How to obtain cafe/restaurant premises only (not the business)

[Echelon_26]

Hello,

I'm looking into one well-placed cafe in my local town centre, but I do not want to buy the business.

The numbers given are as follows:

• annual turnover of £160,452
• gross profit of £82,247
• annual rates payable are £11,300
• rent at £480 per week
  
• staff: owner, 4 FT staff, 2 PT staff (a lot for a cafe!)
  
• 60 seats over 2 floors (30 seats per floor)
• Full Repair and Insure lease (FRI) which started in 2012 and is 12 years in length
• currently operating as a cafe only and closing daily at 6pm.

I have over a decade experience in the industry and have contacts that I can rely on and hire, including managers with a great track record. I'd be looking at extending the hours until about 8pm so that we can have 1-2 dinner seatings for the after work crowd.

My issue is I don't want the business, but the premises only and some F&F, and after a lot of research I still don't know how to go about it. Can you ask the agents to tell the owner to simply exercise their break away clause? What would be a reasonable proposition to the agents? I mean you can put any price on a lease, even £1, and if I don't want their business, can I offer a price for their FF and some stock only?

I'd go to the LL directly but after getting the title register I see it's a limited co that I can't find any contact details for.

Thank you in advance for any advice.

 

[Mr D]

If you don't want the business then what it produces won't matter much. Your turnover and profit will be different. You are wanting the assets and lease.

Have you talked to the owner of the business?

The landlord being a limited company - should have contact details on companies house? Write to the head office of the company.

 

[Newchodge]

If you take over the premises and trade as a cafe or restaurant, you are very likely to also take on the staff under TUPE. Is that what you are trying to avoid?

 

[Echelon_26]

If you don't want the business then what it produces won't matter much. Your turnover and profit will be different. You are wanting the assets and lease.

Have you talked to the owner of the business?

The landlord being a limited company - should have contact details on companies house? Write to the head office of the company.

Yes, my numbers would be different, but I wanted to see if the numbers posted sound reasonable for a cafe in town centre with a seating of 60. If the numbers are OK this is also an indication that hopefully as a restaurant we'd be making more.

I asked the agent what their breakdown was on the asking price so I can see what they want for the F&F, etc. but the agent advised ''we don't know, it's the first time somebody's asked that!''

I haven't talked to the owner yet. I'm looking into arranging the first viewing.

I have the address, but unable to find an email or contact number. Writing is a good idea, thank you.

 

[Echelon_26]

If you take over the premises and trade as a cafe or restaurant, you are very likely to also take on the staff under TUPE. Is that what you are trying to avoid?

I'm not taking over the business. I want the owner to exercise his break out clause and close down. I don't want their staff.

 

[Newchodge]

I'm not taking over the business. I want the owner to exercise his break out clause and close down. I don't want their staff.

I suggest you get proper legal advice!

 

[Mr D]

I'm not taking over the business. I want the owner to exercise his break out clause and close down. I don't want their staff.

Then get advice to see whether the staff are a factor.

 

[Clinton]

I'm not taking over the business. I want the owner to exercise his break out clause and close down. I don't want their staff.

This suggests you've no idea what you're doing.

Even if the owner closes down you could end up liable for paying his staff redundancy.

It may sound crazy, but them's the rules.

Which is why people like you should go get expert advice on matters like these rather than asking in UKBF. I put a thread together yesterday that you may find useful: JTOG.

 

[Energise Accounting]

looking at your post the wage bill will pretty much eliminate any profit.

3 fulltime staff @ 8.21 @= £48,028
2 partime staff say a total of 30hours @8.21 = 12807
Rent £24960
Rates £11300
Total costs £97,095

You are running at a £14,800 loss based on your figures, I have not included all the costs or a wage for yourself.

 

[Mr D]

looking at your post the wage bill will pretty much eliminate any profit.

