Mastering the Bar Purchase: 7 Considerations for Buying a Bar

Unlock the secrets to a successful bar purchase with our essential guide to seven bar purchase considerations on the Bar Business Podcast. This week, we're spilling the beans on everything from navigating the murky waters of stock sales versus asset sales, to dissecting the real fiscal health behind those too-good-to-be-true financial statements. If you've ever daydreamed about owning your own bar or are knee-deep in the process, this episode is your roadmap to sidestepping the common pitfalls and sailing straight into profitable ownership.

Ever wondered how local politics can impact your dream of bar ownership, or what it really takes to get on your landlord's good side? Strap in for a deep dive into the elements that can make or break your bar venture. From the labyrinth of liquor licensing to the ins and outs of lease agreements, this episode is packed with expert advice to ensure you're not left high and dry when it comes to the nuts and bolts of purchasing a bar. Plus, we're serving up the need-to-know on navigating health codes, building regulations, and those all-important inspections.

And let's not forget about the backbone of any bar—the staff. We're breaking down the challenges you might face with staffing changes and dishing out strategies to handle the inevitable turnover. To wrap it all up, we share thrilling tales of caution, like that time the unexpected happened and equipment decided to take a sudden vacation. This episode isn't just about buying a bar; it's about thriving in the aftermath, so grab your notepad and let's raise a glass to your future success in the bar biz.

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Welcome to the Bar Business Podcast, the ultimate resource for bar owners looking to elevate their businesses to the next level. Our podcast is packed with valuable insights, expert advice, and inspiring stories from successful bar owners and industry professionals. Tune in to learn everything from how to craft the perfect cocktail menu to how to manage your staff effectively. Our mission is to help you thrive in the competitive bar industry and achieve your business goals.

Special thank you to our benchmarking data partner Starfish. Starfish works with your bookkeeping software by using AI to help you make smart data-driven decisions and maximize your profits while giving you benchmarking data to understand how you compare to the industry at large.

For more information on how to spend less time working in your bar and more time working on your bar:
The Bar Business Podcast Website
Schedule a Strategy Session
Chris' Book 'How to Make Top-Shelf Profits in the Bar Business'
Bar Business Nation Facebook Group

Transcript

Announcer: 0:00

You're listening to the Bar Business Podcast where every week, your host, chris Schneider, brings you information, strategies and news on the bar industry, giving you the competitive edge you need to start working on your bar rather than in your bar.

Chris Schneider: 0:19

Welcome to this week's edition of the Bar Business Podcaster, ultimate resource for bar owners. I'm your host, chris Schneider, and today's episode will be delving into seven things to consider when buying a bar. I've heard from a number of listeners to the podcast, as well as members of our Bar Business Nation Facebook group, that are not yet bar owners. They're looking to become bar owners. So this episode is to point out some things that you should consider when you go to purchase a bar. Now, if you already own a bar, you might be saying what can I gain from this? Well, you need to think about your exit plan always. It's really important.

Chris Schneider: 0:53

Anytime that you own a business, you know how you can get out of that business. So everything you do in your business while you're running your bar should also revolve around how do I keep this attractive? If I want to sell my bar, you never know what's going to happen. You might have a family illness, you might have some other external issue that causes your life to change, and you need the ability to pivot with your life. So you should always have your bar set up in a way that it is ready to be sold, and this doesn't really happen in real life, but there's always the possibility that's one of your regular. Somebody walks in your bar and says you know what I love this? I really want to buy it. I'll give you a bunch of money. Do you want to sell it? And my thought process has always been, if they're offering me enough money to sell my business and it's at or above the current market price, that it should be, heck, yeah, I'll take your money.

Chris Schneider: 1:46

So, whether you own a bar or are looking to own a bar, knowing what a buyer can look for, knowing what some of those considerations are that a buyer could have, it's really important that you keep those in mind and that you're aware of what those are. Now what I will say is we're going to give you seven things to consider, and there are a heck of a lot more than seven things that you need to consider if you're going to purchase a business. There's all sorts of stuff that we're not even going to get in today that deal with your personal financial situation, funding, all sorts of issues like this, and it's absolutely crucial, if you're going to buy a business, to do your due diligence. An easy way to look at this is you would not buy a car without taking it for a test drive. You're not just going to look at a car online and say, yeah, I'll buy that car and drop 45 grand. Almost everyone would view that as being absolutely crazy. So if you're buying a business, when you're putting down not 45 grand but maybe 450 grand or 250 grand, we're talking about things that the numbers can be talked about in fractions of a million. Maybe it's a half million, maybe it's three quarters of a million. Some bars that have great locations, great followings, hard to get liquor licenses, they might be a million dollars plus.

