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Wine Bar Interest - mad to go there?

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TheFortune8

I'm thinking about buying a wine bar - would I be mad to do it?

Here's the situation.

I've been working for a couple of months trying to establish myself as a self-employed intermediary to a network of Business Angels who specialise in turnaround situations. My background is IT but having failed to secure a contract for too long I've responded to the flattery of an associate and I'm giving this a try as there's little to lose.

I have been building up my own network of contacts who may refer business my way some time in the future. At best I'd describe this as a slow burner, despite the fact there must be many entrepreneurs out there who could benefit from a new injection of equity finance. It's been suggested I do a bit of "ambulance chasing" rather than build relationships with accountants, financial advisors or commercial bank managers. That would mean making cold calls to directors with CCJs, looking for companies who have failed to file a return on time, basically looking for signs of weakness and going in there to offer a life line.

I have some reservations about that, so ....

While that line of business may or may not prove profitable in the future, I'm looking at other opportunities. Completely unrelated to this or my previous skills is the chance to buy a City Centre Wine Bar.

The business is in administration and is trading under a Tenancy at Will agreement.

It's current turnover is £500k and they are losing £30k. The outside of the premises are very smart indeed and the adjacent area is having a massive facelift which should be complete by the end of this year. The inside of the premises are a little tired and the place lacks a little atmosphere - especially as it's not drawing in a great deal of customers.

The current asking price is £50k (recently dropped from £75k). The agents are saying they have an offer at the asking price, but they are still talking to me despite the fact that I put in a speculative bid of just £10k about 10 weeks ago. I know there is another offer of £5k, so buying it for £1 is not an option although my associate who has bought a west end night club for £1 still believes I'm mad to offer £10k.

I'm not sure how serious I am at this stage. Would anyone be mad to even think about buying a wine bar/pub at this time or is this one that could be turned around?

Here are some facts.

The current owners have been very hands off leaving the day to day running to their managers (who change often).

There is NO indication outside to say what the place does. It's got one very small sign which gives the name of the place - "Pozas" (not really I made that up). Then there's an A-board outside which promotes the real ale they've just started selling - but it's meant to be a wine bar not a place looking for CAMRA awards!

His marketing is centred around being a "pre-club" bar. An unusual tactic "Come to us and we'll get you tickets to go somewhere else"

There's no indication that they sell food, and it was only because I overheard a waitress offer another customer their "fantastic food deal" that I knew about the "buy a meal get a drink free offer". My waitress didn't even know about that offer.

OK so the business is in admnistration, but the current owner is still guiding things. He's let the situation get to this.

It wouldn't take much of change and at very little cost to turn this place round. Increase the takings by 10% and you're in profit. Increase takings by 20% and it becomes interesting.

OK you're still reading - excellent! Presumably you have some knowledge or interest in bars?

My gut feel is that this is an easy turnaround - one which I'd like to do myself rather than refer it on.

I've pitched for investment for myself and have had a lukewarm response. OK I haven't done a full business plan and like I say I'm not sure how serious I should get about this especially as there are a few bars not so far away that have recently closed. It's not a great sign.

One point that is unclear at the moment is the present employees rights. the administrators are getting back to me on this. Do employees working for a company in administration have the same rights under TUPE as a business being sold normally?

Any thoughts on this or any comments very welcome - even if it's "you daft b*****d, don't even think about this at the moment - it's financial suicide"
 
I would think that 10k is too much to pay for a biz losing money - you mentioned 30k but what's that, per month, per week, what ?

The nominal sum paid won't cover the losses and the debts - do they have any and if so, how much are they ?

Buy the biz, take the debts then fund the difference if you can to get yourself in the black. At the same time, change the interior and get marketing. Is it near offices - leaflet drop and invite them to the opening night - get people thru the door that way, but a lot of unanswered questions needing addressing first imo..........
 
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If you know how to run it then buy the assets not the business. That will solve your problem taking on staff and it doesn't sound sound like you be losing much.
If you don't know how to run it then the answer is yes you are mad.
 
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Deliberator said:
I would think that 10k is too much to pay for a biz losing money - you mentioned 30k but what's that, per month, per week, what ?

The nominal sum paid won't cover the losses and the debts - do they have any and if so, how much are they ?