4 fulltime staff @ 8.21 = 150 hours @ 8.21= £64038
2 partime staff say a total of 30hours @8.21 = 12807
Rent £24960
Rates £11300
Total costs £113,105

You are running at a £30,850 loss before you start. Looking at your figures there is no way the staff are included in the cost of sales.

I have not even included all the costs

Yes, employers NI and pension payments all come into it too.
To be honest I'm surprised with 60 seats over 2 floors they have so few staff. Unless of course the staff are separate number to the owners who also work there.

 

[ecommerce84]

Have you ran your own cafe/restaurant in the past or has it involved working for others.

It’s VERY different doing it for yourself dispute how much you think it won’t be.

4 + 2 staff doesn’t seem overkill for that level of turnover, especially as I assume that figure is ex VAT.

We often see threads where sellers have very ambitious asking prices, much of which is goodwill, which the seller will be hoping to get as much of as possible.

Short of the business going pop or the landlord serving notice I highly doubt the seller will sell up easily without the goodwill completely. Especially if they’ve had one of @Clinton ‘favourite’ business brokers advising them.

As others have said TUPE would be something that you need to understand as it would almost certainly affect you if you were to be successful with the takeover.

 

[The Byre]

This thread is seriously funny!

Even the sales agents are admitting that the place is running at a massive loss - but our OP hasn't spotted it! The magic words "Turnover £160k" and then adding fixed costs of £36,260 and then four FT staff and two PT staff (about £80k all-in, inc. payroll taxes and costs) and any sensible person has to add about £10k for utilities, equipment and F&F repairs and other costs - making a grand total of £126k in costs WITHOUT any food & drink costs!

If you can get the customers to mime the acts of eating and drinking, then you almost have a profitable business!

And as others have pointed out, TUPE laws apply, regardless of how you structure a take-over.

 

[Mr D]

This thread is seriously funny!

Even the sales agents are admitting that the place is running at a massive loss - but our OP hasn't spotted it! The magic words "Turnover £160k" and then adding fixed costs of £36,260 and then four FT staff and two PT staff (about £80k all-in, inc. payroll taxes and costs) and any sensible person has to add about £10k for utilities, equipment and F&F repairs and other costs - making a grand total of £126k in costs WITHOUT any food & drink costs!

If you can get the customers to mime the acts of eating and drinking, then you almost have a profitable business!

And as others have pointed out, TUPE laws apply, regardless of how you structure a take-over.

Unless OP is using a different idea of gross profit...

 

[Energise Accounting]

The G.P% is 10 to 15% lower than it should be. Even with those adjustments you would still be loosing money.

 

[ecommerce84]

Yes, GP is too low - ours is running at 71% and I consider that to be too low!

The listing was easy enough to find: one thing that did jump out at me was it is 4 FT and 2 PT staff in addition to the owner who also works full time - so it’s 5+2 and no doubt the owner is working long hours.

And the reason for sale is listed as:

“This opportunity is available due to our clients other business interests.”

Translation: the business is losing money someone take it off my hands.

Offers of £70k! No ta.

 

[Mr D]

Yes, GP is too low - ours is running at 71% and I consider that to be too low!

The listing was easy enough to find: one thing that did jump out at me was it is 4 FT and 2 PT staff in addition to the owner who also works full time - so it’s 5+2 and no doubt the owner is working long hours.

And the reason for sale is listed as:

“This opportunity is available due to our clients other business interests.”

Translation: the business is losing money someone take it off my hands.

Offers of £70k! No ta.

And a manager, who of course will be working reasonable hours, can be afforded with of course new staff and lower number of staff.

The few café owners I have known over the years have tended to work longer hours than the staff when starting out, until business could afford for them not to.

 

[mekondelta]

Article in Grauniad, cant post link, about large increase in restaurant and cafes. 25% increase from last year. Im always amazed how many there are and how they manage to survive.

 

[Mr D]

Article in Grauniad, cant post link, about large increase in restaurant and cafes. 25% increase from last year. Im always amazed how many there are and how they manage to survive.

