Restaurants for sale are priced based on purchasing one of two things. You’re buying assets of restaurants for sale in Atlanta or you’re buying cash flow.
In an asset sale the owner is already taking a beating. He’s getting 20 to 30 cents on the dollar of the initial build out. That means the guy selling to you has sunk $250,000 into or a place and is letting it go for $50,000 to $75,000. He’s not too interested in your opinions about why he’s failing. He wants to hand you the equipment list and move on. Sellers can get a little touchy about requests from restaurant brokers for P&L’s and tax returns when he’s going to be putting his kid’s college fund into paying off his debt.
Is it worth it to take the plunge for nothing but assets? You bet. If you were going to put together a restaurant from the ground up, the expenses add up quickly. Consider a grease trap is $12,000 to $15,000, a hood with an Ansul system runs $1000 per linear foot, equipment for the kitchen $20,000 plus, plus, plus and you’re already at nearly $50,000 before you’ve bought the labor to install it all.
Installing the electric and plumbing for the kitchen equipment is the pricey part. One restaurant tenant in Buckhead recently told us his electric work was going to be more than $40,000. All these costs are before you consider refrigeration and the front of the house. Start pricing POS systems, small wares, tables, and chairs and you begin to see asset sales are great deals on restaurants for sale in Atlanta.
It is reasonable to expect to get a complete equipment list. A restaurant buyer should also conduct an inspection and see what condition the restaurant is in. Beyond that, it’s not realistic to pursue the seller detailed profit and loss statements. His concept obviously failed. Your new one may be just what the neighborhood needs.
Restaurants for sale in Atlanta or other major markets priced for assets are great deals. You can pick up a “fixer upper” for as little as $75,000 and get a fully equipped, open and operating restaurant with a sales base. Then change it to a winning concept and count the dollars.
Our next article in this series will focus on what to expect in documentation for restaurants that sell for cash flow. The answers may surprise you.