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Business goodwill

Discussion in 'General Business Forum' started by Suepy, Jul 13, 2018.

  1. Suepy

    Suepy UKBF Newcomer Free Member

    1 0
    Hi
    I am in the final stages of purchasing a restaurant. Exchange in next few weeks.
    My pension is buying the freehold and I am buying the goodwill which is £110000
    It’s a busy restaurant.
    The manager has opened somewhere nearby
    And I have a feeling as soon as we complete the staff will go to him!
    This week it was closed for two days. The owner lives away and said he has staffing problems and couldnt come back to run it himself.
    Do I have any recourse to get goodwill money back if it closes for any reason between exchange and completion?
    If so how easy is this and would it be so costly to pursue it wouldn’t be worth it?
    I’m so far down the line with buying and I do want the restaurant but hate to feel I’m being treated unfairly.
    Anything similar happened to anyone?
     
    Posted: Jul 13, 2018 By: Suepy Member since: Jul 13, 2018
    #1
  2. Mark T Jones

    Mark T Jones UKBF Enthusiast Free Member

    2,129 575
    The answer to your question will lie in the contract - though it's pretty unlikely to be there if you haven't specifically included it

    This is a significant sum, and you need to address it before you exchange! Particularly as you are paying for a customer base which he clearly intends to poach!
     
    Posted: Jul 13, 2018 By: Mark T Jones Member since: Nov 4, 2015
    #2
  3. fisicx

    fisicx It's Major Clanger! Staff Member

    29,200 8,617
    Don't complete. The goodwill is worth zero if you end up with an empty restaurant. The very fact the manager has gone suggests there are already problems with the deal.

    How did he come to a valuation of £110,000? That's a huge amount of money.

    A local restaurant changed hands last year and has now closed because all the old customers liked the old owners and decided to eat elsewhere.
     
    Posted: Jul 13, 2018 By: fisicx Member since: Sep 12, 2006
    #3
  4. Ian J

    Ian J Factoring Specialist Full Member - Verified Business

    4,724 1,321
    I would strongly urge you to think about backing out. Your £100,000 goodwill could end up being worthless if the manager takes all of your customers away.

    I was in the restaurant business 30 years ago in Newcastle Upon Tyne and watched as "them what dine" moved from restaurant to restaurant every few months driven by new places opening up and chefs relocating so I would warn you to be very wary unless you have something that the existing and new customer base might want more than the existing manager will offer in his new place
     
    Posted: Jul 13, 2018 By: Ian J Member since: Nov 6, 2004
    #4
  5. Clearaccy

    Clearaccy UKBF Contributor Free Member

    95 13
    It completely depends on the contract. Have you taken any advice before throwing in the offer?
     
    Posted: Jul 13, 2018 By: Clearaccy Member since: Apr 11, 2017
    #5
  6. estwig

    estwig UKBF Legend Full Member

    11,860 4,105
    If you feel you are being treated unfairly, listen to what you are telling yourself.
     
    Posted: Jul 13, 2018 By: estwig Member since: Sep 29, 2006
    #6
  7. Mark T Jones

    Mark T Jones UKBF Enthusiast Free Member

    2,129 575
    You seldom see quite such consistent responses on here. Take note!!
     
    Posted: Jul 13, 2018 By: Mark T Jones Member since: Nov 4, 2015
    #7
  8. Socio South West

    Socio South West UKBF Enthusiast Free Member

    748 184
    The goodwill of a restaurant depends on what is served.... it is very easy to kill the goodwill of the restaurant business - just watch what happens when a restaurant gets negative publicity.
    The value of the goodwill for the restaurant as it stands is being seriously diminished by the manager opening locally - I would almost say trashed....... and if, as you suspect, there is a good degree of staff loyalty to this manager - that is part and parcel of the goodwill: You shouldn't have to start again with a new team.

    You don't give the size of the restaurant, but I would be thinking that a six figure sum for goodwill would only be appropriate for a sizeable restaurant in a busy tourist area.

    Like others, I would urge you to take another look at this deal before you commit irrevocably.
     
    Posted: Jul 13, 2018 By: Socio South West Member since: Mar 24, 2013
    #8
  9. Stedurham

    Stedurham UKBF Regular Free Member

    148 15
    Realistically you are buying a business that is successful and mainly down to current staff and manager. Now you don't have the manager and im guessing most of the staff will leave. Manager will have been mentioning it to all customer who will no doubt give new place a try and if manager is any good they wont come back to your place after being their. Just my opinion you might aswell get an empty place and start from scratch as its basically what your going to end up doing
     
    Posted: Jul 13, 2018 By: Stedurham Member since: May 11, 2018
    #9
  10. DavidWH

    DavidWH UKBF Enthusiast Free Member

    1,138 190
    No chance I'd be handing over that sum of money, when the current owner plans to open up again.

    You may be able to negotiate a staged payment for goodwill, if certain criteria are met over a period of time... but I suspect they wont like that option.
     
    Posted: Jul 13, 2018 By: DavidWH Member since: Feb 15, 2011
    #10
  11. KAC

    KAC UKBF Enthusiast Free Member

    932 205
    This does not sound a sensible purchase. If you haven't exchanged yet, DON'T
     
    Posted: Jul 13, 2018 By: KAC Member since: May 7, 2017
    #11
  12. Stedurham

    Stedurham UKBF Regular Free Member

    148 15
    Walk away while you can
     
    Posted: Jul 13, 2018 By: Stedurham Member since: May 11, 2018
    #12
  13. Agarwood

    Agarwood UKBF Contributor Free Member

    39 4
    Its very difficult when these types of businesses are often emotional businesses.

    Its a big amount for goodwill - but it really depends on your ability to make a go of it and competing offers on the table.

    The current manager leaving and staffing issues are a worry - and certainly would make me revalue the goodwill.

    Its difficult though if the owner has a figure in mind and wont sell - sometimes in spite of the facts.

    Maybe offer the goodwill on a drip basis - might be better for the owner tax wise as well.
     
    Posted: Jul 13, 2018 By: Agarwood Member since: Jun 28, 2018
    #13
  14. fisicx

    fisicx It's Major Clanger! Staff Member

    29,200 8,617
    The trouble is:
    Which looks like they have already made a decision and are now looking for a get out clause. And we all know that's just not going to happen. They are going to lose that £110,000.
     
    Posted: Jul 13, 2018 By: fisicx Member since: Sep 12, 2006
    #14
  15. The Byre

    The Byre UKBF Ace Free Member

    7,500 2,911
    Read through this lot BEFORE you do anything!

    http://ukbusinessbrokers.com/gallery/

    You can bet you bottom dollar, you will have paid £110k for an empty building.

    If it is an open-ended contract with no guarantees and no hand-over period, the answer is 'None whatsoever!'

    Never fall in love with the dream of running a business!

    And I do hope that you have years of experience in the restaurant trade. Without deep experience, you will be taken to the cleaners by staff, suppliers and anybody and everybody else! It is not a business for the faint-of-heart!

    The only person who is making a monkey out of you and cheating you out of a large sum of money - is you.
     
    Last edited: Jul 13, 2018
    Posted: Jul 13, 2018 By: The Byre Member since: Aug 13, 2013
    #15
  16. KAC

    KAC UKBF Enthusiast Free Member

    932 205
    Hopefully not ....
     
    Posted: Jul 13, 2018 By: KAC Member since: May 7, 2017
    #16