Business for Sale, Would I Buy It? | Waterfront Tiki Bar and Restaurant

In today’s series of “Would I Buy This Business”, we’ve got an established waterfront restaurant with a Tiki bar. I have actually owned restaurants and I have a lot of restaurant experience in the past. The first thing I would tell you about owning a restaurant is it’s a ton of work. You’re running a food manufacturing business with a whole customer service component, as well. You’re making the food from scratch in the back and then you’re bringing it out and serving it to customers in the front. And there’s a lot of moving parts. There’s a lot of inventory to buy, food costs to manage, and there’s a lot of staff to manage. The only way I would probably get into the restaurant business again if I ever did, was if I had an idea or bought into a concept that had multiple locations and was something you could scale, like if I had the idea for Chipotle and I built the first one. And then I said “This is great. We could have 1,000 of these and then I had a team and they ran them and I never had to go into the restaurant after that except to get a meal.” But I wouldn’t want to ever be in a position again of having to be the day-to-day manager of a single restaurant. It’s just so much work. So for that reason alone, I wouldn’t particularly be interested in buying this one. 

But if a restaurant is up your alley, then let’s take a look at what this one is going for. Their asking price is 5,999,982 which is a pretty random number that they came up with. But it indicates that the real estate is 3 million of that. They’re basically asking six, the real estate’s worth three. It does look like a nice waterfront location although if it wasn’t a restaurant not sure what else you could do with it. Maybe turn it into a house. I don’t know how, I don’t know if the 3 million is really the right price for buying that property. But let’s take that off the table and say they’re asking 3 million for something that they’re saying cash flows 982,000 on $4 million in sales, that’s pretty decent for a restaurant. 25% profit margin is something you can be happy with for a restaurant. The gross revenue though is 4 0 0 0 0 0 0 which makes me think obviously they have rounded that from whatever the real number is. What is the real number and then how much of that is cash that they’re not reporting and other restaurant tricks? So then that makes you of course suspicious of the cash flow number.

If I wanted to get into the restaurant business and I wanted a higher-end one that would be a one-off concept this one might be worth looking at. A lot of times a location like this waterfront will always draw customers, whereas another restaurant down the street with maybe better food and better service but without the view won’t get nearly as much traffic just because people like to sit down and look out at a beautiful view while they’re eating. Even if the food’s not that great and the service isn’t that great. So there’s a lot to be said for restaurant location. But I want to investigate the numbers, I don’t have any faith in these super-round numbers. And if the real estate is included but I didn’t want the real estate and what’s the lease do to that price and so on. So there’d be a lot to look into on this.

Again I’m just not interested in getting into the restaurant business as a one-off again. The problem with a location like this, even let’s say the food was great the service was great, the location is really what makes it. You couldn’t take this concept and replicate it somewhere else because it wouldn’t have the same location. It’s really a one-off business opportunity. You’d have to decide you wanted to stay and be involved in and run or at least have good management in place but it could, it could be good. But I want to definitely look into it more and this one in particular is probably not for me.

Here’s a little about this series. CapForge’s owner and founder gives us a little behind-the-scenes on what a good or bad business would be. CapForge helps tons of clients either buy or sell business and Matt was a business broker before starting CapForge. Let’s look at some of these businesses for sale and see if Matt would be interested in buying them.