Many do not survive.
They open up, they attract some business, not enough to pay the bills, close business. Can be as little as 3 months for all that.

 

[fisicx]

Many do not survive.
They open up, they attract some business, not enough to pay the bills, close business. Can be as little as 3 months for all that.

There was one locally that didn't last a month.

And lots of restaurants go bust once a year only to be resurrected by their brother a few weeks later. It's almost as if there is some sort of tax fraud going on...

 

[mekondelta]

A friend of a friend lost her house to the folly of opening a city centre cafe. Seems like a nice idea i suppose. Ive worked in a few catering establishments and not quite sure what the draw is.

 

[Mr D]

A friend of a friend lost her house to the folly of opening a city centre cafe. Seems like a nice idea i suppose. Ive worked in a few catering establishments and not quite sure what the draw is.

Some who have never had a business appear to think that being their own boss and making their own hours is easier.
Employment, working for someone else, gets a lot of stick. It is however a lot easier...

 

[Opinion87]

Had an ex-alcoholic open a non-alcoholic bar near me recently. Two months later they were crowd funding to stay open. A month later they closed.

Who'd have thought it.

 

[Echelon_26]

Hi everyone,

Thank you to all who replied and pointed out all the''inconsistencies''.

Yes, I copy/pasted the details so the listing is very easy to find And just to confirm, I've been self-employed before (although not running a cafe) and I've worked in restaurants for over 10 years and have reliable contacts, from very good managers to very good waiters. Kitchen staff is a pain however, as we all know. I know what it is to work 60-80 hour weeks, I know what it is to re-stock your bar at 4am. I am very familiar with this industry. I also have experience negotiating with suppliers and planning training for staff. My basics are there.

My lack of knowledge is in the legal area and around how to go about ''acquiring'' a business. Anyhow, I am very aware these businesses are advised by agents who want their cut as well, but I wonder how can you present these numbers in a way that is totally misleading? It doesn't look like any accountant is working on having proper books for this cafe!

I'll keep an eye on this listing anyway, as the location is quite good. I want to see what they decide to do.

Thank you all again for your very useful contributions.

 

[Echelon_26]

We often see threads where sellers have very ambitious asking prices, much of which is goodwill, which the seller will be hoping to get as much of as possible.

Short of the business going pop or the landlord serving notice I highly doubt the seller will sell up easily without the goodwill completely. Especially if they’ve had one of @Clinton ‘favourite’ business brokers advising them.

As others have said TUPE would be something that you need to understand as it would almost certainly affect you if you were to be successful with the takeover.

Thank you for this!

 

[Clinton]

My lack of knowledge is in the legal area and around how to go about ''acquiring'' a business.

Oh, is that all? That's super easy!

Like brain surgery: Just cut open the skull, get to brain, move bits around, put everything back together. Piece of cake.

So you just have to find the right business, do due diligence, negotiate the best price, arrange the finance, draw up legal contracts etc. Nothing to it.

Some people charge £2K - £3k a month just for the first bit - deal sourcing ie. to find you the right target businesses to approach. What a joke! Don't waste time or money on them. You're smart enough to find targets. Hey, you found this gem yourself, didn't you?!

Similarly, you don't want to end up paying agents and accountants and lawyers. That's for the birds.

Anyhow, I am very aware these businesses are advised by agents who want their cut as well..

I'm not a big fan of the business brokers operating at this bottom end of the market, but let me get this right: you found this business through the agent's marketing effort and now want to cut the agent out of the fees he would normally earn for the sale?

I wonder how can you present these numbers in a way that is totally misleading?

You can't. If there are numbers there, then they are 100%. Always. Just trust them! Forensic accountants exist only because McDonalds didn't need any more burger flipping staff. They don't actually do anything.

This is too small a deal to put together a whole team of advisors. But, and I repeat my earlier advice, go get at least one - a good solicitor who specialises in these small deals.