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Opening A Small Bar/restaurant In Bangkok

12call
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Indo-Siam Gold Member

Indo-Siam

Posted
Posted

12call -

In overview, what you first do is incorporate - most likely a Thai Private Co. Ltd. (TPCL). This type of entity - at the start - is effectively just a holding company (it doesn't "do" anything - it just hasa listing of company objectives that it may pursue). This TPCL then becomes the entity that can open a bank account, enter into lease agreements, apply for licenses, employ workers.

A TPCL can operate a number of different entities, all doing business by different names.

My firm's practice does not include help in setting up hospitality industry businesses - all we would do is help establish the holding company, and help process work pernits and visa extensions. It is my understanding that obtaining food and beverage licenses generally is a very local thing - down to the level of individual police station. Anecdotally, I have heard the "horror stories" - first you need a license to serve food. Then a license to serve alcohol. Then a license to have live music. Then a license to have live music while serving food and alcohol. Then a license for dancing. Then a license for dancing with live music. Then a license for dancing with live music while serving food and alcohol. Each of these "layers" can cost up to several million baht - paid to the local police.

What might go much smoother would be to have the business run by a Thai (if you hvae one you can trust), in the Thai's name. Then the Thai pays a visit to the local police station to learn the local licensing requirements (I suppose it would be Thonglor station where you are talking about setting up - or is there a Onnuch police station???).

Sunbelt Asia does have a practice that is more oriented toward buying and selling hospitality businesses - an they probbaly know more about relative licensing burdens in different areas.

A few other questins:

1. How long have you been in Thailand, and do you have a trustworthy Thai partner?

2. Are you planning to work for the company? Will income from this pub have to support you (and help you build wealth) or is this just a hobby, or something to keep a Thai wife/girlfriend busy? Can you invest, and then run for several years just to recover your investment? (assume that you will not make your first satang of return - beyond your initial ivestment - until year five)

3. Do you already have a precise street location/building in mind?

4. Have you had someone (Thai) pay a visit to the owners of several of the nearest comparable hospitality outlets to the place you plan to set up, and learn from them about the "informal" costs of remaining in operation in that area?

5. Do you have a background in running a hospitality business - somehwere else, or in Thailand?

6. Do you have an exit strategy? (sell for a profit; run as a family business and turn it over to your children; ???).

7. Out of curiosity - why set up in Onnuch? Does you business plan target Thai clientele?

Good luck!

Steve Sykes

Managing Director

Indo-Siam Group

Bangkok

www.thaistartup.com

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p1p Platinum Member

p1p

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FAR better to put the business in the name of a Thai as a sole trader, or as a partnership with yourself as a minor partner. Any company involvement will make the book keeping and taxation etc. many times more onerous.

Licensing is generally not too much of a problem. My experience is up-country, (Chiang Mai & Esarn) and all that has generally been required was a trip to the Ampur office, an hour or so and about 3K Baht for all licences.

Most important question to answer is regarding your own experience and expectations. This business is not the easy, fun life that so many misguided new bar/restaurant owners expect it to be. If you are to make it a success, expect to work harder and for longer hours than you ever have before. Eighteen-hour days are common for the successful proprietor; those who work only ten to twelve hours or so daily are likely to fail.

Beware; current statistic is that under 2% of start up bar/restaurant businesses will still be operating under the same ownership after five years.

The failure rate is very high for many reasons: *. Most cannot keep covering the running costs of a business while it is becoming established, or in a low period. The oft quoted average time for a restaurant to break even is three years. *. You cannot slack off when your business is successful, the work becomes harder and many people cannot take that. *. Drinkers dream of being able to own & run their own bar. Alcoholism, Cirrhosis and bankruptcy claim them extraordinarily quickly. *. Staff problems are immense. They are difficult to find, difficult to train, difficult to keep and they often rob you blind. *. Landlords are the most difficult people on Earth, particularly in Thailand. I have lost two successful businesses here because the landlord saw we were doing well and just stepped in to take over. It is difficult in the extreme for a farang to go up against a wealthy, landowning, important Thai in the local court and expect to receive justice.

Good luck and please make sure all your ?T?s are crossed and ?I?s dotted.

:o

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Sunbelt Asia Platinum Member

Sunbelt Asia

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"FAR better to put the business in the name of a Thai as a sole trader, or as a partnership with yourself as a minor partner. Any company involvement will make the book keeping and taxation etc. many times more onerous."

True its better to be a sole proprietor than any other company structure if you’re not worried about personal liability. However unless you are American or Thai, this method won’t work. Your legal standing on you owning the business if you’re not Thai or American is zero as a sole proprietor. You’ve just donated the business to a Thai, sure you saved money on tax but all your hard work could be zero. Legally at least you own nothing.