Chris Schneider: 3:01

So if you're going to spend that kind of money, you need to know what you're buying. You need to do your due diligence. So these are just seven things to think about, but there is so much more. I absolutely need to make this point before we get into the nuts and bolts of this episode. You need to talk to advisors, you need lawyers and accountants when you're starting a business. They know your considerations, they know your personal financial position. They know a lot about you because, as much as we're going to talk about these considerations in a very high level way, not everything applies to everyone equally.

Chris Schneider: 3:35

Obviously, if you're inside the United States or if you're in I don't know Barbados, Barbados has different laws than the US. If you're in Australia, you have different laws, so your local situation is going to determine a lot of what you need to consider. So I am not a lawyer, I am not an accountant and because I'm not either one of those things, I'm definitely not your lawyer or accountant. So make sure you get a lawyer and an accountant to help you. When you're buying a business, you need good advice from people that are local, that understand your current situation. That being said, these seven considerations we're going to talk about are really fundamental, and they should be things that are true most places. So let's get started.

Chris Schneider: 4:18

Our first consideration when you're buying a bar is what are you actually buying? Or, if you're selling a bar, what are you actually selling? Now, in the United States, there's two basic ways that a business gets sold as a stock sale or an asset sale. When we talk about a stock sale, that is literally selling the company and everything. So Jim owns XYZ Bar LLC and you buy XYZ Bar LLC by buying the company and by buying the stock in that company, you're buying all the assets, all the contracts, all the liabilities. You're buying everything regarding that business.

Chris Schneider: 4:56

Now, a lot of times people don't want to do that, and the reason why you don't want to do that is, yes, you're getting everything, all the licenses they probably don't have to transfer. It can make a lot of things easier, but at the same time, you're on the hook for any liabilities that exist. So if you're buying XYZ Bar from Jim, have all his sales taxes been paid up? Have all his payroll taxes been paid up? Because if they haven't, if there's any outstanding tax issues property taxes too you as the owner of the company, the company is the one on the hook, not the owner. That company is now yours, your company is now on the hook for those. So you want to be careful about stock sales, because you're not only assuming all the assets of the business, you're not only assuming all the receivables that may be out there, all the revenue that has yet to come in as of the close date, but you're also assuming all of the liabilities associated with that business. So if there's anything outstanding, even loans can potentially transfer in a stock sale.

Chris Schneider: 6:02

So if you're going to do a stock sale, you need to be really, really careful about it, and because of that reason, the US most bars are not sold as stock sales. They're sold as asset sales. So essentially, xyz Bar LLC is going to sell everything it owns to you. You're not getting XYZ Bar LLC, you're company ABC Bar LLC. It's just buying everything XYZ owns. That tends to make things a lot cleaner. And it makes things cleaner because you're not buying their liabilities. You're not buying AR, ap intangible things. You're handing someone a set amount of money for essentially the assets that are in their business and some goodwill in the form of their regulars, their book of business, the people that come in. But the main thing is in an asset sale you are really just buying assets. Whether those are tangible or intangible is not really what's important. What's important here is that you're not buying any of the liability. You're not buying a potential back sales tax issue. You're not buying a potential back payroll tax issue. So you don't have to do the same amount of due diligence and investigation of what the prior owner has done, because those liabilities just don't exist in an asset sale.

Chris Schneider: 7:25

Now, one of the potential pitfalls when it comes to an asset sale is licensing. So some licenses transfer, some don't, and we'll get into licensure a little bit more in our third consideration. But things like liquor licenses depending upon where you are, they might be hard to transfer. They might be difficult to transfer. They may be tied to the individual, they may be tied to the business. So you need to make sure that there isn't something that prohibits doing an asset sale based upon where you are or the type of business that you are.

Chris Schneider: 7:58

One thing where this would come into play is, say you were buying a winery or a brewery or distillery that has a, in the United States at least, has a TTB license from the federal government for excise taxes and production of alcohol. That TTB license does not transfer. It's owned by the company and a new company. You can't transfer that license to you. You have to apply for a whole new license. So maybe if you were buying a brewery, there might be a reason to look at a stock sale rather than an asset sale. Regardless of which way you go, though, be aware that those are the two common ways that bars are sold, at least here in the United States, and definitely talk with both your accountant and your attorney about the pitfalls in them, because your attorney can tell you things all about liability and your accountant can tell you a bunch of stuff about the taxes and stuff and how that works if you're doing a stock sale versus an asset sale. So make sure you talk to your advisors and get information on those, because which way you go has a lot, a lot of downstream implications that can exist for you and your business.

Chris Schneider: 9:04

The second thing to consider when buying a bar is the books, the financial accounting of the current business. Now, if you're doing an asset sale, obviously you're not buying any of the current contracts that owner has with suppliers. You're not AR and AP and those sorts of things. So the books for the prior owner and the books for you will not be the same. But it's absolutely essential if you're going to purchase business to understand the current state.

