Purchasing a drive thru-NEED HELP!

ape1090

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Feb 22, 2009
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Hello,

I am in the process of purchasing a coffee/esspresso drive thru and was looking for some advice from people that have experience in the business.

The drive thru that I'm looking at purchasing is a very small (mobile via flatbed trailer) specialty coffee/espresso deal with tea, smoothies, and limited food items. For the past two years they have averaged about $200 a day. It is located at the intersection of two busy roads and is surrounded by a number of LARGE businesses (500+ employees). Keeping in mind that the largest expense was payroll ($21,000) for the full time employees that were hired to work there, the profit and loss statement from the current owner says they made $7300 last year. Additionally, the current owner has also been trying to sell me on the concept that there was no time or money invested in marketing or advertising (basically they are trying to make the claim that they didn't reach out to surrounding businesses). The current owner said they originally invested somewhere in the neighborhood of $80,000 for the building and all of the equipment. They are asking $45,000 for the whole thing, equipment and limited inventory included.

I've got a few dilemmas here, first being that I think $45,000 is way too much for the business. The current owner is trying to sell me on the concept of being an owner operator, eliminating the $21,000 payroll expense. Additionally, I am trying to figure out if it is fair or not for the current owner to sell me on the concept that there has been no marketing or advertising efforts the entire time they have been in business. If I were to purchase the business, I would definitely invest time and money into effective marketing and advertising campaigns to gain customers from the surrounding businesses. and this would cost money.

Overall, I just think $45,000 is too much to ask for a suggested owner/operator business like this. In fact, I did the math, and for me to take out a $45,000 term loan to be repaid over five years, my loan payment would be somewhere in the neighborhood of $900-1000 a month. This is insane considering that would only leave me making about $1000-1200 a month after expenses are paid, and that is not enough to live on. I have done some research, and I've seen some other drive thrus that are basically the same thing, in very similar markets, producing the same cash flow (some even higher), that are priced MUCH lower than $45,000. I've found some for as low as $15,000 that are producing the exact same numbers. I've found one priced at $42,000 that is producing a little bit over double the sales revenue of the drive thru I'm looking at.

Overall, I think there is room for growth as the current owner is averaging 66 customers a day on a busy intersection with over 17,500 cars daily, but I don't think it is worth $45,000.

My question is, what do you think is a fair price for a business like this? And if you agree with me and think that it is over priced, how do I propose a counter offer and explain the owner my reasons without insulting them?

Thanks so much for any help!
 

CCafe

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Aug 11, 2004
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Des Moines, Iowa
I hate to say it but $45,000 isn't that steep if you were to build it all out yourself. Heck a good espresso machine can run between $7 - $10K depending on what you buy. Another $3K for a coffee brewer and airpots. Then the cost of the cart can easily exceed another 10 - 20K depending on the amenities you add. This still doesn't include the rest of the appliances you'll need to get started.

I'm always weary of people who are willing to sell carts that seem very low in price. I would very carefully check out the ones for 15K and see how old they are or what they come with. Just because its cheaper doesn't mean its better.
 
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ape1090

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Feb 22, 2009
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CCafe said:
I hate to say it but $45,000 isn't that steep if you were to build it all out yourself. Heck a good espresso machine can run between $7 - $10K depending on what you buy. Another $3K for a coffee brewer and airpots. Then the cost of the cart can easily exceed another 10 - 20K depending on the amenities you add. This still doesn't include the rest of the appliances you'll need to get started.

I'm always weary of people who are willing to sell carts that seem very low in price. I would very carefully check out the ones for 15K and see how old they are or what they come with. Just because its cheaper doesn't mean its better.


I understand what you mean, but all of the equipment that is included in the sale is at least four years old. Additionally, the current owner does not have any airpots or brewers because their current distributor supplies them. I checked the resale value of the espresso machine and it's somewhere in the neighborhood of $1,100. I agree that it would probably cost significantly more to go out and start from scratch, however this asking price seems to not really consider depreciation. From a straight business standpoint, using time value of money and net present value, paying $45k for something that only generates $7,300 of profit on paper annually does not make sense.
 

CCafe

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Aug 11, 2004
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Des Moines, Iowa
You list the equipment that is currently in the sale with the kiosk and then we might be able to help you determine a fair price. As for that resale value on the espresso machine I would say that's awful low even for a 4 year old machine. That sounds more like a ebay price then a private party resale.
 
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ape1090

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Feb 22, 2009
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Ok, here's the list of assets included in the sale (building as well) and the time and price at which they were purchased:

Custom all galvaneil powdercoated steel kiosk 11/06 $39,000
custom cabinet packet with uppers and lowers 11/06 $8,000
all NSF certified stainless steel countertops 11/06 $3,000
NSF triple sink and hand sink with stainless faucets 11/06 $1,200
Medintech surgical-grade flooring 11/06 $900
All pextite hot and cold plumbing 11/06 $700
Sureflo fresh water pressure pump to all equipment and sinks 11/06 $450
Ariston GL 2.5 gallon water heater 11/06 $250


Selecto Scientific COFFEE PRO high volume water descaler/purification filter 09/07 $400
Carrier 15,000btu roof-mounted heater/air conditioner 11/06 $900
3 neon open signs 09/07 $250
1 open flag 09/07 $15
Exterior Menu board 11/06 $2,000
custom exterior light package on automatic light sensor 09/07 $400
fire extinguisher 09/07 $25
florescent tube and lower energy track lighting 11/06 $100
2-handset cordless telephone and answering system 09/07 $42
wall clock 09/07 $10
Radio with CD player 11/06 $75
52 gallon potable water tank 11/06 incl
63 gallon dirty water tank 11/06 incl
True TWT-60 stainless steel 15.5cf under counter refrigerator 09/07 3,700
Vitamix 36000 commercial blender with two blending bowls 09/07 1,300
LaMarzocco Swift Dual Espresso Grinder 09/07 4,200
Nuevo Simonelli Appia single group head Espresso Machine 09/07 6,200
Chef King Microwave oven 09/07 45
Coffee Shop Manager POS software and computer with touch screen, integrated credit card reader and receipt printer 09/07 5,400

5' X 8' support trailer 11/06 2,200
100 gallon potable water tank 11/06
100 gallon dirty water tank 11/06
heavy duty evacuator pump to empty dirty water from shop 11/06
fresh water pump to fill shop 11/06
dirty water pump to empty trailer dirty water tank 11/06
hoses and fittings 11/06

Chest freezer 11/08 800
 

thewilliams1

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Jan 29, 2009
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North Eastern Pennsylvania
I was under the assumption that, when selling or buying a business, you take the net profit for two years and equate that to the companies value.. ie: the drive-thru has a selling value of $14,600 .. but what the seller is trying to do is count the $21,000 he pays out in employment in the net figure.. so hes saying the business has a value of $56,600.. I'm no professional.. thats just my take.
 
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