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Opening a Takeaway - what are the downsides?

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sands1967

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Jan 6, 2010
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Posting on behalf of a friend.

He's been asked if he's interested in taking over an established Greek takeaway. £10k down and £10k over 12 months, seems to be doing about £2,500 a week (not seen official accounts yet).

He doesn't have kitchen experience (other than he was a cook during his national service) but has worked for years front of house, he's very good with people. The current guy has offered to work alongside for a month.

We know how difficult catering is to make a living so not after comments about that but we're trying to pull together a real pro's and con's list. Long hours, difficult to take holidays versus better earning potential to where he is now, the opportunity to grow into a small chain...that sort of thing.

Location is key of course. The area is not great, it wouldn't be ripe for a premium product, in a better area he could add a deli and do fancier Greek offerings, 5 miles up the road has more affluent clientele but he would need double the initial investment at least. He could learn a lot here but at what cost?

For those of you that familiar with The Athenian (small chain in London) thats what it could be..
 
Kitchen experience makes a difference too. Orders have to be put together from different items and be ready at the same time.

All the figures need examining - and double checking. Its common enough in a small business for the owner to take little or no wage and have the profits as income. So a profit of say £20k a year is buying a job at maybe less than minimum wage for the hours needed.

And the price the owner wants to sell it at isn't necessarily the price the buyer will end up paying...
 
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As per the answers above, there are two key things that stand out.

1. Your friend has never run a takeaway, and is unlikely to be immediately brilliant at it - even with a month's overlap. During that time the turnover is mostly likely to drop.

2. Until they have seen the properly prepared accounts they are leaping into the total dark. A turnover of £2500 is not much if the net profit is 5%.

If the information to properly understand the figures is not made available then this is an extremely poor idea.
 
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Paul Norman said:
As per the answers above, there are two key things that stand out.

1. Your friend has never run a takeaway, and is unlikely to be immediately brilliant at it - even with a month's overlap. During that time the turnover is mostly likely to drop.

2. Until they have seen the properly prepared accounts they are leaping into the total dark. A turnover of £2500 is not much if the net profit is 5%.

If the information to properly understand the figures is not made available then this is an extremely poor idea.
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1) Fair point

2) Agreed, I'm told he has no issue in sharing them, that meeting hasn't been arranged yet (my friend is away atm) It will be interesting to see them.
 
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In my humble opinion, it takes a lot with just browsing the area and the market. Choosing partners is another type of pain in the neck. When my co-founder started running a catering business, I adviced him to find a company that "would do both" (considering the time of delivery and their quality). That was company and it's still my favourite credential to anybody concerned.
 
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kedgemor said:
In my humble opinion, it takes a lot with just browsing the area and the market. Choosing partners is another type of pain in the neck. When my co-founder started running a catering business, I adviced him to find a company that "would do both" (considering the time of delivery and their quality). That was company and it's still my favourite credential to anybody concerned.
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funny enough he's already muted getting a partner, another Greek guy he knows. I've suggested this is a bad idea, I've met far more partnerships that have fallen out with each other than not...
 
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As someone who has previously owned a Greek takeaway (we've moved onto a Greek restaurant), I would be very careful. You are basically buying a (very full-time) job. I think it's better to use this kind of business as a stepping stone to a larger more stable business rather than having it as a long-term plan. Find out the history of the businesses in the building, how long has this one been running? How long was the previous business running? Often there is a pattern of businesses opening for 3 to 4 years, struggling, closing, a new one opens etc... The food side is very important, if you're buying customers along with the business, they will not like change so you have to keep the standards up, as it only takes one bad experience to turn a customer away, even if they have been coming for years. And partnerships can be tricky, although it sounds like he needs the kitchen expertise brought in.

Be wary of accounts, they are extremely easy to be manipulated in this type of business. Maybe have a trial month working alongside it running now before committing to anything to see exactly how much money is really being made, costs etc.

The dreaded Brexit is also something to consider, the cost of importing authentic ingredients is extremely likely to rise and reduce margins further (something that is scaring the **** out of us just now!)
 
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sminter1st said:
As someone who has previously owned a Greek takeaway (we've moved onto a Greek restaurant), I would be very careful. You are basically buying a (very full-time) job. I think it's better to use this kind of business as a stepping stone to a larger more stable business rather than having it as a long-term plan. Find out the history of the businesses in the building, how long has this one been running? How long was the previous business running? Often there is a pattern of businesses opening for 3 to 4 years, struggling, closing, a new one opens etc... The food side is very important, if you're buying customers along with the business, they will not like change so you have to keep the standards up, as it only takes one bad experience to turn a customer away, even if they have been coming for years. And partnerships can be tricky, although it sounds like he needs the kitchen expertise brought in.

Be wary of accounts, they are extremely easy to be manipulated in this type of business. Maybe have a trial month working alongside it running now before committing to anything to see exactly how much money is really being made, costs etc.

The dreaded Brexit is also something to consider, the cost of importing authentic ingredients is extremely likely to rise and reduce margins further (something that is scaring the **** out of us just now!)
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That's the sort of response I was hoping for. Thank you so much for taking the time to respond. My gut feel is that's it's too big a risk with his background. I really love what the Athenian are doing so would love to see a small northern chain but yeah, Brexit is a worry. Thank you!
 
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Previously owned a restaurant/takeaway. Sold it because it dominated my entire life. I regularly had to work 85 hour weeks. If your friend has this vision that he will find these wonderful people to run the place without issue for him and he'll swan in and out at his pleasure then he'll be in for a nasty shock. Finding good staff capable of running the show in hospitality is rare. There is usually a high turnover of staff, people are lazy, self entitled "I don't work weekends...." and often thieves of time, your stock and sometimes even cash.

If your friend is serious and is willing to be VERY hands on then he will have the potential to make a really decent living. It won't make him rich though and he likely won't be able to step away from the business for long.
 
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Thanks for your input. No, he's a grafter and will put in the hours. I think he needs to consider whether he wants to or not. Will he make enough to justify the inevitable sacrifices, if not he might as well stay employed.
 
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Working a lot of hours myself I managed to keep 50-60% of my turnover. If he manages the same he should be pocketing around 1k a week. Nothing to to sneeze at but he'll be sacrificing a lot of freedom.
 
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He also needs to check out the terms on which the property is occupied. It may be that the landlord has just given the current tenant notice to quit, or the rent may be due to double in 6 months' time. If there's a written lease in place he needs to employ a solicitor to check its terms.

Bear in mind that the landlord will need to approve the transfer of the tenancy, and a solicitor will also probably be needed to deal with the licence to assign - the written permission from the landlord for your friend to take over the lease.

It would also be a good idea to speak to someone in the local planning department, so as to make sure there are no plans for local development that might affect the business, for example a new road that would divert customers away.

So far as taking on a partner is concerned he needs to remember the old adage, partnership is the only ship guaranteed to sink!
 
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The Byre said:
As Warren Buffett said "It is better to buy a good company at a fair price, than to buy a fair company at a good price."
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Having now been to see the property with him, this is incredibly apt. The location is poor meaning they are reliant on delivery. They use Just Eat so I didn't need him to tell me his margins are being decimated. It's only been open six months, I think it's simply up for sale because it's not making money.
 
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He also would need to take VAT into account when making his decision. Over the VAT threshold at £2,500 per week but not by much. Very little input VAT to reclaim normally as much of the purchases are zero rated. Of the £2,500 turnover he will be collecting weekly over £400 to be paid to the VATman
 
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