I Need To Sell My Restaurant In Patong

[chilli]

Hi,

I need to sell my restaurant The Corner Steakhouse & Pizzeria in Phuket/Patong (see more info at http://www.thailand.tc?id=2504)

All documents are handled by our accounting company.

How can I be sure that the contract they set up between me and the buyer are correct and that I not will have any taxes or expensies in the future?

Rgds

Cyril Porseland "Chilli"

[Sunbelt Asia]

Thanks. Couple comments...

I see a number of issues for the buyer.

1. The lease ends December 2005. Way too short if someone buys AU Business Ltd. No way do they get their $ back in 18 months. This will have to be renegotiated with the landlord by the new buyer.

2. Your selling price of 2.5 million Baht is too high based on the limited info from your summary. I surmise you are making around 400,000 Baht net a year before your salary, depreciation and taxes. This means you should be asking around 1 million to 1.2 million. I estimate you are doing an average of 200,000 gross per month including high and low season. Take away the rent, wages, electricity and of course food costs. Should leave around 400,000 baht profit per year. Most restaurants sell around 2.5 to 3 times earnings including the equipment.

If I use a different evaluation and surmise your original investment was 2.5 million for leasehold improvements and equipment. If you in fact on a full year are losing money ( not just the high month of January) then your sales price should be around 1.2 million as well. (50% of your original investment)

Now if I guess wrong on the income, please clarify as by putting one month of income in high season leaves way too many questions. You have an accountant so it should be easy to know what the restaurant has done in a year.

With an open sale like this, you now have zero confidentiality. Has any of the staff left? Your sales as well must be crashing. My experience has been no one likes to eat at a place that is for sale except the prospective buyers. On that basis, even if you had a great little restaurant, now its a shadow of it former self. Having a open sale like this, even if you're making 1 million baht profit a year and was worth 2.5 million. The goodwill has been disposed so take it back to 1.2 million Baht. Imagine walking by a restaurant with a sign" For Sale" would you go into eat? It might be a great restaurant for sale for a human reason such as divorce, partnership dispute or retirement but you still would have a phobia. Forget any goodwill.

3. 2.500.000 baht for the business and 2.000.000 baht with Ken & Cyril as partners. How many shares would the buyer get with having Ken and Cyril as partners?

4. Sorry but your reason for sale sells like " The days of our lives in Phuket"

How can I be sure that the contract they set up between me and the buyer are correct and that I not will have any taxes or expenses in the future?

In the share purchase agreement, it should give you a indemnification to hold harmless on any future taxes and liabilities owed after the closing date. You resign as a director and a new director takes your place. You however will still have the responsibility of taxes and bills before the closing.

In a asset purchase you still have AU Business Ltd. and will still have the responsibility as the buyer doesn't buy the corporation, he buys the equipment, trade name and any goodwill and puts it in his own corporation.

Probably 95% of business transfers are done by an asset purchase as the buyer doesn't want to deal with skeletons in the closet of no taxes been paid or outstanding bill. Not saying you haven't but with an asset purchase and the buyer sleeps well at night.

www.sunbeltasia.com

[Bad News]

Hi,

I need to sell my restaurant The Corner Steakhouse & Pizzeria

How can I be sure that the contract they set up between me and the buyer are correct and that I not will have any taxes or expensies in the future?

Rgds

Cyril Porseland "Chilli"

I fail to undrstand how you can own and run a restaurant,

and seem to require basic information which you choose to

gain in an open forum.

I suggest this is just a gross attempt to advertise your

property outside normal advertising venues.....

or you are not who you say you are and are trying to hurt

the sale in some way.

Isn't Sunbelts analysis great?

[chilli]

Sunbelt,

1. Your analyse are very intressting and I suppose you are right about some things like that its a short time left of the contract.

2. Perhaps my information are like you say to thin to make a correct economic analyse. I will ask my accounter for more details and put it a the webpage to clerify for prospects.

One thing, I dont understand where/how you can estimate the year net to 400.000 when we have 388.500 in january?

About the open sale, yes I do it open while we have nothing to hide and the fact that the restaurant are for sale has not effected the income from turist, perhaps regular customers yes.

No, no staff has quited, opposit, they love me and Ken while we gave carrots like english course for free to the waitress who sell most... Unfortunly there is low season so some staff had to go. The spirit are great, not the same as in high season with fulll restaurant. Nobody can think that.

3. 20% is what we have today with the owner Tommie.

4. Okey, I will clearify this on the page that we need to put 100% of us in .tc, our business in Kata beach. Perhaps the history today are a little confusing.

Regarding the main reason for my post, how I can be sure of the new contract is a issue while many of my friends around in thailand have to may problems after they sold their business. What I mean is that the person who writes the contract many times not are intressted in putting in all small details while they not will be responsible for anything in the future.