Partnership… you cannot control or manage the company. The Thai has unlimited liability but if you interfere with the mgmt, you have the same liability as the Thai partner…unlimited. You cannot get a work permit unless you file for Vat.

"Licensing is generally not too much of a problem. My experience is up-country, (Chiang Mai & Esarn) and all that has generally been required was a trip to the Ampur office, an hour or so and about 3K Baht for all licences."

The food license and alcohol license are relatively easy to get as long as you have the house papers from the Landlord. The food license they will come out and check (you can’t get it in one day) Cost with lawyer is 5,000 Baht.

"Most important question to answer is regarding your own experience and expectations. This business is not the easy, fun life that so many misguided new bar/restaurant owners expect it to be. If you are to make it a success, expect to work harder and for longer hours than you ever have before. Eighteen-hour days are common for the successful proprietor;"

Sure if you are just starting out, 18 hours are needed per day. After awhile though, If you have done a good job, your employees will emulate you. Were open 24 hours and some days we don’t even visit the business. The sales don’t go down either.

"Beware; current statistic is that under 2% of start up bar/restaurant businesses will still be operating under the same ownership after five years. "

Can you show me where that stat is? Its high but 2% is the first time I heard that number.

"The failure rate is very high for many reasons: *. Most cannot keep covering the running costs of a business while it is becoming established, or in a low period."

Cash flow is the number 1 reason for failure. People do a business plan. They figure they’ll be up and running in 2 months. Contractors delay, sourcing problems, hiring, etc and they finally open after 5 months while they are still paying rent. They finally open and noone knows who they are. They don’t understand Thais are trendy. They follow places where their friends talked about. Throw the business plan out the window. It stated they would be doing 200 covers a day after the second month. Acquire a business that is ongoing and the odds of success are much higher. Why? You are looking at 10-20 restaurants that are open and getting cash flow from day one. You can see what is working and when you open, you pick the best business. That in real time is doing 200 covers or more.

"The oft quoted average time for a restaurant to break even is three years. *"

Acquiring an existing business rule of thumb is 2.5 times earnings. 40% return per year. You have recovered your investment in 2.5 years and now have an asset totally paid for. This is a rule of thumb in the industry but no guarantee, a new owner will keep the sales at the same level or they may even go lower. This number though has been valid for the 20 years, I've been in the business as a good solid number.

". You cannot slack off when your business is successful, the work becomes harder and many people cannot take that. *"

I think you’re talking about a bar that has a foreign business owner. Many people co0me in to see the owner. When he’s not there, they don’t stay. Have a manager that has an outgoing personality. In restaurants, this need for a white face is not as important.

." Drinkers dream of being able to own & run their own bar. Alcoholism, Cirrhosis and bankruptcy claim them extraordinarily quickly. *"

Some do drink. Most people who fail, blame alcohol ( forcing to drink with customers) and they spent their wad on building out the bar( no cashflow).

". Staff problems are immense. They are difficult to find, difficult to train, difficult to keep and they often rob you blind. *"

One of the main reasons why acquiring an existing business is more successful. Good employees are worth their weight in gold. The previous seller has done all the hard work. As for robbing you blind… Thai employees are much more honest than most any other nationality. But you get one bad apple, it spreads fast. You better paid 100% as an owner. If you do, your employees will respect your character and will emulate that.

." Landlords are the most difficult people on Earth, particularly in Thailand. "

LOL. Finally something we really agree on. How bout also the most greediest!

"I have lost two successful businesses here because the landlord saw we were doing well and just stepped in to take over. It is difficult in the extreme for a farang to go up against a wealthy, landowning, important Thai in the local court and expect to receive justice. "

Sorry to hear that. Check out the reputation of the landlord. We personally just walked away from a potential perfect retail location because of the landlords rep. Be sure that you have a long term lease.

"Good luck and please make sure all your ?T?s are crossed and ?I?s dotted."

Work with a professional. You will be glad you did. They will warn you of the pitfalls.

Sunbeltasia.com is our site. Feel free to see what we have on the books.

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12call Silver Member

12call

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Thank you all for the info.I have been offered a 3 year contract(renewable).Can I have this contract in my name but have a Thai run the day 2 day business?

No LOUD music,2 clean WORKING toilets(pooying & poochai),Thai/Western food,ICE-Cold beverages and rooms to let(short/long term).

I'll keep you posted.

Bob:Sri-Nakirn end.

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p1p Platinum Member

p1p

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Sunbelt Asia

I thank you for your interesting reply to my post. I apologise for taking a while to reply but I do not check in every day. I know Sunbelt Asia and have previously done business with your company.

