Fish and Chips

[houman1979]

Hi,

I viewed a fish a chips for sale recently and in my view there are two concerns in the business and I want to know about the others opinions:

-owner claims that the business makes about £150K net per year but the the sale price is about £120K. Does it make sense that you sell a business for less than its annual profit (not turnover)? He says he wants to retire and so does not care!

-he claims there is no premium to renew the leasehold apart from the legal fees. Is it normal? I know that I can check it easily with the freeholder.

Also, I am more concerned about the capital growth of the business and not only its sales. Is it possible to gain a good growth (say after 5-10 years) in leasehold restaurants or it is just for the freehold businesses?

 

[Mr D]

Hi,

I viewed a fish a chips for sale recently and in my view there are two concerns in the business and I want to know about the others opinions:

-owner claims that the business makes about £150K net per year but the the sale price is about £120K. Does it make sense that you sell a business for less than its annual profit (not turnover)? He says he wants to retire and so does not care!

-he claims there is no premium to renew the leasehold apart from the legal fees. Is it normal? I know that I can check it easily with the freeholder.

Also, I am more concerned about the capital growth of the business and not only its sales. Is it possible to gain a good growth (say after 5-10 years) in leasehold restaurants or it is just for the freehold businesses?

There isn't a particular method of valuing a small business. A cheap one may sell while a reasonably priced for what it is may not sell at all. Which should the owner do?

As for the business, if you are interested in it then you would do your due diligence and be certain of its income and costs, its profit and its liabilities. Or drop the interest because the figures don't work.

 

[Mark T Jones]

‘He says’ counts for zilch.

You need hard facts and verified figures. Prior to that we will all just be guessing

With regards to growth, freehold or leasehold should make no difference - what will matter is your own research and the changes you make to meet the needs of your market.

 

[The Byre]

Here we go again! There seems to be something about selling businesses (and strangely grand pianos as well) that turns honest folk into the biggest liars imaginable!

Have a read through this lot - http://resources.theexitfirm.co.uk/

There are two goals in business - profit and equity. If you own the shop, you are targeting both and in the long run, will probably make more profit. Small businesses that are in reality just jobs, are often sold for too much money - the income from the job being tarted-up as profit.

If you run a rented shop, the chances are, you have a job, but the landlord has a business!

 

[houman1979]

Thanks.

I know that we need hard facts but the problem is that it is not easy to find them. Accounts may not be accurate. About the sale my estimation is that the business can sell around £350K per year (based on my sampling of number of the customers and menu prices in different dates and times) and so maybe £150K net profit (I know the staff wages in the town, rent and rates and an estimation of raw material costs) is not very off. But the fact that it is being sold for less than an annual profit makes me worried.

Also, I may not agree that in a small business you only have a job as I've seen small business owners who have more than a job.

About the lease renewal fees as I said, I think the best way is to check with the landlord.

 

[Mark T Jones]

The overwhelming majority of retail businesses are run from leasehold premises, as long as the lease is well negotiated that needn’t be a problem

I’m aware of the ‘cash factor ‘ however in terms of making an offer the stance should be ‘if I can’t see it, it didn’t hapoen’ (Technically it’s illegal to do otherwise). It’s fairly easy to cook profits upwards for a year, difficult to do so for several year, which is why you need at least a 3 year spread of figures.

 

[Mr D]

Thanks.

I know that we need hard facts but the problem is that it is not easy to find them. Accounts may not be accurate. About the sale my estimation is that the business can sell around £350K per year (based on my sampling of number of the customers and menu prices in different dates and times) and so maybe £150K net profit (I know the staff wages in the town, rent and rates and an estimation of raw material costs) is not very off. But the fact that it is being sold for less than an annual profit makes me worried.

Also, I may not agree that in a small business you only have a job as I've seen small business owners who have more than a job.

About the lease renewal fees as I said, I think the best way is to check with the landlord.

So you dig for the facts. That's part of your job as the buyer.
Before you agree to buy you can access far more than an advert. Go over the books, look at receipts, speak to the council etc.

We tend to view a business where the entity revolves around one person as buying a job. If you can take 6 months off for a tour of the pacific islands and the business can keep going without you being there then its a business.
Nothing wrong with buying a job - many people do it. Some then build it into a business, setting up policies and management team so if they drop dead tomorrow their heir can still get an income from the business.