Chris Schneider: 9:28

Maybe you're buying a business that isn't doing well because you think you can turn it around. You see the bar, you see the issues that exist and you know that you can change some things. Turn it around, amp up the marketing work on the culture, deploy a lot of these strategies and concepts that we've talked about in this podcast. Then make something better, make something that works. Or maybe you're buying the bar for the assets, the location and not necessarily the name and the concept. So it's going to be totally different. But you need to look at the books because you need to understand the current state. You need to know what's going on there. You need to know what kind of business is coming in the door. Currently, buying a bar that does a million dollars in revenue is a heck of a lot of difference than buying a bar that does a hundred thousand dollars in revenue. One of them is going to be a lot easier to make money on than the other. But also, in understanding current state, you need to look at discounts, costs, things of that nature, so that you have some idea of what the business is currently doing.

Chris Schneider: 10:31

Now one thing I will say here, because you'll see this a lot when you go to buy a business, you'll see this cash flow number and they'll say well, the business cash flow is 300 grand a year. It's very important to understand the relationship between cash flow and actual net income, or even EBITDA, so earnings before interest, taxes, depreciation and amortization. There is no relationship there. Cash flow is this nebulous thing that business brokers use. Now, it's often very much a real number, but it's nebulous in that it's taking out of the books everything that's directly benefiting the owner and we'll talk about this a little bit more in a second. But it's taking that all out and saying this is how much value the owner is getting out of this business every.

Chris Schneider: 11:20

There is absolutely reason to be skeptical of that number. You need to verify it, you need to see the books, you need to understand how that cash flow number was determined and you need to understand what is the net income that we're showing year in and year out. Now the EBITDA is generally a little bit better because, obviously, depreciation amortization here in the States it's going to be different every year. There's different tactics that can be used to determine how you're going to take depreciation, what that looks like and all sorts of things. So it's absolutely important that, a have your account, look through this, because they understand this probably better than anyone but B that you understand that current state, that you really get your mind wrapped around the books and what's going on.

Chris Schneider: 12:07

And as you're doing that, you're probably going to look at the books and say, well, this looks like total BS, because here's the thing. It's a small business and those of you that are listening that are current bar owners you know as well as I do. Your books are not as clean as they should be. No one's books, no one's bookkeeping is as good and on point as we would all want it to be. Now maybe you have a business where the bookkeeping is outsourced and that bookkeeper is specialized in hospitality and they actually have great books, and that would be amazing as a buyer to come across that and be able to look at books that are actually perfect.

Chris Schneider: 12:44

But in general, the books are never as clean as they should be, or rather as clean as you might want them to be, and one of the big reasons behind that is almost every small business is going to have some owner expenses on the box. Let's say I, as the owner, have this bar and I have a truck that I bought. But I say the bar bought it because I mostly use the truck to haul stuff around for the bar. I used to go to the store and pick up supplies and I use it to deliver catering orders and I use it when I drive to meetings, so I'm going to expense that truck on my books. Well, unless that truck is included as part of the sale of the business, those expenses should not be on the books when you're looking at what the business can do. Maybe there's a lot of dining on the books, like the owner goes out to eat a lot and they charge the business a lot. You need to factor all those owner's expenses out of the books to get a clear picture of what's actually going on and that's really what that cash flow number that you'll see advertised a lot of times should be.

Chris Schneider: 13:44

But still get the books yourself, do your own math, review it with an accountant, make sure that anything that's funny, anything that's weird, that you've figured out what it is and you know why. Because maybe the weird thing is some compliance requirement, some really expensive, I don't know grease trap cleaning. That has to happen every year because they have a weird grease trap and it requires a special equipment and special people to be able to clean it, and blah, blah, blah. You need to figure out what the expenses are on the books and whether or not you can discount them and get rid of them, because they don't matter, they're not actually part of the business and what you're buying or whether or not they are.

Chris Schneider: 14:24

Now, if you're looking at the books and revenue seems off, which it could I know bar owners that are old school and this probably happens less now than it used to. But I was talking to an old bar owner years ago. He said you know, I never have cash sales on Wednesday and Saturday and the reason you didn't have cash sales on Wednesday and Saturday is literally the cash went in his pocket on Wednesday and Saturday and that was common. Well, I shouldn't say common, but a lot of bar owners did that stuff back in the day. So if somebody was still doing that I would make revenue look low.

Chris Schneider: 14:59

Maybe revenue looks too high, but regardless, if you are looking for a way to double check the revenue figures that you see in someone's box, ask for their POS data, because nowadays almost every bar in the world is going to use a POS. That means there's a computer that everything gets run into and if you have to ring in as a server, you have to ring something in for it to go to the kitchen, for it to go to the bar, so that you can get that to serve to your guests. That means that POS data is probably may not be, but it's more likely than not really really really close to what's actually going on. So if the revenue says they're doing a million and you go in there and it's always slow and you're like I don't see a million dollars worth of business coming in and out of here. Ask for that POS data, because if the POS system shows basically the same amount of sales as the books, it's probably accurate. Now don't expect it to match to the penny.

