What is the rule of thum in buying or leasing a resturant business

In General Area - Asked by Darioush K. - Feb 2, 2010
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Charles R.
Fort Myers, FL

I am not sure what the question pertains to but if it is how much you should pay for an exhisting restaurant, then you must go buy the actual net cash flow reported and don't take a sellers word on how much cash is taken in and not reported. if the P& L statement shows no net cash flow, then it would be an asset only sell. Also, good demographics, business plan, experience, food value must match the demographics, and location, location, location. If you lease for 3 yrs or more, make sure you have a kick out clause after 1.5 yrs so that you have an opportunity to renegotiate your lease payments just in case the numbers don't come up to your expectations. Hope this helps, don't have a lot to go on.

Feb 3, 2010
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Jim M.
Charlotte, NC

In today's market you shouldn't pay any more than 2 to 2/12 times discretionary cash flow produced by the business, this after doing all of your homework re all other aspects of the business, ie location, lease, sales trends, cost of sales, labor costs etc etc. Everything!
Jim McAuliffe
NMKT Commercial

Feb 3, 2010
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