Buy the biz, take the debts then fund the difference if you can to get yourself in the black. At the same time, change the interior and get marketing. Is it near offices - leaflet drop and invite them to the opening night - get people thru the door that way, but a lot of unanswered questions needing addressing first imo..........
Click to expand...

Thanks for the reply deliberator.

Losses of £30k are in the last year for which I have figures ... I'm still awaiting the up to date position - who knows how much worse that will be?

As the business is in administration the past losses are not a concern of mine. The creditors will pick over the bones of my paltry offer and the current owners will get nothing - with his partners they've lost something like £250k of an original investment and have accumulated trading losses over 4 years.

I do see the image of the place, its brand, its marketing as being the key to turning this place around, but not necessarily by spending a fortune on decor. First of all people need to know clearly what it is. Currently it's notionally a wine bar, but it's not upmarket enough to appeal to "the suits" as my brother would say. It's in a good location but not the very best for passing trade, however it's good enough to attract people there if the marketing is right. Personally I think it needs to call itself a cafe bar rather than a wine bar with simple food presented excellently. You'd increase the lunchtime trade massively just by having the word cafe in the name.

It's adjacent to the theatre, very close to the town hall and university and close enough to a shopping precinct (200 yards away) and yet it can seem like a bit of a backwater sometimes - but that can be a bonus when the sun is out like yesterday - outside is a peaceful suntrap.
 
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Well it sounds like you're quite taken with it and if that's the case, then get it for the least amount you can and turn it into a cafe bar..................but, be very cautious before you do decide and consider how many similar businesses are failing weekly !
 
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dsigner said:
If you know how to run it then buy the assets not the business. That will solve your problem taking on staff and it doesn't sound sound like you be losing much.
If you don't know how to run it then the answer is yes you are mad.
Click to expand...

It's currently trading while in administration and will be sold as a going concern. The realisable assets of the business if they went to auction are put at about £5k.

Do I know how to run a wine bar? Heck no, my background is IT. Am I mad enough to try? Well I'm mad enough to consider it ... beyond that? I'll let you know ...
 
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Deliberator said:
Well it sounds like you're quite taken with it and if that's the case, then get it for the least amount you can and turn it into a cafe bar..................but, be very cautious before you do decide and consider how many similar businesses are failing weekly !
Click to expand...

My heart is saying GO FOR IT. My head is saying whoah steady on there boy. At the moment the cautious part of me has the upper hand ...
 
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The only thing I would say is that if the premises are already tainted by its previous reputation as a place not to go to, this will be very difficult to shake off.

You are better off going for a new location with an unblemished image. However much you try to promote the changes you are making, many people will write it off because of its old associations.

I can think of several bars/restaurants/cafes that continually change hands and try to reinvent themselves but continue to fail. Despite the changes in ownership and direction, people still think of it negatively and don't go there.

I can't think of a single failing bar/restaurant that changed hands and succeeded.

Having said that, a turnover of £500K is not insubstantial. What is it that is causing the business to operate at a loss on that sort of turnover? What are the costs?
 
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deniser said:
The only thing I would say is that if the premises are already tainted by its previous reputation as a place not to go to, this will be very difficult to shake off.

You are better off going for a new location with an unblemished image. However much you try to promote the changes you are making, many people will write it off because of its old associations.

I can think of several bars/restaurants/cafes that continually change hands and try to reinvent themselves but continue to fail. Despite the changes in ownership and direction, people still think of it negatively and don't go there.
Click to expand...

I wouldn't say the place was tainted in anyway, just anonymous. People can walk past the huge glass front, see tables and chairs inside, but not realise it's a bar of any kind that's open for trade.

It definitely needs a new marketing initiative and I don't think many bars will survive as simply places where you can buy a drink. I've got loads of ideas to experiment with there - what it doesn't need to to do is try to compete with the many pubs and nightclubs aimed at the twenty somethings. It's next to a theatre - I'm sure a moderately upmarket wine bar/cafe bar will work in that location rather than a bar that sells tickets to other venues - 80's nights, night clubs (& raves???). Imagine coming out of the theatre going into an adjacent bar and being offered tickets to a night spot that doesn't close till 4am. The owners aren't giving any reasons why anyone should come to THEIR bar.

deniser said:
I can't think of a single failing bar/restaurant that changed hands and succeeded.
Click to expand...