Chris Schneider: 15:53

This is accounting. We're talking about manually moving numbers. We're talking about people doing data entry. There will be mistakes in everyone's accounting, so it may not match to the dollar, but if you're within 2%, 3%, 4% between the POS and the revenue shown on the books, it's probably accurate. The other thing that you can always ask for and look at is tax returns. You're not always going to get those, but it's definitely another source that can confirm what people are actually making revenue amounts. But the bottom line here is if something in the books looks weird, have your accountant, have an industry consultant, get someone who knows what those books should look like intimately, that can look at a bars P&L and a bars balance sheet and understand not just see the numbers and know some formulas around them or know what the industry standards are, but they can look at the numbers and those numbers tell a story to them. Find someone like that and have them review those financials with you.

Chris Schneider: 16:57

Hey there, bar owners, it's Chris Schneider, the bar business coach. Are you tired of the daily grind and ready to skyrocket your profits? I've got the solution. With my coaching and consulting services, we deep dive into menu management, team empowerment and business optimization. Instead of slogging away in your business day in and day out, washing dishes, covering for employees and working 60 plus hours a week, picture this A thriving business that runs like clockwork, whether you're there or not, letting you enjoy the successes that you've dreamed of. Let's make it happen. Visit https://www. barbusinesscoach. com to schedule your free 30 minute strategy session with me, or you can book a session just by clicking the link in the show notes below. Together, we will turn your business into a profit powerhouse, because at the Bar Business Coach, our only goal is to help you spend less time working in your bar and more time working on your bar.

Chris Schneider: 17:53

The third consideration that I would recommend that you look at is the business licenses and government compliance. So I mentioned liquor licenses, food licenses. If you have federal government tax licenses, it's all going to be different depending on where you live, and in some states you could be talking about federal, state and local involvement in some of this licensure process, like where I am here in Indiana, the state is responsible for issuing liquor licenses but the local county liquor board must approve it and then some cities have city liquor boards that must approve it as well. Or you might need the city council to sign off and the county and the state to get a liquor license. So know what those licenses look like, know the licenses that you need for your location and then make sure that you have those licenses, that those licenses can transfer as part of the purchase of the bar or that you have a plan and path to get those licenses once you have purchased the bar. Now, with that, you also need to look at how hard will that be to do? How likely is it that you will get issued that new license that you need or that that license will transfer?

Chris Schneider: 19:03

And again, because at least here in the United States we're talking about the combination of potentially state, local, county, city, all these different groups, there can be small town politics involved here. There can be issues that you come up against that you don't expect. I know there are some communities that don't issue liquor licenses just because they don't, or they try to greatly limit the number of liquor licenses in places that can sell booze in their community, because that's what they want. Even if a license could exist in your area, even if there are excess licenses available in your area, when you have to get a group of frankly politicians to approve that you get that license. Well, it's not always a sure thing. Politics is weird. We all know that and well, look around the globe right now. Politics can get really weird everywhere. So when you have a group of politicians in charge of issuing a license, things can get really messed up.

Chris Schneider: 20:03

Now, in addition to the licenses, you need to check with just other government compliance, regulatory compliance, and things that really come in my mind are things like grease traps, fire suppression. Even lighting has legal requirements on it in most health codes. Everything in the health code, everything in the building code comes into play here, and the big question is when this business transfers. Are things that are not up to current code, but where grandfather didn't enter the current business going to remain grandfather, or will you have to make updates and changes in order to get the licenses you need to be able to operate? Will you need to change your Ansel system over, which is the fire suppression system in your hood right? Will you need to change that Ansel system in order to get your food license as a well, not new business, but as a new owner of an old business that is theoretically a new business? If you did an asset sale and the thing is, those lines in every community will be different, those lines in every country will be different, those lines in every city will be different.

Chris Schneider: 21:07

I was looking into a bar that was sale in the county over for me and that county's regulations were totally different than the regulations in the county I live in, which were totally different than the regulations in the county that I owned. Most of my bars, all the bars I was involved in, were in a different county than the county I live in or the county I was looking at this bar project in, and all of the regulations were different. All of the government was different. All of the way they approached things was different. So this becomes a highly localized issue and you need to be aware of what all those things are, because the last thing you wanna do is spend a quarter million dollars and drop that money only to find out that you can't get the licensure that you need, that you can't be open because there's some compliance issue you didn't know about, and to fix that compliance issue is gonna cost you 30 grand and it's gonna keep you closed for two weeks or a month. That's not the surprise you need when you're starting out in a business. So make sure that the licensure that you need will transfer or that you can get it as a new issued license, and make sure that all the code work is done properly, that everything's up to date, that you have the right things in place so that if you get a visit from the health department or the fire marshal or whomever else is responsible for enforcing codes in your area general code enforcement you're gonna pass those and not have to close and not have to lay out a bunch of money.