 

[houman1979]

So you dig for the facts. That's part of your job as the buyer.
Before you agree to buy you can access far more than an advert. Go over the books, look at receipts, speak to the council etc.

We tend to view a business where the entity revolves around one person as buying a job. If you can take 6 months off for a tour of the pacific islands and the business can keep going without you being there then its a business.
Nothing wrong with buying a job - many people do it. Some then build it into a business, setting up policies and management team so if they drop dead tomorrow their heir can still get an income from the business.

Very good advice and I thank you so much.

As you said many of these businesses are actually jobs and without your presence they are dead. My goal (which is not easy) is to make them a business and I've seen people who have done it.

 

[Mr D]

Very good advice and I thank you so much.

As you said many of these businesses are actually jobs and without your presence they are dead. My goal (which is not easy) is to make them a business and I've seen people who have done it.

Yes, its not easy and not necessarily cheap. However with that kind of net then paying a manager a figure of say £40k or even a pair of managers (hey, long hours and 7 days?) is possible.
It is a different approach and not everyone can cope with the hands off element of having managers. It can be a profitable use of time when done right.

 

[houman1979]

I started this thread about three months ago and since then I've seen some chippies. Based on what I read on the other websites and forums, most people are talking very badly of fish and chips. very low profit margin (about 10-15% for net) and very low turnover. But my question is that if this is true and if yes why still many people entering this line of work or restaurant in general? Is it possible that only failed people bother to post and those who make money just mind their chippies??
Is it realistic to have a sale of around £150-200K from a normal established fish and chip shop with a net profit margin of about 25-30%?

PS: I am not trusting the accounts and I need some independent advice from those who actually work or worked in this line.

 

[Stedurham]

All fish and chip shops near me are now selling pizza, burgers kebabs etc think its to much of a small market to be able to solely sell fish and chips, unless of course you are in a seaside type are or have massive foot flow that will stop and eat. There are loads up for sale aswell

 

[houman1979]

All fish and chip shops near me are now selling pizza, burgers kebabs etc think its to much of a small market to be able to solely sell fish and chips, unless of course you are in a seaside type are or have massive foot flow that will stop and eat. There are loads up for sale aswell

thank you for your reply. as your observation is about the real cases it is very useful.

on the other and the funny thing is that when you look for a pizza shop or burger or any other restaurant types, you will hear the same thing. I know that running a business is a tough job, or maybe the whole economy is slowing down but I've never seen a line of work that its people are happy. It was the reason that I was thinking maybe I am only seeing the negative side of story in the net. also, the official statistics still showing fish and chips as a whole is very popular and the market size is so big.

 

[Stedurham]

He isn't making 150k Net guarantee that, don't believe what you are told, spoke to mates whos got a restaurant a while ago as there was few available we went through all the actual rough costs and you are as people say above buying a job. You will be lucky to make 40k
You can do it yourself whats rent? How many hours is it open? How many staff? Check on gov site if theres business rate, Gas will be expensive and electric. Let me know what this comes to

 

[houman1979]

He isn't making 150k Net guarantee that, don't believe what you are told, spoke to mates whos got a restaurant a while ago as there was few available we went through all the actual rough costs and you are as people say above buying a job. You will be lucky to make 40k
You can do it yourself whats rent? How many hours is it open? How many staff? Check on gov site if theres business rate, Gas will be expensive and electric. Let me know what this comes to

actually it was not £150K net profit, it was £150K as sales and I am wondering can I make a net of about £30-40K from this sale?

I know about the rest, and it is somehow similar among the shops I've seen. rent and rates around £15-20K, staffs are usually part time on minimum wage, utilities, insurance, etc are all can be estimated with a good accuracy. Yes, I agree that I am actually buying a job. But when you add the figures,you will see the profits of about £10-20K!!! then why bother??
About owning a business and selling it, it seems by increasing the sales and profit, your business selling price does not change too much (i am saying it based on couple of observations). So I wont have a good capital growth.

