, forgot about the crap by fisherman's wharf like Bubba Gumps or the Cheesecake Factory, this just in, when you come to SF, don't go to Fisherman's Wharf)

There's Noah's and Le Boulanger, and a bunch of Subways, but that's about all I can think of. There are a couple McDonalds and Burger Kings but significantly fewer than you'd expect in a city this size, there used to be a couple Chevy's but I think they might be all gone. There's also a Cheesecake Factory in the Macy's in Union Square. But yeah, SF is significantly unfriendly to chains. Chipotle (which actually has nine other locations here, I had no idea) tried to open in the Castro and there was a big public outcry about it, enough to make it not happen.

[Gregg]

Also - what is the liquidation value? How much could you lose? The lease si good for 15 years (but can you get out of it)?

I the liquor license itself valuable - some are obscenely valuable - some are easily and cheaply acquired

Also, do you have time to be involved?

Lastly - why? why this investment over others?

Good questions. In fact a lot of good stuff on this one.

I would add, How much time have you spent there observing the place?

[Fresno Bob]

There's Noah's and Le Boulanger, and a bunch of Subways, but that's about all I can think of. There are a couple McDonalds and Burger Kings but significantly fewer than you'd expect in a city this size, there used to be a couple Chevy's but I think they might be all gone. There's also a Cheesecake Factory in the Macy's in Union Square. But yeah, SF is significantly unfriendly to chains. Chipotle (which actually has nine other locations here, I had no idea) tried to open in the Castro and there was a big public outcry about it, enough to make it not happen.

yep, I wasn't really thinking about Noah's or Subways, more the delightful lack of Applebee's/PF Changs/Border Grills that I see every frakking place I travel to in this fine land