Chris Schneider: 22:39

That brings us to the fourth consideration for purchasing a bar, which is the landlord. So if you were lucky enough to be able to purchase the real estate and the bar together, you don't have a landlord, you don't have a lease, no one else can control your space. That is awesome. You are one of the few bars anywhere that gets to own their land and the bar and not have to worry about a landlord. But for most of us, whether we're in an urban area where it's just the real estate's never for sale, or where you're talking about getting a part of a much larger building, you're not gonna buy a $10 million building for a neighborhood bar and then have to lease out the other spaces. Then you're just being a landlord. Now, if he can, great, there are some benefits there. We could talk about those. But again, most bars are gonna be in lease space and if you're buying an existing bar, you're probably buying lease space. Heck, I've even seen deals where the existing owner owns the bar and the building but is only selling the bar because they want the residual income from owning the building. So 90% of the time plus what you're buying also includes a relationship with your landlord and you need to be able to have a good relationship with your landlord.

Chris Schneider: 24:00

A bad landlord is one of the worst things for a business ever. It's going to make it very difficult to just have a business and make money. You can run into civil court issues. You can run into issues with repairs and maintenance of the building and the facility. You can run into all sorts of issues with a bad landlord. So having a good landlord is really key to having a good bar and being able to make money on that business. So the first thing when it comes to landlords to think about is just don't work with people that have a bad reputation or that have a reputation for being hard to work with, or that have a reputation for being an asshole, or who have other tenants that are unhappy with them. It's not worth the risk. Might be a great bar, might be a great location, but if that landlord is going to be a pain in your ass and that landlord is going to cause you a lot of trouble, you can probably find an equally good location that has a nice landlord, who's a good guy, who's easy to work with.

Chris Schneider: 25:03

Now the other thing you need to consider is what type of lease are you getting? So, generally, when you go and you buy a bar or you buy any business that's in a lease space, there's an existing lease in place and that lease has terms and that probably has a personal guarantee from the current owner involved. And the real question is are you going to just have the same lease they had, or can you get a new lease? Are you able to get a fresh lease with the landlord? Probably not. In most cases, you're going to be assigned the current lease and that current lease may or may not have some issues with it. And, frankly, an assignment of lease is not the end of the world by any means. Obviously, have an attorney review it. That's familiar with real estate law in your area. Make sure that you can abide by the terms that are there.

Chris Schneider: 25:59

But whether you have an assignment or a fresh lease, you need to make sure that you're looking at every little detail. Is it a triple net lease? Is it a gross lease? What's going on? What are you actually responsible for in that lease? Now, not sure about everyone else in the world, but in the US, triple net lease would mean that you, as the tenant are responsible for your pro-rasher share of common area maintenance, insurance and taxes on the building, whereas with a gross lease, the landlords paying for all that and it's included in what you pay him every month. Most commercial leases you're going to see are triple net, so the actual expenses that the landlord incurred is on the common area. The actual property taxes and the actual insurance on the building will be broken up generally on a percentage basis based upon square foot to all the tenants and each tenant is responsible for their share. So when you see that your lease is $2,500 a month, triple net, you're not spending $2,500 a month. Maybe it's three grand a month, maybe it's 3,500 a month. It all depends on what that common area maintenance is.

Chris Schneider: 27:17

So when you're getting that lease, you need to look at what type of lease are you getting. What are you responsible for? Because also with what you're responsible for, there could be maintenance on things. So generally, hvac is going to be the responsibility of the landlord, but maybe not fully the responsibility of the landlord. So the landlord may be responsible for the actual HVAC units, the air handlers and all that, but maybe you're responsible for maintenance and upkeep they're just responsible for replacement. Or maybe you're responsible for all the electrical from X point forward, but they're responsible for all the electrical to X point. So you may be a breaker box within your business, or maybe they're responsible for all of it. But you need to be aware of what are you responsible for versus what is your landlord responsible for, because that will be a huge, huge impact on what's your actual expense for occupancy is.

Chris Schneider: 28:26

Now, the other thing that you need to consider when it comes to landlords in your lease is how much time is left on the lease. One of the Issues that exists when you're leasing space from anyone is that they only have to lease it to you for the term of that lease and Any options you may have. They're not required to lease it to you forever. So if you're buying a business that has no options left on the lease and the lease is only good for another three years, all you know is that you can use that location for three years if you just get it straight assigned to you. After those three years, the layler could say you know what great. You've been a wonderful tenant, but I'm selling this building or I want to put my own bar in this space, so I'm not going to renew you. You dropped a hundreds of thousands of dollars, a huge sum of money, but you didn't have the right to the space after three years. After three years, the landlord can kick you out.