 

[james_77]

Interesting thread. It has always struck me just how many fish and chip shops are always for sale on the business sites. That has to tell you that a lot of people in the game want to exit. It is definitely a job not a business, unless you have a very exceptional shop near the sea. I think fish and chips is probably less popular now compare to 20 years back.

Do you need to buy an established business, could you not kit one out for less money.
My advice with any business that is being considered, is to go and work in one for a couple of weeks. Dont let on you are looking to buy, and I bet you will learn lots about the business, including what the takings are each night. Would even help to learn suppliers, procedures, what works etc.

 

[Stedurham]

150K as sales walk away!!!!! ITs not making any money you will work for less than minimum wage guaranteed!! Got a spreadsheet somewhere from where was looking to open one will have a look for it buy £3k a week is low and achievable but you wont make anything, hence sale

 

[Clinton]

...my estimation is... £150K net profit

actually it was not £150K net profit, it was £150K as sales...

You were convinced it was £150K profit and I thought you were mad at the time.

Now you figure it's not profit, but turnover ... and you still want to go ahead with buying this business?!

You've got no clue about business or risk or buying businesses. Do yourself a favour and go find a job somewhere!

 

[houman1979]

Interesting thread. It has always struck me just how many fish and chip shops are always for sale on the business sites. That has to tell you that a lot of people in the game want to exit. It is definitely a job not a business, unless you have a very exceptional shop near the sea. I think fish and chips is probably less popular now compare to 20 years back.

Do you need to buy an established business, could you not kit one out for less money.
My advice with any business that is being considered, is to go and work in one for a couple of weeks. Dont let on you are looking to buy, and I bet you will learn lots about the business, including what the takings are each night. Would even help to learn suppliers, procedures, what works etc.

Honestly, in my area there are not many shops for sale (about three in the last six months). the fact that it is a job is applicable to all kind of similar businesses (small restaurants and cafes) and I think it is up to the owner's wisdom to create a system and establish a real business (i've seen people did it and they now have more than 5 branches).
About working for them I had this conversation and in my view it is useless with all due respect.

 

[Stedurham]

Theres a bloke up in north east that has over 100 fish and chip shops makes an amazing living, someone opened near him as he saw how busy it was. He offered to buy all the fixtures and fitting before he opened and let him walk away, he didn't accept this roll on 6 month and fish and chips was £3 from both, 3 month later he closed now hes back up to normal prices.
What do you know as im guessing you don't know how to buy gut fish etc, Get into a business you know about or enjoy

 

[houman1979]

You were convinced it was £150K profit and I thought you were mad at the time.

Now you figure it's not profit, but turnover ... and you still want to go ahead with buying this business?!

You've got no clue about business or risk or buying businesses. Do yourself a favour and go find a job somewhere!

I have never said £150K is net profit and that comments you mentioned was a typo. !! and so I dont know why you think I went mad!!! I am not stupid to dont know that a small shop cannot make £150K net profit.

Also, if you read my thread it was my main question that based on these figures these guys are wasting their time and they earn less than their own staff so why bother!!!! So I do not want to go ahead if these figures are real!

 

[The Byre]

I was in Air Studios in London and the owner, Richard Boote, said to me "The trouble with this place is, I can only sell it for 365 days a year. A studio ain't scaleable!"

The same applies to a chippy. But at least Richard was not the studio manager / engineer / cleaner / office staff / dog's-body: he runs the place as a business and has others doing these things. He also owns 'The Strongroom' studio and has other business interests.

With a small chippy, you are tied to the damn thing and you can't escape - unless you can find a sucker to buy it!

Get into a business you know about or enjoy

Bingo!

 

[houman1979]

I was in Air Studios in London and the owner, Richard Boote, said to me "The trouble with this place is, I can only sell it for 365 days a year. A studio ain't scaleable!"

The same applies to a chippy. But at least Richard was not the studio manager / engineer / cleaner / office staff / dog's-body: he runs the place as a business and has others doing these things. He also owns 'The Strongroom' studio and has other business interests.

With a small chippy, you are tied to the damn thing and you can't escape - unless you can find a sucker to buy it!

Bingo!

It is a wrong idea as you can create a real business and then open the next shops! As someone above said that he knows a guy owns many branches. It is a very difficult job but it is worth it. So, restaurants are scaleable if you can establish a system that works with the minimal supervision.