Definitely a worry - there's a bar not a million miles away that had a fair bit spent on it - and has closed after less than a year. The fact that this bar is still holding on by the skin of its teeth despite dreadful management says that with the right focus, the right image, brand, marketing something could be made of it. I'm not talking about spending huge sums of money - give it a new name that says what it is, rather than some character's name from 2 centuries ago.

Rather than "Atlees", call it "The Theatre Bar" (not actual current or proposed names) but what is "Atlees"? It doesn't say anything does it?

What is "The Theatre Bar"? It's a bar. It's next to the Theatre. No explanation is required.

deniser said:
Having said that, a turnover of £500K is not insubstantial. What is it that is causing the business to operate at a loss on that sort of turnover? What are the costs?
Click to expand...

Sales £500k (near enough)
£200k purchases.
£300k Gross profit

£150k staff.
£58k rent.
£25k rates.
£18k entertainment.
£10k cleaning and laundry
£10k (just under) bank charges and interest

Then a further £60k approx on heating, lighting, insurance, office equipment, professional fees etc.

Sure you'd have to keep a tight rein on costs. The key to making it work is getting people through the door and spending.
 
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I considered a similar thing a couple of years ago.

A bar that was very popular 3/4 years ago was up for sale (well the lease was) It had 3 years remaining and was for sale for £120. The bar had an income of £700k with good profit margins but was beginning to slow down due to the owner taking on another project and some new bars opening in the area.

I decided to leave it be and consequently it remained closed for about 18 months. It then reopened under a new name and owner. This lasted about 8 months. It is now for sale again for £20k on a new lease of 7 years. To say i have not thought about it again would be a lie but to be honest i think this one is best left alone.

What i think this taught me is that this location has "had its day" and i cant honestly think of a new angle to come from to make it work.

Maybe this is the same situation for your location? with all the exciting new venues springing up the older bars tend to fall out of the spot light
 
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belucrative said:
I considered a similar thing a couple of years ago.

A bar that was very popular 3/4 years ago was up for sale (well the lease was) It had 3 years remaining and was for sale for £120. The bar had an income of £700k with good profit margins but was beginning to slow down due to the owner taking on another project and some new bars opening in the area.

I decided to leave it be and consequently it remained closed for about 18 months. It then reopened under a new name and owner. This lasted about 8 months. It is now for sale again for £20k on a new lease of 7 years. To say i have not thought about it again would be a lie but to be honest i think this one is best left alone.

What i think this taught me is that this location has "had its day" and i cant honestly think of a new angle to come from to make it work.

Maybe this is the same situation for your location? with all the exciting new venues springing up the older bars tend to fall out of the spot light
Click to expand...

Many thanks for this insight which I'll share with my partner. If I do proceed, I want to go in with eyes open.

The thing about this bar is that although I've said the interior decor is a little tired, it is a modern glass fronted bar with some style a million miles removed from an old man's boozer. It's right next to the theatre and the council are spending big money on the area.

I don't believe it's just a sprucing up of the interior that will make this bar work - it does need a "new angle" - that's the reason I think it would work as a moderately upmarket cafe bar - just something that's clean, offering great food and service, which will attract shoppers and office workers. If it was bigger, the likes of Cafe Rouge would be looking at it. As it is it's notionally a wine bar that's advertising real ale on an A-board outside. It's an anonymous bar and any attempt to give itself an identity is confusing.

It does food, but you can go inside and it's not obvious that they do ... and the staff aren't clued up on their special offers.

The owner's main marketing idea is that they're a pre-club bar ... come here, buy tickets to go elsewhere. On his flyers he lists five bars other than his own.

It's currently a disaster for management and marketing reasons I'd say, rather than something that's inherently wrong with the place or its location.

If it was my decision alone and I had the money, I'd buy it tomorrow, but I've got to persuade the people who'll be backing me with the money ...

... but it's good to hear other insights like yours belucrative. Thanks again.
 
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vvaannmmaann said:
Didn't wine bars just fade away in the late eighties?
Click to expand...

Maybe so ... and I don't think this particuar town had any thriving wine bars in the first place! I certainly wouldn't be banking on red-braced Yahoo Henry's and Loadsamoney characters to fill the place!