Chris Schneider: 29:16

The only way to ensure that you have a lot of Time to run your business, that you hold that space for years and years and years, is to have that in your contract. So when you're getting assigned to lease, if there's a short term left on it, you really should push to have a new lease Figured out with the landlord before you close on the business, because you need that additional time. You need the ability to control that space, at least as long as it will take you to make your money back, and Probably longer than that, because even if your goal is to get in the business, make your money and get out, you then need enough time to get your initial investment out of it and then be able to sell it at a profit. So you have to be very careful with how much time is left on the lease. I have seen bars that have been in one location for 20 years and did killer business Closed because the landlord went yeah, I Want to put my own bar here. So it's absolutely critical you have enough time left on that lease to make it work.

Chris Schneider: 30:23

The fifth consideration when you're buying a bar is the equipment. You need to know the equipment's a good working order and that equipment, like I mentioned in the previous section, depending on how your lease looks, could include electrical, plumbing, hvac, all those things need to be up to code and all those things need to be in good working order because you don't want to have to plop Down a bunch of money to fix something that you just spent a bunch of money on the big things. When it comes to your equipment, though, to always have checked out is your refrigeration, your big restaurant equipment, the things that are going to cost you a lot of money to replace, and Sometimes you might be able to get proof from the seller that they've been serviced and they have a company come in and look at it Every month, there, every quarter, and here's the report from that company saying that it's all in great working order. But if the seller cannot provide you with that, you need to go hire your own company To come in and look at it and make sure that things are working the way they should.

Chris Schneider: 31:23

If you just think about your refrigeration, a Walk-in cooler, the actual compressor, the actual unit on it that is generating the cold air Can cost thousands and thousands of dollars, and Unfortunately because we've all seen bar rescue and we've all seen kitchen nightmares we know there are restaurants and bars out there that are operating without a properly working cooler. So you need to make sure everything works and you need to have someone that's qualified, that understands it, go in it and look at it, because maybe you all get in the cooler and it works great. But you have somebody look at it and you realize that the belt is about to go bad or that the Freon is leaking or that there's some issue that the seller has just quickly fixed and done a duct tape type repair job to that is actually going to cost you real money in the future. So you need to go through all that equipment. You need to go through the gas equipment. Make sure all the elements work on your burners, on your stove and on your grill and on your griddle. Make sure that if you have a draft beer system that is a long draw system coming from the walk-in, that that glide call system that you need to cool those lines between the walk-in and your taps is working properly. And again, make sure all the plumbing, electrical and HVC is up to code and Works and won't require quick replacement.

Chris Schneider: 32:53

The absolute last thing you want to do is Buy a bar and then have to throw down money the next day because something broke. Now I will say and I've told this story before but first, boy, I bought closed on Sunday. I had a calculator break on Wednesday, cost me five thousand dollars. You're gonna do that was not because I didn't check it, that calculator that was there, I looked, fine, I'd been working for years. It's just sometimes things die. So you cannot look. No matter how much you look at the equipment, you can't prevent something from just dying because it's at the end of its usable life and you shouldn't hold up a deal for something like that. But you need to be aware of where your money is potentially gonna go. Who knows, had I actually had someone come out and inspect that calculator, there may have been an issue they found. That pointed out to me that that was gonna be an issue in the next few days or weeks. Maybe not, but you really don't want to do that because it's really. It sucks. I'm telling you from personal experience. It sucks to lay out Hundreds of thousands of dollars and then, if something go wrong the next week and have to lay out another five Because something you just bought broke. It's absolutely essential when you're buying a bar, check the equipment. Have qualified people look at it. Make sure everything works and is up to code. If, when you're looking through everything, you find something is not up to code, make sure you know exactly what it's gonna cost and take to become compliant, because you need to factor that timeline and that spend into your purchase, whether the old owner does it before they sell to you, whether you discount the price to cover it. You just need to be aware of what it's gonna take and aware of what that means for your purchase so that you can plan around it.

Chris Schneider: 34:45

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Chris Schneider: 35:25

The sixth thing we want to look at is the furniture's and fixtures and, much like the equipment, we're trying to figure out how much time is left on the furniture and fixtures, and when I say furniture and fixtures I really hear I'm talking about like tables, cushions on seats, things like that. Because, well, everything in a bar or a restaurant looks pretty good when the lights are low. I will tell you right now there are Probably the majority of bars in the world. You turn those lights all the way up, things do not look as pretty. It is not as good behind the scenes as it is on the surface. So you need to be able to know exactly what's going on with your furniture and the fixtures you're buying and what their serviceable life still is.

