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Thread: Questions to ask when buying a bar..

  1. #1
    Join Date
    Mar 2007
    Location
    Denver
    Posts
    1

    Questions to ask when buying a bar..

    Hey everyone...This is my first official post, so please be gentle on me.

    Finally after 3 years of looking I found a bar/venue that I am interested in purchasing. I considered the new buildout route but it's hard to find locations willing to accept a bar and even harder to get a caberet license.

    I found a place that has everything I want. It has a music stage, it has a good size kitchen, and it has 2 amazing patios. It's in a nice section of town that is growing fast, it even just got it's new hip lable, as bars and restaurants continue to open and flourish in the neighborhood. Plus there are 2,000 Urban condos going in 3 blocks away.

    The one thing it doesn't have is a lot of profits, however it's easy to see why. The place is totally mis-managed if managed at all. The owner bought the place because he loves music, he put some money in to fix it up and then stopped there. He shows up once a week and does nothing to improve the place or advertise for it. The bartender is leaving the bar to cook food, there patio is not open during the day on the weekend when tons of foot traffic goes by and I'd imagine the employees are stealing or giving away fifty cents on the dollar. Even with all that there is still a pretty consistant crowd.

    Now comes my job, the place needs a manager to come in, be there 14 hours a day, 7 days a week and start kicking some ass.

    This weekend I'm going through to do a detailed inspection before I make an offer. What questions do I need to ask and what should I be on the look out for? I've worked at bars so I know who to get a beer out of a cooler but it's never been my responsibility to pay for their repairs, so I need to look at things in a whole new way. I'm getting a copy of the lease, as much information as I can on the equipment, etc etc. What else do I need to know?

    Any suggestions would be appreciated. Than ks

  2. #2
    Join Date
    Dec 2005
    Location
    RENO, NEVADA
    Posts
    8
    ive been looking for a spot as well...though my issue is captial...

    anyway...some stuff id like to know about regarding a property...

    lease terms...avg electric bills...pending lawsuits...police records/history regarding the place(robberies/stabbings/shootings/drug busts etc...number of parking spots available...how the neighboring bussiness feel about the existing club...testing of all the plumbing and machinery and electrical...

    id have a lawyer on hand as well...to guide u through most of this...

    other than the terms/costs...i hope youve got a good practical idea concering what type of venue u want to create and how ur goin to do it...

    so easy to think u can make a place better...but not so easy to "rebound" a venue as it is to "recreate" one...good luck, ABear

  3. #3
    Join Date
    Aug 2006
    Location
    Milwaukee, WI
    Posts
    27
    Once u are at the point were you are seriously considering the place, have a licensed heating/AC place go over the HVAC, a licensed electrician look at the electrical, a plumber look at the plumbing etc etc etc. The existing owner will probably tell you everything is working great. NEVER TRUST THEM!!!

    I've seen too many new owners screwed, hard, because they trusted the previous owner and never had the building systems inspected. Now they are paying for costly repairs for things they thought were in good working condition.

  4. #4
    Join Date
    Feb 2007
    Location
    Tampa bay
    Posts
    40
    Here is a very important exercise: Go drink at the bar with a friend (who is NOT a big mouth). Do not talk to any employees, just pose as a customer.

    Observe who's doing what. See how many people are there. Watch and see if the bartender really is giving away the bar, or stealing. See how efficient service is. Do the bartenders bus and wipe tables? Does the bar back hustle? Does the bartending staff sell specialty drinks?

    Or is the place grossly mis-managed?

    Next: the P&L statements. See what sales he's doing monthly, then ask for Z tape to back up the numbers.

    Next: Ask to see supplier invoices. If they say they don't have them, RED FLAG. Every bar owner has these, the ATF will demand to see them if you get raided. Figure out his cost % for alcohol cost of goods (cogs).

    Next: Ask for a copy of last months utility bill. Ask what weekly payroll is. Find out what other expenses he has for the bar. Cleaning crews, advertising, etc etc. Then take the total sales and figure out roughly what he is (or is not) making per month. In my opinion, you should only buy the place if it is currently covering his bills and is a break even- or better.

    Why? Because unless you are an experienced bar operator (which you are not) then the initial learning curve may be steep, and you may lose your ass. See what areas can be improved and provide for them.

    During the meeting with the owner, here are some questions to ask the owner:

    1. are you the sole owner? If not, what role do your partner/s play in the business?

    2. What employees will be staying? Any key managers or bartenders (that have a huge following?)

    3. Equipment: Get the year everything was put in. Ask if he's recently had equipment serviced. Once he agrees his equipment isn't "cream puff" he will LOWER the price of the business, because the assets are not worth what you'd buy them for new! FF&E (furniture fixtures and equipment) are always worth far less than the owner will state. With that in mind, remember that owners and business brokers will tell you that if you were to "build everything from scratch" it'd cost $300k+. NOT TRUE! assets are devaluing by the day, and just because he sunk $300k into the business DOES NOT mean he can recoup that investment when he sells.

