Fish and Chips

Discussion in 'General Business Forum' started by houman1979, Jan 8, 2019.

  1. houman1979

    houman1979 UKBF Regular Free Member

    135 5
    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?
     
    Posted: Jan 8, 2019 By: houman1979 Member since: Apr 3, 2010
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  2. Mr D

    Mr D UKBF Legend Free Member

    13,174 1,441
    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.
     
    Posted: Jan 8, 2019 By: Mr D Member since: Feb 12, 2017
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  3. Mark T Jones

    Mark T Jones UKBF Ace Full Member

    2,813 800
    ‘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.
     
    Posted: Jan 8, 2019 By: Mark T Jones Member since: Nov 4, 2015
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  4. The Byre

    The Byre UKBF Ace Free Member

    8,210 3,183
    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!
     
    Posted: Jan 8, 2019 By: The Byre Member since: Aug 13, 2013
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  5. houman1979

    houman1979 UKBF Regular Free Member

    135 5
    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.
     
    Posted: Jan 8, 2019 By: houman1979 Member since: Apr 3, 2010
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  6. Mark T Jones

    Mark T Jones UKBF Ace Full Member

    2,813 800
    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.
     
    Posted: Jan 8, 2019 By: Mark T Jones Member since: Nov 4, 2015
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  7. Mr D

    Mr D UKBF Legend Free Member

    13,174 1,441
    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.
     
    Posted: Jan 8, 2019 By: Mr D Member since: Feb 12, 2017
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  8. houman1979

    houman1979 UKBF Regular Free Member

    135 5
    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.
     
    Posted: Jan 8, 2019 By: houman1979 Member since: Apr 3, 2010
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  9. Mr D

    Mr D UKBF Legend Free Member

    13,174 1,441
    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.
     
    Posted: Jan 8, 2019 By: Mr D Member since: Feb 12, 2017
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  10. houman1979

    houman1979 UKBF Regular Free Member

    135 5
    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.
     
    Posted: Apr 17, 2019 at 10:02 AM By: houman1979 Member since: Apr 3, 2010
    #10
  11. Stedurham

    Stedurham UKBF Regular Free Member

    250 36
    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
     
    Posted: Apr 17, 2019 at 10:14 AM By: Stedurham Member since: May 11, 2018
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  12. houman1979

    houman1979 UKBF Regular Free Member

    135 5
    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.
     
    Posted: Apr 17, 2019 at 10:24 AM By: houman1979 Member since: Apr 3, 2010
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  13. Stedurham

    Stedurham UKBF Regular Free Member

    250 36
    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
     
    Posted: Apr 17, 2019 at 10:31 AM By: Stedurham Member since: May 11, 2018
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  14. houman1979

    houman1979 UKBF Regular Free Member

    135 5
    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.
     
    Posted: Apr 17, 2019 at 10:36 AM By: houman1979 Member since: Apr 3, 2010
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  15. james_77

    james_77 UKBF Newcomer Free Member

    25 4
    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.
     
    Posted: Apr 17, 2019 at 11:01 AM By: james_77 Member since: Aug 10, 2015
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  16. Stedurham

    Stedurham UKBF Regular Free Member

    250 36
    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
     
    Posted: Apr 17, 2019 at 11:06 AM By: Stedurham Member since: May 11, 2018
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  17. Clinton

    Clinton UKBF Big Shot Full Member

    3,851 1,315
    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!
     
    Posted: Apr 17, 2019 at 11:08 AM By: Clinton Member since: Jan 17, 2010
    #17
  18. houman1979

    houman1979 UKBF Regular Free Member

    135 5
    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.
     
    Posted: Apr 17, 2019 at 11:08 AM By: houman1979 Member since: Apr 3, 2010
    #18
  19. Stedurham

    Stedurham UKBF Regular Free Member

    250 36
    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
     
    Posted: Apr 17, 2019 at 11:13 AM By: Stedurham Member since: May 11, 2018
    #19
  20. houman1979

    houman1979 UKBF Regular Free Member

    135 5
    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!
     
    Posted: Apr 17, 2019 at 11:39 AM By: houman1979 Member since: Apr 3, 2010
    #20