A smart, value-for-money cafe-bar next to the theatre can attract a wide range of people if it serves

Sticky buns and tea from 10.30,
Coffee and sandwiches to go,
Continental light lunches and afternoon teas
A cool lager and a glass of white wine for the lady on the terrace when the sun is out
A quieter bar with ambient music Mon - Thu evenings
Something a little bit more upbeat Fri/Sat but not something to compete with all the bars that want to be the hottest spot in town!

Now to find the money to back the brainwave .... somebody stop me! :D
 
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TheFortune8 said:
Losses of £30k are in the last year for which I have figures ... I'm still awaiting the up to date position - who knows how much worse that will be?
Click to expand...

That's the big question. It could change the picture completely.

Depending how old the figures you've seen are, the takings may have dropped significantly since they were produced.

Steve
 
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As Steve has mentioned above past figures are of very little use to you. When buying a business you want up to date figures as that is what you are dealing with on day one of your name on the business.

Do not do anything until you have those figures.

That said, £10k for a business already doing £500k a year TO and with losses of £30k on an annual basis is a bargin

Many people underestimate how expensive it is in time and money to set up a business. Taking one over is and improving it is often a much better way.

There is no doubt this could be turned round if what you have said is correct by a hands on owner.

My main concern is you have no experinece in two sectors

Doing turnarounds
Bar Trade

Dong turnarounds is difficult and you will need to invest a lot of time and money but on your above figure it will pay. Unlikely you will get someone to back you with money as you have no history so you will probably need to self fund.

I look for exactly the situations you are talking about and have done several. Not in bar trade though. Much easier and quicker than starting businesses which I also do on a too regular basis for my liking;)
 
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your nuts, these places are dropping like flies, dozens closing every week.

what experience have you in running pubs, any? I've seen this so many times, I fancy being a landlord, nearly all end in disaster, are you ready to work 18 hours a day.

Just send me the money you were going to spend I will have some fun with it, do yourself a really big favour, walk away

Mark
 
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can you do a survey of existing customers,
local businesses, people who walk by, existing or past staff...
...to ask them what is wrong with the bar, how it could be improved, and check their are no dark hidden secrets?/!

what about check the local papers for the last 10 yrs for details about that bar? how many times has it changed hands already?

good luck
 
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Thanks for all these replies. I worry myself sometimes that I should think about taking something on like this without the relevant experience mentioned! Having said that I have an associate who has done many turnarounds in pubs, clubs and restaurants, my sister in law runs a pub and will be able to offer advice and my sister is a book-keeper and is keen to help out.

With my hard work and enthusiasm, it seems less of a risk to me than it might to others. I've only seen the current owner in the bar on a handful of occasions. I understand he is in full time employment in another town. (He actually owns it jointly with his wife and 2 other partners. The others have no direct involvement in running the place). I think anyone who has an interest and is prepared to be more hands on could turn this place around even without past experience.

I already know the bar very well. It hasn't changed hands since opening in 2004 and I have already had many conversations with others who know it. Some hate it because it's not like the bars on "the strip" (or whatever else you might call the centre of town for youngsters on a Fri/Sat). Others love it for exactly the same reason. A slightly more mature, professional, arts-oriented customer doesn't want to mingle with the crowd getting "blasted" and "on the pull", and there's massive scope to increase lunch time trade as a moderately upmarket cafe.

Facts are though that year on year comparisons for the 6 months up to last Dec were down by significant amounts. In Dec for example takings were down by 27% on the previous year.

I'll be chasing up the latest figures with the administrators tomorrow and clarifying the position with regards to present employees rights.

:rolleyes:
 
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it's a bugga when Heart & Head are going in completely different directions!

i get the feeling that at any other time, you'd jump at this, & rightly so. in the current climate, your Head has got to rule - which is what you're doing.

we do joinery for a lot of pubs/hotels/restaurants & everything has just come to a gradual stop over the last year. finance has dried up or is being re-negotiated, not just for the big chains, everyone.

we are still getting word on contracts that are getting the 'go ahead', but none of them have actually started yet...just seems to be so much uncertainty across a wide section of the leisure industry.

good luck in whatever you decide :)
 
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I think some people who run bars tend to think that you open the doors, stick out an A frame in the road and the punters will come rolling in.

