The rule of thumb, is that there is no rule of thumb. There are many variables in the purchase of such an entity as a bar or restaurant. Especially when there is no Real Estate involved. One of the most important is the fact that "one offs" typically base their success on loyalty to the proprietor. Not a methodology used by appraisers, but a very real impact. Also, one offs have a tendency to "hide" profits. This will not give you a very good multiplier, and if they give you the,..we do much better than the books indicate...wink, wink. walk away. You may never realize similar numbers based on speculation. 2x's earnings, and a very clear understanding of expenses.(theft,broken plates, glasses,etc. can really add up) FF&E has more inherent depreciation than a used automobile, ...unless it is high end. Still, based on age and condition....anything over 5 yrs isn't worth more than 25% of the original cost. That include kitchen equipment as well. Also, the LEASE,..in order to make a real go of a business you will need at least a 10 yr. lease with options. If there are no options on the current lease, be sure that an acceptable lease is a contingency. Stock and food items will be inspected as well by the Health Dept. What you think you can keep,...may not be the case. Any food or liquors that are rejected must be credited by way of reduction in price or check. Be sure and do a search of any activity on the books at Planning & Zoning.. don't want to buy a business where the block may undergoing drastic changes. As you are interested in the establishment,...you quite possibly a patron,... ask yourself objectively....Is this highest and best use of my investment dollars in this economy... Most of the time "One Offs" are on the market because they didn't "Pay Off"
Oct 23, 2014