Knowing about an operation of a business does not help you too much and I know many people started businesses they did not have any idea and they were profitable.
Assuming I decide to work in a chippie. As a part time staff do I know about the costs? Will i be in touch with the suppliers, will I know about the marketing, rent/rate, legal, insurance, accounting, utility costs, will I know about the taking each night (occasionally I may know but most of the time no!). I will only know how to prepare a fish and operations. That could be learnt easily.

 

[Stedurham]

Anything is scaleable, but why spend 150k to start with it. You can have an amazing fish and chip shop for that and will cost considerably less than 150K. Mates got a restaurant been that busy he has opened up stairs up seats 40 and has had a kitchen installed, he bought kitchen equipment used but looks new cost for total upstairs 50K

 

[Stedurham]

Plus fish is probably one product that the price can drastically change, be very careful

 

[houman1979]

Anything is scaleable, but why spend 150k to start with it. You can have an amazing fish and chip shop for that and will cost considerably less than 150K. Mates got a restaurant been that busy he has opened up stairs up seats 40 and has had a kitchen installed, he bought kitchen equipment used but looks new cost for total upstairs 50K

the business sale price is about £90K and the business turnover is £150K. Thank you for your comments. Appreciated.

 

[Stedurham]

Look at his books if you are desperate to buy it, but don't forget the dreaded vat man that business will be about 85K a year to run lights insurances, rent one member of staff etc. Then you have to buy the fish, potatoes etc. Then pay yourself, wish you all the best

 

[Clinton]

I have never said £150K is net profit and that comments you mentioned was a typo. !!

What a load of pollocks.

Your OP quotes the vendor's claim of £150K in profit. You were told to not believe any old rubbish from the vendor. So you investigated this, did some research and posted later that your estimate of net profit is £150K.

... my estimation is that the business can sell around £350K per year (based on my sampling of number of the customers and menu prices in different dates and times) and so maybe £150K net profit ...

The net profit drops from £150K to a turtle disaster and you're still considering buying this pile of carp! There is no better definition of stark, raving OMC.

 

[Mark T Jones]

The challenge with all of these 'is XXX a good business to go into' threads is that they mostly ignore the critical fact - the main difference between good and bad comes in the way it's run, not in the business category - or as Bananarama would put: It ain't what you do, it's the way that you do it'

Start by asking yourself what business you are going in to. If the answer is fish & chips, then you are probably committing yourself to a life of long hours, spots and minimum wage. If, however you can se through the product and build a business which happens to operate around fish and chips, you could build a profitable business.

There are many people making good money from fish & chips - you almost certainly won't see them behind the counter (or indeed in the shop very often) - same goes for pubs, shops etc...

 

[alan1302]

Tthe main difference between good and bad comes in the way it's run,

And the even more important one...are the fish and chips any good...a lot of fish and chip shops struggle to make decent fish and chips.

 

[houman1979]

What a load of pollocks.

Your OP quotes the vendor's claim of £150K in profit. You were told to not believe any old rubbish from the vendor. So you investigated this, did some research and posted later that your estimate of net profit is £150K.



The net profit drops from £150K to a turtle disaster and you're still considering buying this pile of carp! There is no better definition of stark, raving OMC.

I am not going to have a row with someone who even does not bother to read the posts correctly. Also the OP was for three months ago and another shop. this is a new one Mr. intelligent. Even at that time I did not believe the claims otherwise why posting here?

 

[houman1979]

Look at his books if you are desperate to buy it, but don't forget the dreaded vat man that business will be about 85K a year to run lights insurances, rent one member of staff etc. Then you have to buy the fish, potatoes etc. Then pay yourself, wish you all the best

noted with thanks. Actually I am not desperate at all and after couple of viewings I am more suspicious.

 

[Stedurham]

Houman do you have excel theres a profit and loss spreadsheet on there than I use when looking at businesses, lets you cover all costs and give you an idea what it will need to do to make money. Run figures through and see where you come out im doing it for a pizza shop that a friend wants to sell me at the minute. Can send it over if you want to have a look

 

[houman1979]

The challenge with all of these 'is XXX a good business to go into' threads is that they mostly ignore the critical fact - the main difference between good and bad comes in the way it's run, not in the business category - or as Bananarama would put: It ain't what you do, it's the way that you do it'

Start by asking yourself what business you are going in to. If the answer is fish & chips, then you are probably committing yourself to a life of long hours, spots and minimum wage. If, however you can se through the product and build a business which happens to operate around fish and chips, you could build a profitable business.