I posted this question here while I thought that Sunbelt perhaps know where to go to make a correct contract...

I tried a accouting company in Kho Samui while I had a limited company there, Ernst & Young in Bangkok (same as I have for my swedish company) and finally the current one here in Phuket. Nobody gives me fully answers. They say 50% of the issue and its up to you to find out the rest with experiense and mostly high penalty fee as result.

I not read Thai and even if I translate the contract, Im not the right person to say if this is correct or not.

So if anyone have any suggestions of where I find a 99% contract (100% can never be done), post a reply to me please.

Rgds

/Cyril

[Sunbelt Asia]

One thing, I dont understand where/how you can estimate the year net to 400.000 when we have 388.500 in january?

You stated you made 388,500 baht in January. I surmise as you knew exactly that # to 500 baht, just felt that you probably know those other high season months as well. If you had done higher than that in February, certainly would of use that month instead. You were doing promotions in fact of 50% off on some days in February. Now if I was busy, I would not be doing promotions in high season. Low season, I understand! But getting back to my analysis as you knew the high season numbers and did not say something like “In November to April we did 2.4 million or 400,000 Baht per month) I’m giving the benefit of the doubt to the business and say 300,000 Baht per month during high season (10,000 Baht a day) and you are doing 100,000 Baht in low season or 3,333 baht per day. The average than is 600,000 for six months low season and 1.8 million for 6 months in high season. Total of 2.4 million.

Food cost has to be around 40% for 960,000 Baht

Rent and Key money is 238,000

Salaries with Social fund 460,000

Electricity .. Surmise is 144,000

Miscellaneous …. 200,000

Total 2 million Baht

Net profit of 400,000 Baht before your salary, taxes and depreciation.

Now this is a rough guess but odds are high, I’m very close within 100,000 Baht of these numbers if you are doing 300,000 per month in high season. Would of course have to look at the books to be sure.

What I mean is that the person who writes the contract many times not are intressted in putting in all small details while they not will be responsible for anything in the future.

I understand but that person is not a professional. If you want to have a good reputation, then you better be awake because every case is like a handprint. Every contract is different. Of over 500 contracts we’ve done in the last 2 years. Not ONE is the same. Always their will be some issues that need to be covered for those parties.

Our fee on an asset purchase agreement is 8,900 Baht or 17,500 Baht for a share purchase agreement. A Commercial Lease agreement fee for our lawyers is 9,500 Baht. Please add 7% Vat to all quotes. Translation of English to Thai or Thai to English is 4,000 Baht per agreement. If you need such a contract, contact us when you have a letter of intent from a buyer. Will be happy to represent the transfer of yourself.

As for getting a acquisition. We almost never will market a business after its disclosed to the public its for sale as they almost never ever are acquired. As for your business, the goodwill is gone but if you understand the odds are high, it has to be sold at a much lower price, to get it transferred. Our firm would be interested in marketing it as a asset sale. We are part of the World's largest business brokerage. Please contact us at [email protected]

Good luck to you and looking forward for Sunbelt Asia helping you with sincere professional advice.

Regards,

Greg Lange

Managing Director

Sunbelt Asia

www.sunbeltasia.com

[Jimbo]

You have taken 960 K towards food cost. What about beverage cost. Beverage cost % should be lower then 40% and therefor changing the results you outlined. This should lead to higher net profit then the one you indicated.

I agree with you though that the owner is trying to sell this the wrong way

[Sunbelt Asia]

Jimbo,

You're right; the drink cost of 20% would bring his cost of sales down. However he stated he gives kickbacks to bargirls to bring customers in and is doing promotions of "order two dinners and pay for one" as well. On top of that in low season he will have quite a bit of food waste so 40% I think in my opinion would be the fair # with the variation running from 32% to 50%

Regards,

Greg Lange

Managing Director

Sunbelt Asia

www.sunbeltasia.com

[Jimbo]

Sounds fair enough. It all depends on how good of a F&B person he is. Depends on how good he can plan ahead and purchase supplies during low season and obviously depends on how many kickbacks he gives to the bar girls but I guess your figures do add up. And let me tell you, I wouldnt want to invest a lot of money into those figures.

By the way Greg, which restaurants do you run / own. Maybe I can drop in for a bite

[Sunbelt Asia]

Hi Jimbo

Thanks for asking...

http://www.subwaythailand.com

One Subway is between Soi 4 and 6 on Sukhumvit Road and another Subway is on the corner of Soi 7/1 Sukhumvit Road.

http://www.coffeeworld.com

On Corner of Suk Soi 7/1

http://www.glasshomebangkok.com

508 Ramkamhang 39

O'Brians Restaurant

Between Soi 3/1 andf Soi 5 on Sukhumvit Rd. ( next to Tony Roma's)

See you there one night.

Regards

Greg