I was helping a friend who was interested in getting into running a bar and i had contacts with the breweries already so passed on and went along to sort out.

The bar was in administration, wasnt bought and was one that i watched for around a year, from point of going on sale running at £70,000 then at £10,000 closed and then was got from the brewers for the F+F cost + deposit.

The pub was 1mile from the main street of the town, perfect for the use, bang in the student area. The pub was turning over £250,000 per year. Staff costs of £40,000 + the owner p**sed about too for a few hours. The pub was decent, was designed up market though in a student area. The beer was priced at the city centre prices.

Was a bit skeptical at first... reducing the beer prices inline with other locals, offering some decent entertainment, £300 of bunker seating and painted one wall a nice colour and then some photos to suit.

Without doing anything this bar would have been in profit if the owner had actually worked and not had 3 staff in Monday-Sunday all hours without any changes that were made. Add on the coffee and light bites in the daytime and its another story!

Do the numbers and you will see it work!
 
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Facts are though that year on year comparisons for the 6 months up to last Dec were down by significant amounts. In Dec for example takings were down by 27% on the previous year.

Well if you do your homework this is the trend everywhere. wake up and smell the coffee.

The decline of the British pub

With recent figures showing that beer sales have slumped to their lowest levels since the 'Great Depression' of the 1930s, and government policy being to ever increase the tax on beer what hope is there for the Pub.
Beer sold in The UK carries taxes eight times greater than those in France, 32 pence per pint compared to 4 pence. No wonder then that pub beer sales have fallen by almost half, or more than 5 billion pints. Pubs are now pulling 14 million less pints than they did since the peak thirty years ago, figures from the British Beer and Pub Association [BBPA] showed.
With the soaring prices of barley, malt, glass, aluminium and energy prices sky high, the brewers who for so many years have made consistently good profits, are now beginning to feel the effects. The BBPA said that major UK Brewers have seen profits plummet by almost 80 percent, and claimed brewers make 0.7 pence per pint profit, compared to the average 33 pence per pint they pay in taxes.
 
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I'd like to know who the pubco is ( if there is one )...If it's anything to do with enterprise my advice would be put your running shoes on and don't look back...If you like I will give you a freelance auditors / stock takers ( for Pubs/clubs ) Tel Number who you can have a chat with ( No charge ) and he will tell you what the score is...Just send me a PM
 
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Oh my word ... received an email late yesterday with the latest info.

There are 13 staff protected by TUPE legislation.

The bar has lost £48,000 in the last 8 months. :eek:

Still have a gut feel that the place can be turned around, by actually working in the place, retraining staff and attracting people in for "coffee and lite bites".

I also think because of the fab location and improvements the council are making (£4m upgrade to area - completion Dec 09) this place would work as a continental style cafe bar rather than a traditional British pub or trendy wine bar.

The numbers are a bit scary though.

I'm off to smell the strongest coffee available.
 
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with those numbers and your lack of experience in that field, just do one thing "Walk away", you wont have the time to change things around and learn at the same time, you wil just loose money,
 
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The one piece of advice I'd give is, if you're going to go ahead with this, make sure you plan out EXACTLY what you will do to turn it around.

-Work out everything you will do.
-Work out how it will work and why.
-Calculate an educated estimate of the returns from each part of your plan.

By the end you should have a solid plan of action which has been developed with the aid of expertise. Once you have the business you should then be able to act out the plan like an instruction manual.

If at any point during the development of this plan the numbers don't add up, or there's some serious flaws, then don't go ahead with it. Gut feelings won't get you very far.

An example. You say "attracting people in for "coffee and lite bites"". Exactly how will you attract these people in, how much will it cost and how well do you know that it will work? To find out if it will work you should do research and seek the advice of experienced businesspeople in this field. Don't finalise that part of your plan (or any part) until every piece is solid.
 
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Thanks guys. I do still love the place and believe it can work, however I'm not going ahead without doing what you suggest in detail.

I'll confess: I tried to start a low cost business working from home on a gut feel. My business plan wasn't much more than "have fun, make money". I had fun, I didn't make money, but fortunately I didn't lose money either (well not much).

This new venture has the potential to make money but it also has a greater potential to lose money. I'll be guided by my head after I've thought this through a lot more ...

If passion drives you,
let reason hold the reins.
Benjamin Franklin
 
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