There are many people making good money from fish & chips - you almost certainly won't see them behind the counter (or indeed in the shop very often) - same goes for pubs, shops etc...

As always I found your comments very wise and helpful. thanks

 

[houman1979]

Houman do you have excel theres a profit and loss spreadsheet on there than I use when looking at businesses, lets you cover all costs and give you an idea what it will need to do to make money. Run figures through and see where you come out im doing it for a pizza shop that a friend wants to sell me at the minute. Can send it over if you want to have a look

thank you very much. I have a similar thing and based on my figure and as you said at £150K sales it is rubbish (best case a breakeven). At £200K it starts making some money. It is the reason that I am becoming less interested.

 

[Stedurham]

For 90k theres better around and believe me reason mate is selling pizza shop is that it takes over your life. Do something you like or enjoy if you are in position with 90k to spend, always go for something you are good at or enjoy makes it way eassier

 

[Mark T Jones]

And the even more important one...are the fish and chips any good...a lot of fish and chip shops struggle to make decent fish and chips.

That really depends where you are pitching yourself. Also, definitions of 'good' can vary wildly.

What is critical in any F & B business, however is consistency. Consistently average will usually be better than varying from brilliant to poor.

 

[JpeeL]

For 90k theres better around and believe me reason mate is selling pizza shop is that it takes over your life. Do something you like or enjoy if you are in position with 90k to spend, always go for something you are good at or enjoy makes it way eassier

Yep they do take over your life, organising staff for them is a PITA, most pizza shop staff just see themselves as transient (drivers especially). Expect late calls ‘oh btw I can’t come in tonight (usually on a Friday or Saturday).

On top of the staff thing because of the sheer number of other places your constantly having to ‘reach out’ to people to compete. Our have 2 choices, go on just eat and get charged a fortune for it, or don’t go on just eat and have no customers because they don’t know you exist.

The income of ours is so touch and go atm that yes it literally takes over your life, honestly I’m not even sure what the end goal is rn. I have a decent chef there who I’m thinking once we get established I can rent the place to, but at best he has a patchy history with actually running a business.

 

[Stedurham]

Exactly why friend wants out, but ive always wanted to own one for some weird reason lol Think the money he's wanting its worth it but looking to partner with someone who will be there and not me
They aren't on just eat but were and now have own app that they give 10 percent discount on, way cheaper than what just eat were taking

 

[JpeeL]

Exactly why friend wants out, but ive always wanted to own one for some weird reason lol Think the money he's wanting its worth it but looking to partner with someone who will be there and not me
They aren't on just eat but were and now have own app that they give 10 percent discount on, way cheaper than what just eat were taking

That’s kind of what I did at first but I’ve ended up doing deliveries through the week haha. Obviously I have no idea of the figures of your place and it sounds like it’s established already so will take more than mine.

Just be aware a partner who does the work (basically a chef) will be wanting at least £400 p/w, so be mindful of what will be left over for you and wether it’s worth while for all the headache and commitment it comes with. I still haven’t took a wage from mine yet and I’m lucky that I don’t have rent to pay (family owned building).

I could have took a small wage but I prefer to put it back into the business so far and there is still plenty of stuff to set up and grow things, that’s whats keeping me going at the minute otherwise I’d have shut the door already!

 

[Stedurham]

Hi thanks for that its currently doing 4500-5500 a week, I think realistically I would bite bullet and use just eat etc to get it higher but as previous offer a 10% discount if they order direct through the shops app saves them 10% and delivery is cheaper. Would also look at facebook currently not on but do a free give away eaxh week and make up special offer that currently aren't done. Think could get it upto 7/8k a week easily as area is good and must admit cant fault food, I drive past 7/8 other for the chicken kebab lol. Just struggling to find the one to run it, some of his current staff would go I hope as they are exactly like you stated above and I haven't got time for people like that lol