    4. What is his average work week? Why does he want to get out of this business? (he'll be prepared for this one)

    5. Poke around and keep your ears open. Is the owner considered "Shady" or a mob type. If so, RUN FAR AWAY. You do NOT want to buy a business from a shady character, trust me. People love to hear themselves talk, so mention the club and say you were in there. Then shut up and let other people fill in the blanks. DO NOT blab that you are going to buy the place to anyone.

    6. Ask the owner what theft prevention measures he has in place; liquor control auditors like Bevinco, cameras, manual weighing of inventory, etc. If he has NOTHING in place, the bar is being mismanaged.

    7. Ask him if he's willing to provide register Z tape, invoices, P&L's, tax returns etc. If he's not cooperative, run.

    8. IMPORTANT! your lease and landlord are a very crucial component in your success! if the landlord is a jerk and the lease is horribly one sided, i'd reevaluate first if not run. Make sure you'll get two 5 year options on the lease. Ask for a copy of his current lease. Ask lots of questions about the landlord and any past, current, etc pending litigation against him.

    9. Ask if they've ever been robbed. Then stay silent. He may know that you already know he has been. In other words, he may figure you know about the 'robbery' and blab all the details. Find out the how and when's of this.

    10. ASk him go into detail about his marketing plan. If he says he "doesn't have one" ask him why not. If he says "I think it is a waste of money most of the time" then you've got yourself a scrooge who is mis-managing the business.

    11. Ask him about bartender and employee turnover. Bartenders are a crucial element to a bar's success.

    12. Ask him if he were to keep the club, what he'd do with it.

    13. Get all the facts, ask questions, and DO NOT LOOK EXCITED about the business in front of the owner or broker! Act like you are an emotionless party that is giving THEM the chance to sell you on their business. If they see you are excited, the price isn't going to budge much when it comes to negotiating.

    14. WATCH OUT for the "Hidden money game" The hidden money game is where the owner will imply or outright say that there is 'a ton of money cash that is off the books'. If you can't see it, YOU CAN NOT PAY FOR IT. It is not your fault he didn't pay taxes or keep good records. Owners often try to play the 'hidden money' game to pump up their SDC (owners benefit)

  5. #5
    Join Date
    Oct 2004
    Location
    california
    Posts
    252

    1st

    Its been a lil while, been busy with business.. Thought about seeing whats been going on in here... Really everything that has been posted is all great stuff... But honestly what you need to do is go to ABC an check the LIC. an make sure it does not have any bad marks. You dont want to buy something that could be on the verge of loseing its LIC. I am not saying it is but just check. I had a friend buy a place an ask questions but not do the home work. Well what he found out after he cut the check. Was that ABC was ready to take the LIC. away. So to save him self an his money he worked out a few things with them. The big problem though, the place has a hip-hop crowd, an ABC said he can only play hip-hop once a week!!! Because of all the problems the place would have.. Believe it or not the place aint doing very well. Because on the weekends he has to play other music maybe a lil song here an there. So he doesn't have a very big crowd. Except for that one day! An thats not enough. So check out the Liq. Lic. 1st to make sure you are not getting into one of the ordeals a friend of mine got in. Other than that go for it, no matter what you look for the place is going to " COST " you money. Cant avoid it no matter how hard you try. Sounds like you are going in the right direction.. Good Luck...

  6. #6
    Join Date
    Mar 2007
    Location
    hawaii
    Posts
    279

    better to build off a foundation than a pile of dirt

    first and foremost in my opinion is as stated previously is the license & status
    if the license is transferable and whats the history, i.e. pending actions, violations etc. basically if you dont have a license or are going to lose the one you have then you have no business

    personally i can care less about what the current business is pulling in or not becuase i would clean house - basically keep whats good and dx the rest

    the building itself needs to be inspected again as previous posters stated. new owner is going to have to abide by current standards ( unless grandfather claus is valid w/ new owner/operator )

    assess the big expense items - hvac, bathrooms, emergency exits, occupancy allowances, all pertinent operating equipment with big price tags

    how long from the time the business is yours to when the doors can open and start generating at min. enough to cover operating expenses.

    this list can go on and on and not knowing anything more about the exisitng business i would just be tinkling into the wind trying to provide anymore essential info. than what has been posted.

    the best thing you have going for is that the building is already an up and running business in need of a major over haul. much better than starting from scratch because after allocating the funding it is finding a suitable property that is zoned for this type of business that is paramount.

    good luck and i look foward to hearing how things work out.



    non-compete clauses w/in x miles of original

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