Chris Schneider: 36:15

The most important item to look at when you're talking furniture to fixtures is actually the bar structure in the bar top itself. Bars are expensive to build and if you think about just buying a countertop, if you're putting in granite or our quartz bar top and you're talking about buying a 30 or 40 or 50 linear foot bar worth of quartz or granite, that's gonna cost you a lot of money. Even if you're doing a wood bar or you're trying to put copper over the top of our whatever that bar top surface is, it's not cheap, but even more so than the top. What's the structure look like? Because a lot of bars you go into, the tops look great, but the structure below it is normally made out of what it's.

Chris Schneider: 37:06

Normally most bars are made out of two by fours and then probably some plywood or some composite board on the front to kind of hold it all together. Ideally, in a perfect world, all bars would be made from cinder blocks or something that's nonporous in pervious to rock. But most bars aren't made that way and most bars have a life of 15 to 30 years. You get around that 20 year bark. You have a bar made out of what it probably needs to be replaced. And it's really simple if you think about the reasoning behind that, because most bars are Going to get liquid spilled on them. Liquid plus wood equals rock. So you need to see how sound it is. You need to see if that bar is something that will need to be replaced in the future or not because, like I said, it's easily in most bars 15,000 dollars a low end and can be 50, 60, 100 grand at the high end to replace and build out a high quality bar.

Chris Schneider: 38:15

Now, one note here is you may not see that raw easily. So one of the things that happened when I closed my bar I'm pulling out all the equipment and when I pulled all the equipment away from under the bar the refrigerators and the coolers that were under the bar like under the bar top where the customer set, but on the bartender side turned out, as I pulled all those pieces of equipment out, the bar started to lean. By the time I cleared all of the equipment out from behind the bar, the bar had a good about 25, 30 degree lean to it Because the bar structure was literally falling apart, but the equipment had been holding it up. Had I not taken all that equipment out at once, I probably never would have known that was the case. But if you're going to buy a bar, you need to look for things like that. Is it actually structurally sound, does it work or is it rotting and needs replacement, because you need to plan for that replacement cost.

Chris Schneider: 39:15

Now, when it comes to your seats, check the cushions and check out what kind of seats they are. A lot of bars use a relatively standard seat and the thing is most bars and restaurants chairs. Frankly, the seats are interchangeable. They tend to be vinyl seats that are screwed on with four screws. You can go on a place like Webster on store online and buy those seats. You can probably find them through your local restaurant or bar equipment supplier as well. But are those seats ripped, are they torn? Are they starting to fray at the corners? Do you need to potentially replace those? Now, if it's not a standard seat and you need to replace it, what is it going to cost you to reupholster that chair? What is it going to cost you to reupholster that bar stool? Can you actually replace just the upholstery or do you need to essentially throw the whole thing out and buy new? So make sure you know that about your seats.

Chris Schneider: 40:17

If you have booths and banquets, look at your cushions there as well, but also look at the structure, just like with a bar, a booth or a banquette. Things get spilled on the floor and bars. There's liquid getting on there, there are people kicking them, there are people moving around on them, there are people probably jumping on them because, well, drunk people do dumb stuff. So you need to look at that structure and you also need to look at your table tops. Whether it is a wood table top or it's vermicah, or it's stone or it's plastic, look at the table top, see what kind of shape they're in. Make sure you're not going to have to replace those in the not so distant future as well. Basically, when it comes to all your furniture and fixtures, just make sure you look at them, you understand the future, usable life, what you're buying, when you'll probably have to replace it and anything that you really feel like you need to replace immediately because it's just not at the quality you need to run your establishment and your concept and be able to succeed.

Chris Schneider: 41:23

The seventh consideration that we want to look at when purchasing a bar is the staff, and the big question here is will the staff stay? Are the bartenders that are in place? Are the managers that are in place? Are the servers that are in place? Are the cooks in the kitchen management that is in place? Are they going to stay with the new transition to a new owner? Now, generally speaking, most bars they will, but they may not, especially if you're buying from someone that owns multiple bars. Maybe they really like their boss and they're just going to transfer to a different location that their boss runs, in which case you're going to lose those staff members.

Chris Schneider: 42:02

Maybe there are positions that currently exist that you don't need. For instance, maybe the current owner has multiple bars, restaurants, businesses, whatever, and they have a GM that works full-time. But you, as the new owner, intend to kind of fill that GM role in the early days so that you get your standards and systems in place, and then hire another GM a year down the road or six months down the road, so you don't need that GM. You have a position that exists currently with someone in it that is not part of your plan, so you don't need that person in that position. Maybe the prior owner was working a position that you don't intend to work in, so maybe the prior owner was working as the GM. But you intend to hire a GM because from day one, you're focused on working on and not in your business. Well, now you need to bring a GM with you when you close on the bar. You need someone in place on day one of your ownership to take over that role.

