should we sell the business or partnership? Getting ripped off?
So, my family owns a restaurant business. We are on a main street in a good location and great parking. The business is worth 400K if we sold it. the reason to sell is because it is not doing as hot as it was in the previous years. Also our most important cooks want to retire.
It is a must for us to sell OR replace the current business with a new one.
An offer for a partnership as a new food restaurant franchise came in.
They are willing to invest 100k to fix the place.
50k for the new food skills and technique teaching.
then they want 1/3 of the money when we sell the business.
AND 1/2 the income every month.
Does this sound right?
The cash that comes in after taking everything out is 5000 at the current business.
The new business with the partner would allow us to bring in about 7000 per month.
Should we just search a different partnership or invest some money ourselves and replace a new business? Or should we take the offer.?
- roadster9879Lv 61 decade agoFavorite Answer
First of all. know this.
Partnerships never always work out equally. Somebody usually wins and somebody almost always looses. Be extremely wary of any partnership offers. And if they demand it be passed through an LLC type corp, grab your wallet and run screaming into the night.
You need to get in touch with three places for business help. 1. find out about a group called S.C.O.R.E. (Service Core of Retired Executives). They are reasonable in cost and can consult with you about a business Plan. 2. Contact the Business department of your local colleges or junior colleges. They also have a wealth of help and one of the big things is a business valuation and a proforma valuation and a Small business loan. If you want, you can go it alone and work through a local bank, but that is harder to do if you haven't done it before. And Third, Contact your local chamber of commerce, they have resources available also.
Secondly ... Restaraunt businesses are going to be significantly down right now and the increase in revenue probably won't happen. Most people are so busy putting gas in their tanks to get to a from work that they have cut back on everything, and restaraunt dining is usually the first to suffer. You could raise the menu prices slightly and then on slow nights do a promotional like Buy one entree and get second half price, or kids eat free, or something like that. Most restaraunt chains are doing this, you could do it as an independant too. The public is expecting it.
As far as the cook goes. Advertise in the local paper for a cook. Let the existing cook help you find and train a replacement. The cook could then retire and then come in as on a "consulting" basis, and you could work out a compensation that would be acceptable. You could also look in the career labs on line and check with the local employment bureau.
Just hang in there. Do not let panic or pressure scare you. You can work through this without taking on partners or excess risks. You have worked too long and too hard to give it up now. You can. And don't worry Things will definately improve after the election jitters pass. The democrats have huge sway over the US Dept of Energy (dennis kucinnich, chairman, democrat) and always have. Coincidentally the cost of fuel and the economy takes a huge down turn during election years. The democrats promise to make it better, and they do. Go back and check you history books, It happens every major election for the last 40 years. When the election passes, it will get better. What I am saying is truth.
I hope this helps. So, Keep heart and hope, all is not lost.
- 1 decade ago
this is a very interesting situation. Here are some factors that will come into play:
-world oil production can't increase any. with growth in population that means the price will only rise.
-because of the above the cost of food will not drop, because of population it will continue to rise.
If food prices are going to rise then you must pass along your costs to the consumer. If the average consumer is afluent and cares little for the cost of dinner than you are OK. otherwise you ought to sell out because increased prices will mean fewer customers and thus less profit.
Let us, for agruments sake, assume your average customer is rich. What you then need to do is get an evaluation of how much the $100K investment will increase the value of your place. let us take a look at a scenario where the value is increased $100K. If you wish to get out immidiatly you will lose dough because 2/3 of $500K is $333K. To break even you would have to run the business for 28 1/2 months (you get 1/2 of the $7,000 , you must make $100K). And this is just to break even.
If you are going to have 1/2 your monthly profit taken you need downside protection. I would tell this investor to go take a hike if he refuses to cover at least 1/3 of any possible losses. The guy will probably get pretty upset at this but if you don't get this you are getting ripped off.
As a result of a hostile market, increasing costs and a hostile investment bid I would sell, take 1/2 and put it in the bank. I would take the other 1/2 and invest it, perhaps in a few years, in real estate (don't do this now, the housing market has a long ways to fall). If you choose to go into business again I would look into running a business where you will not be hurt too much by rising commodity prices (or where people will pay whatever the product costs). the first business like that which comes to mind is a hardware store. obvioulsy I don't know the condition of your town/city or any other factors (such as land prices and locations) but this is a business where people generally don't care a ton about cost. for instance you won't find many people kvetching about a price kike in 2x4's.
- pugaLv 44 years ago
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