hi all, i have been offered to go silent partner in a pub. i know the other business partner extremely well, and know that he can run the day to day business with his eyes closed.
anyway, apart from the obvious ie checking the books to see if its financially viable, setting up the right structure (no idea as of yet) capital growth, expansion etc. what else should i be looking for?
anyone ever owned a pub before? am i missing anything?
the basic details are
asking price 700k (this includes liquior licence, poker machines, building and fittings etc) basically the whole lock, stock and barrels.
turnover a year 120k
in a town with 3 other pubs, though this one is the most “upmarket” (read most renovated)
your thoughts would be greatly appreciated
thanks for your time
cheers
shaunLead, Follow or get out of the bloody way
hey shaunwalker sounds orsome dude but make sur you do all your homework first and if after all taht you still happy with info go for it bro!
oh yeah and make sure you dont sign any papework or contrects if you tippsie! cheers bud! [lmao]Make sure your patner is the licencee, as he will be the hands on partner who will be around most of the time (last thing you want is a phone call to come down to the pub at one in the morning when something has gone wrong and the police will only talk to the licencee. Also find out if you are contracted to any beer or liquor company eg you can only sell CUB products and finnally make sure you staff have done all the relevent courses eg responsible service of alchol and gaming. And one last thing, find out what clients this pub atracts, go in there with a few mates on a friday night for a few and see if the local hells angels roll in, also its a good idea to go down to the local police and see if they have had many call outs ( the police are your best mates in this business, get to know you liquor licencing officer (will be the best move you ever made. (this is also a great time to see how good the staff are). Also i would set it up as a pty lty company as this will protect your personnall assets.
I was speaking to my accountant last week and he said one of his clients formerly owned a pub. They had just sold it recently and they received a call form the new owner who was very happy as it was taking much more than expected. The accountant asked him for a few numbers and they compared takings to previous years. It seems it was suddenly taking an extra $10,000 per week approx with the new owners who were actually working in and running the pub, compared tot he old owner who was not working there and had it managed. It seems the previous management was probably skimming the till of about $10,000 per week!
Terryw
Discover Home Loans
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or the managers had put alot of the locals off by the way they were running the place, this often happens when new publicans take over, people who hadnt drank there for years start comming back.
Pubs can also be priced relative to their Keg sales.
Sometimes the “real” keg sales are not really what they appear..
you say in your post, a turn over of 120k???? that doesnt seem much to me. 120k would be a ok net return.
A turnover of only 120k is absolutely dismal, especially with poker machines?
[biggrin]I would be concerned about the turnover unless that is net profit and in a 3 pub town the population should be at least 1500. We got involved with someone in a pub 2 years ago and got a little burnt by his actions but came out of it okay ans we take over our new place in 2 weeks time. Check out the CUB figures and the spirit sales as well and that way you will get a better idea. Depending on the council you may also get rate releif for the 1st 2 years. i could tell you a lot more and if required send me a PM.
Chefmanthanks for all your help.
chefman i will be in touch with you personally if thats ok. yeah 120k gross doesnt sound right, though bare in mind no books etc have even been looked at yet. a company definetly sounds the way to go. and checking the turnover will be a must. oh well sounds like i have alot more to learn, before we even make an offer.
i will definetly check out the pub/locals etc to make sure that nothing untoward is happening.
again thanks for all your help guys and girls.
i will let you know more numbers etc as i get them (they are being sent this week)
cheers
shaunLead, Follow or get out of the bloody way
Shaun,
Make sure you do get in touch with Chefman – we have emailed each other and he is a very nice chap and knows what he is doing!
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
thanks simon,
i will keep in contact with chefman. i will give you a call saturday arvo to see where you are for a beer in melbourne.
cheers mate
shaunLead, Follow or get out of the bloody way
[inlove]Thanks Simon!!! I will talk to shaun and try to help him out.
Chefman[confused2]Shaun & Simon,
If you are both in melbourne this saturday you are both more than welcomed to come to my place for a beer. I have 20 dozen home made brews sitting here rangeing from lager’s to bitter;s and besides i can cook!!!! i have been brewing for 15 years now so i have it down pat!!!
SeeyaThanks for the offer chefman!
but i’ve sort of made arrangements to catch up with a few forumites for drinks in the city saturday night. are you going to the seminar on sunday?
if not, i will catch up with you at another date and buy you a beer. even if this means i come down to melbourne for the weekend.
again i appreciate your help.
cheers
shaunLead, Follow or get out of the bloody way
[thumbsupanim]Hi Shaun,
No drama!! Next time. Have sent you an email with my number to call me about the possible pub. Catch you soon.Chefman
As long as your getting a 15% return minimum, and how many pokies are there and is it freehold?
My mates brought a Pub in Sydney for 5.1 mil, it had around 20 machines and the money laundering was going off like a bunga! Greta return on their investment. Pubs are great if you hook the right one, and have a great relationship with a very freindly banker. Never lease, only buy freehold.
Good luck.[biggrin]
We are all made from Stars
Salubrious, Why never buy a lease???? If the lease is long this can be a very good way of getting into a business that has very high turn over and net profits, the secret to leaseing is to keep buying years on your lease, never go below 15 years left on a lease or it will be near impossible to sell. One of my leasees buys a year at the end of the year (it costs him just over 10k p/a to add the year but the lease time never changes. Have you had a problem with leaseing??? I would really like to here why you dont like leases. Granted you are better off buying a freehold, but freeholds tend to go for 3 times the amount of leases. I would rather have a lease that is pumping, than buying a freehold for the same money that cant support you.
we are buying the whole lot,so theres no lease involved. there are 16 pokies in the pub. i think my partner wants to sell a couple to draw down on the debts used to borrow the 30% deposit.
i will have to look into the effects of the cashflow should we end up selling 2 poker machines (at 100k each).
ive been in contact with the SA liquor license, and they are very helpfull. we need to get a transfer of liquor/gaming license which is pretty straight forward from what i understand.
chefman, i havent received your email yet, but will wait a bit longer, if i dont get it i will let you know.
will let you all know more about the pub as the information arrives.
cheers
shaunLead, Follow or get out of the bloody way
[biggrin]I agree with John Howard as leases are okay to start with and some of the best bargains are long term stuff. Our new place has a 25 year term and we are only paying $300 per week fixed for the next 2 years. i reckon thats okay. We also have an option on the freehold which i am sure the vendor will offer us in due course. Shaun my number is 03 9705 2226. Am home most of the time but if not here leave message on the machine.
Chefman
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