Chris Schneider: 43:04

But regardless, you need to identify who exists in what positions and are they likely or not to stay, because you need to know who isn't coming along on that journey so that the prior owner or the current owner, I guess in this case can tell their staff hey, I don't think this position will be available moving forward, or you need to identify what gaps exist in the current staffing model that you need to have filled on day one. You also need to know this so that when you're looking at the books and when you're thinking about the finances and all that of the bar, you can factor this in, because your payroll is probably not going to look identical to the last owner's payroll. A really good example of this could be say, the last owner had a bookkeeper on staff and you intend to do all your own bookkeeping, which I highly recommend as an owner, because that gives you a really good connection to your numbers and your data. But that aside, let's say they had a bookkeeper. You don't intend to have a bookkeeper. You need to take that payroll out of the book so you can understand the current state of the business based upon what you're going to do.

Chris Schneider: 44:11

Now, one variable that almost always exists is that the current staff does not know that the business is for sale. Or maybe they know it's for sale but they don't know where you are in the sales process. Or maybe they know it's for sale but they don't know the buyer yet, so they don't know what they're going to do. Anytime you have a transition like this, whether the staff is aware of it or not, there's going to be some more turnover than you expect. Somebody's not going to like you. You're not going to like someone. Someone is going to think that they can pull one over on you because you're a new owner, so maybe you have to fire them. But, regardless, that staff that you start with is still going to shake out in different ways. But you're absolutely needing to have some expectation of what your starting point is, especially when it comes to management, because if you're buying a bar that currently exists, that does great, and they currently have a GM and a kitchen manager in place, but those individuals don't plan to stay on after the sale may not be as good of a deal as it looks like, because that support those folks that are in place that do those jobs that the business relies on are both leaving at the same time. If you don't have a way to replace them, if you don't have a way to understand what their job was, what they did, how they did things, you aren't necessarily going to have the same success as the current owner, the person you're buying the bar from. So it's very important for you to understand what staff is in place, who's staying in place and what differences exist between how you intend to run the bar and how the prior owner ran the bar, so that you can really massage out your staffing plan and what that means as far as the sale transaction of the bar is concerned.

Chris Schneider: 46:03

Now, I know this has been a longer episode than most of ours, but here's the thing. We covered seven considerations, and these are seven things that you absolutely should think through. The reason why I picked these seven is because some of these details people don't necessarily think of right away, but these are just some of the things you need to think about, some of the considerations you should have. There are literally hundreds of details that you should check when you're purchasing a bar, and that's why it's absolutely imperative that you make sure that you have advisors, consultants, accountants, attorneys that can help guide you through some of this, because I don't care how many times you've bought and sold a business, contract law, unless you're an attorney, is not your thing. You need an attorney to look at your contract. I don't care how much of your own bookkeeping you've done. You need to have an accountant look at the numbers and at least verify what you're purchasing and that you're looking at it the right way.

Chris Schneider: 47:02

You're getting ready to drop. If you're buying a bar, you're getting ready to drop hundreds of thousands of dollars on something. You better be absolutely clear on what you're buying and, frankly, if you're not absolutely clear on what you're buying, if things don't look right, if you go through all these and you end up with well, this is a little weird, but I'll do this when you get to too many butts, walk away. There will always be another business for sale, there will be always be another bar you can buy, but once you've made that investment, you're stuck with it. So, too many butts, too many. This is cool, but this looks good, but I have to do this. Well, this looks good, but I have to do this. Say that too many times. My advice, frankly walk away.

Chris Schneider: 47:50

Don't buy a headache for yourself. Spend your time, get your advisors, walk through it step by step by step, and make sure you know what you're getting yourself into, because that's the way that you set yourself up for success. Trying to breeze through this, moving through the process too quickly, not looking at all the details, you may or may not be setting yourself up for success and, frankly, you don't know what you are or not. So there are unlimited numbers of surprises that could happen and you don't want to be the person that buys a business. Everything looks great, only for surprise after surprise after surprise, to cost you tens of thousands of dollars and to just drive your business into the ground. That's not the way to start a business. So make sure you do your due diligence, make sure you have the right advisors and make sure you go through every little detail that you can. Again, this has been a longer episode, so really thank you for sticking around to the end. I hope this has been valuable for you and that, whether you currently own a bar that you may sell in the future, or whether you're looking to get in the business, this has pointed out some places to put some of your attention.

Chris Schneider: 49:06

Now, that about wraps us up for today. If you enjoyed today's insights, make sure to like, subscribe and leave a review. If you want to gain more insights, join our Bar Business Nation Facebook group for ongoing conversations with me and other bar owners, where we're just building a community for everyone to get along and really promote each other's businesses and help each other out. As always, you can schedule a free coaching strategy session with me to explore how we can collaborate together, optimize your success. Or, if you're buying a bar, we can talk about other considerations, other strategies, other things that you need to work on when buying a bar. You can find links for both the Facebook group and a schedule a strategy session with me below in the show notes. Have a great day everyone and we will talk again later.

Announcer: 49:56

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