Bielat Santore & Company’s – This Month’s Restaurant Reservation
(PRWEB) November 19, 2013 -- From time to time, usually on a monthly basis, we take a close look at businesses for sale, which can offer interesting lessons for both buyers and sellers. This writing looks at a restaurant that’s currently on the market in Ocean County, New Jersey.
Numerous people want to own restaurants. Many go into the business with a great deal of experience knowing what to expect, and some go in blind, not knowing what to expect. The latter is one of the reasons restaurants are viewed to have high failure rates. The restaurant business is an extremely time intensive business, with a demand for an owner’s presence on site continually, unless a trusted family member or skillfully trained manager can take over, providing the owner with time off. Restaurants do not usually fare well when the owner is not present and attempts to run the business absentee. This is the second reason restaurants are viewed to have high failure rates.
Property Overview
The township has the property assessed at over $900,000 and although the physical plant, 2.5 acres of land with a two-year old, fully equipped 4,200 square foot restaurant building is in excellent condition, the business itself has not been able to move past an average of $20,000 in sales per week under absentee management. The owners are real estate investors who purchased the property, spent hundreds of thousands of dollars renovating the facility and then turned it over to an associate to manage.
Business Overview
This particular restaurant in the Toms River area of New Jersey is open six days a week for lunch and dinner. Restaurants of this type with a high liquor mix (60% food –40% liquor) generally sell for 3-3.5 times what’s known as owner cash flow (“OCF”), or the amount an owner can expect to take from a business based on what the business generates. This restaurant has been in operation for two years.
Opportunity
Since the business has been run under absentee ownership, there are plenty of areas for improvement. The first is once on-site ownership is in place, management payroll can be scaled backed significantly while costs and expenses can be directly overseen and reduced. A second is the potential of opening on the seventh day to generate additional revenue. There are also challenges; the “inmates have been running the prison,” so a new owner will have to establish new systems, policies and procedures and may have to go outside the restaurant to hire new personnel. The hours are relatively long, so this business may be well suited for a partnership, husband and wife team or as a family-run business.
And You Say?
The vast majority of independently owned restaurants in this country are owner-operated. If they’re successful, most of these businesses provide a reasonably good living for the owner. Whoever buys this business will likely derive a great deal of satisfaction from owning and operating the restaurant. Restaurants like this one often become neighborhood gathering places, and the new owner will have a chance to be a part of that community.
With a property assessment in excess of $900,000 and a business with an estimated value of over $300,000 (including a New Jersey liquor license), this restaurant seems to be priced under market at $950,000 and should make a smart purchase for a knowledgeable restaurateur who will not only acquire an on-going business concern but valuable real estate with it as well. A transaction could probably be facilitated through a combination of a home equity loan, a Small Business Administration (SBA) loan and/or seller financing.
Before buying this restaurant or any restaurant, a prospective purchaser should investigate all of the conditions and attributes of the business and/or property, and verify the accuracy of all information to the extent such purchaser deems necessary.
Richard R. Santore, Bielat Santore & Company, http://www.123bsc.com, +1 732-869-4200, [email protected]
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