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I'm interested along with 2 other friends in purchasing a small fast food outfit but we really don't know where to begin. I do understand that I will need to come up with a business plan/proposal for starters... if anyone can help me with this, I can get moving in the right direction.:)
There is much for you to learn. This sort of thing is often a much bigger deal than one in your position tends to realize. Before even beginning the steps of actually making it happen, you need to make sure that something like this is really and truly what you want to do; that your partners will be reliable, will do their share, and will live-up to their agreement with you; that you know how hard the work is, and how much of it there will be; that the work includes not just working in the business like any other employee, but also running it... making the tough decisions, putting-in the long hours, risking your personal assets -- which can sometimes include personal relationships with loved ones -- in order to make it happen. A great deal of thought and discernment about these things should be undertaken before taking the first tangible step. The problem can sometimes be that in the time it takes to think it through, someone else may snatch-up the business out from under your nose. So, obviously, you must act accordingly.
You're going to need some help... either that, or you're going to need to go out, in the very immediate future, and obtain in a short time the kind of knowledge that a business or management consultant, with years of experience, has. Such a consultant can guide and advise you, and I strongly recommend that you find one. As it happens, I am just such a consultant... been doing it for 30 years. And the first thing I will tell you is that you need someone like me. That person, in turn, will make sure that whatever other experts you'll need (like an accountant and a lawyer, for example, just for starters) will also be available to you.
Were I advising you, I'd first want to understand the situation completely, including why the business is for sale; what the owner knows about its future... and why he doesn't want to be around for it (and which he may or may not be fully disclosing to you)... that sort of thing. I'd also want to get the business appraised by someone who does business (not just real estate, but full business valuation) appraisals for a living, and who has a good track record in such things. In many cases, businesses are grossly over-valued; or there is some other not-always-obvious negative aspect that makes it not a good deal. Business is about money, first and foremost. Of course it's wonderful to love what you do for a living, but it's got to be about money first, or it's not really a business, by definitioin. And being a good businessperson means knowing how to make the tough money decisions... including a decision to forego purchasing the business at all if the numbers, and all other factors, just don't add-up. A full and comprehensive assessment of the situation is required. A lawyer will be needed for some of it, but an accountant will be needed for a great deal of this part of it. You'll need to obtain several years worth of the business's financial statements and have them reviewed by the accountant, in part to see if the business is really worth the asking price; and also to see what kind of a living you and your partners will be able to squeak out of it. Itemized expenses in financial statements can also alert you to problems on which the seller has had to spent money in order to deal with.
You'll also need to make sure you fully understand exactly what you're buying. Does the business own or rent the building it's in, for example; and, therefore, will you be buying both the business and the building, or just the business? That sort of thing will greatly affect the value of what you're purchasing; and if you're not also buying the building, could deprive you of the type of security which the bank may want in order to loan you the money.
If, after such due diligence, the business still seems to be worthy of purchase, and the price is right, then you need to sit down with your partners and come up with a good partnership agreement. Partnerships gone bad later on down the line is one of the biggest reasons that small business owners go belly-up, file bankruptcy, lose everything -- including, sometimes, their families -- and/or have heart attacks and/or strokes. A good lawyer, in concert with the management consultant, will be doing most of the heavy lifting during this part of things. And until the business is finally secured, the partnership agreement may have to be in two parts: One part describing how things will work during the acquisition process, and another part describing how they'll work once the business is finally owned by the three of you and you begin actual operations. There should also be a very clear pathway set forth in the partnership agreement for its ultimate dissolution; as well as contingencies if there is a catastrophe (eg, one or more of the partners dies, etc.).
Once everyone knows what their job is, and that the business is really worth what you're all going to be paying for it, then you'll need to figure out how you're going to get the money. This step may actually be the first step you'll want to take so that you won't waste your time on the other steps only to later learn that you can't get the money in any case. Most banks won't give you a definitive answer until you make formal application; and formal application will include all of the documents that all of the previous steps produce, plus the business plan that you earlier mentioned. But even before that, most bankers would be willing to sit down with the three of you, ask hard questions about your credit, your assets, the value of the business, its asking price, its potential (as you estimate it to be), etc.; and knowing all of these things the banker can probably tell you if there's even a chance, and how good of a chance it would be. Remember, too, that there are Small Business Administration (SBA) loans... for which potential new business owners are often not be eligible until a bank or two turns them down. There may also be grants from local business development agencies, etc. The consultant -- and often the banker -- can usually help you fully plumb those kinds of depths.
There's also the matter of the franchise, if one is even involved. If it's a mom-and-pop-owned fast food business, then there's no franchise to worry about. But if it's a part of a fast food chain, and it's franchised, then you'll probably need to be approved by the corporate headquarters of the brand. For example, if it's a Burger King you're thinking about buying, then you'll most likely need to approach Burger King's corporate franchise office in Miami and get approved as a franchisee. Something to watch for: Change of franchise ownership is often a time when a corporate franchise office will try to increase the franchise fee, or change other terms of the franchise agreement... some of which changes may make owning the business less attractive for you than it was for the seller.
Even if the business is independent, and mom-and-pop owned, and isn't franchised, there may be agreements between the business and others, and upon which the business relies, which may become in jeopardy if there is new ownership. For example, the seller may have negotiated exclusive rights with a vendor to sell a certain of the vendor's product in the seller's general geographic area. With your new ownership, the vendor may no longer want to honor that agreement. If the seller's business was not incorporated, you, as the new owner, may not be able to keep that agreement in full force and effect. The vendor may also take the opportunity to raise prices. You (or your management consultant, if you so authorize him/her) will need investigate and/or negotiate these things, and make sure that all of those kinds of I's are dotted and t's are crossed, too... most likely with the help of the attorney.
Then there's deciding precisely what the structure of the business will be (partnership, corporation, type of corporation, LLC, whatever); and there's insurance; making sure that the business isn't being tendered to you with liabilities (either real or potential) that you didn't foresee; etc. etc. etc. It can get very complicated... or, if not complicated, then at least complex.
As a small business owner, there is much for you to learn. A lot of it you can get from reading. Some of it you'll need to get from small business seminars or even college courses. Just staying one step ahead of the IRS can be a challenge. Running a business is way, way, way more work and complexity than merely working in it. You and your partners will need to be very careful -- both before you buy the business, and once you own it -- to avoid being one of the statistical majority of small businesses that fail in the first year of operation. Fortunately, there's lots of good help out there... just don't be afraid to ask for it... and to spend money on it.
If none of all that has scared you off, and if it all still seems worth it to you, then you may very well be about to embark on a new chapter in your life that could possibly bring you and your partners immense job satisfaction and maybe even riches. If you don't do appropriate due diligence, however, and make sure that all your I's are dotted and t's crossed, it could also bring you ruin and bankruptcy.
You need to do your homework, don't skip steps, be tough, and get some professional help.
The business I'm trying to purchase is located in a mall and it's owned buy a couple that I do know well enough. They want to sell because they want to move onto something else but she's going from $80,000 to $120,000.00. My two partners are cooks and are more than willing to come into this with me. Why she raised the price I do not know... this business is located in the busiest area of the mall and a lot of people do sit down and eat at the food court.Quote:
Originally Posted by verahead2005
Do you have the funds or are able to obtain the funds in order to purchase the business? That would be a starting place at least concerning a business plan.
Best for people to be taking things in small steps rather than overwhelming replies when answering questions.
You do have the professional resources from people on this site who would be willing to help you!
Thanks!
Also have you reviewed their books, what is their normal average gross income, what has been their net profit after expenses, what is the rental for the area. Just seeing a lot of people eating does not mean it is enough to pay the bills.
Also what is the actual value of what you are buying used equipment has little actual value, get a list of it, and go to several supply houses and see what the equipment is worth, beyond that you are buying their name, their customer base. And to be honest if there is a empty space you may be able to start allot cheaper
Starting any small business capital is required. You may want to ask franchise consultant for advice. It's not cheap to start a business. It will have to have financial plan one month, 6months, 12 months. So on... you can idea of your assests and liabilites.
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