We seem to be looking at this subject from different ends of a spectrum. I have been at the sharp end of the business for the best part of thirty years. I have been chef, manager and proprietor of several establishments, most of which have been regarded as of world class standard. I have also taught cooking and management, both at college and privately and have presented television programmes in Europe, Japan and Australasia.

I would abrogate my responsibility and disregard my experience if I set out to paint a rosy picture of this business. I have watched far too many people, with a love of good food and drink, enter this business and lose the shirts from their backs. I have even had friends spend time in prison and others commit suicide for this reason.

I firmly believe in perhaps exaggerating the difficulties to try to counteract the dreaming impression so many people have of the business. Everything is not easy, perfection and light enabling the proprietor to sit back and enjoy good food, drink and the company of his/her friends. Bills arrive on a daily, weekly and monthly basis and they must be paid. Those who turn a blind eye to the hard business end of their enterprise soon find that the bills are not paid and they are in court minus a shirt, let alone their car, home and often, family.

I fear if you were to take my approach to advising aspirants, you would only end up persuading potential purchasers to look elsewhere and would do your business and your clients a great disservice. For the sake of your business, you must therefore talk up the benefits while not stressing, or minimising, the difficulties.

As a professional, I have an alternate vested interest, to dissuade dreamers from entering the catering/restaurant trade. Over the years I have witnessed rental and other costs spiralling almost out of control and have several times lost potential properties to inexperienced new owners who agreed vastly inflated rental levels and then quickly went bankrupt. The rental these people agreed to pay became a basis for future rental negotiations in the area and resulted in dragging down other, long standing, viable businesses. (I have written pieces on this problem for both the trade and mass circulation press in Europe.)

? its better to be a sole proprietor than any other company structure if you?re not worried about personal liability. However unless you are American or Thai, this method won?t work. Your legal standing on you owning the business if you?re not Thai or American is zero as a sole proprietor. You?ve just donated the business to a Thai, sure you saved money on tax but all your hard work could be zero. Legally at least you own nothing..

True, however there are ways to safeguard your interest.

You cannot get a work permit unless you file for Vat.

Also true

The food license and alcohol license are relatively easy to get as long as you have the house papers from the Landlord. The food license they will come out and check (you can?t get it in one day) Cost with lawyer is 5,000 Baht.

I?m afraid I have always done these things myself, hence 3K Baht.n It is possible to arrange the inspection by phone and then visit the office to arrange all licenses at one time.

Sure if you are just starting out, 18 hours are needed per day. After awhile though, If you have done a good job, your employees will emulate you. Were open 24 hours and some days we don?t even visit the business. The sales don?t go down either. 

You are lucky. Good employees are always subject to poaching, which leaves you holding the baby again.

"Beware; current statistic is that under 2% of start up bar/restaurant businesses will still be operating under the same ownership after five years. " Can you show me where that stat is? Its high but 2% is the first time I heard that number.

Statistic comes from a ten-year European study conducted by a British catering college, I believe Westminster. The figure is for first-time owner-operated single-site restaurant businesses and does not include chains, franchises or outlets as part of larger enterprises; hotels, exhibition centres etc.

Cash flow is the number 1 reason for failure. People do a business plan. They figure they?ll be up and running in 2 months. Contractors delay, sourcing problems, hiring, etc and they finally open after 5 months while they are still paying rent. They finally open and no-one knows who they are. They don?t understand Thais are trendy. They follow places where their friends talked about. Throw the business plan out the window. It stated they would be doing 200 covers a day after the second month. Acquire a business that is ongoing and the odds of success are much higher. Why? You are looking at 10-20 restaurants that are open and getting cash flow from day one. You can see what is working and when you open, you pick the best business. That in real time is doing 200 covers or more.

An experienced professional advisor should help you put together a realistic business plan and point out the pitfalls. You will tend to pay a premium for a successful running business, whereas the fire sale bargain may well have picked up a bad reputation, which will take years to overcome. Starting from scratch, you have the chance to mould your own reputation from day one.

"The oft quoted average time for a restaurant to break even is three years. *"

Acquiring an existing business rule of thumb is 2.5 times earnings. 40% return per year. You have recovered your investment in 2.5 years and now have an asset totally paid for. This is a rule of thumb in the industry but no guarantee, a new owner will keep the sales at the same level or they may even go lower. This number though has been valid for the 20 years, I've been in the business as a good solid number.

Accepted, although the change in ownership will almost always cause an initial hiccup in sales and can push you over the three year mark.

". You cannot slack off when your business is successful, the work becomes harder and many people cannot take that. *"

I think you?re talking about a bar that has a foreign business owner. Many people come in to see the owner. When he?s not there, they don?t stay. Have a manager that has an outgoing personality. In restaurants, this need for a white face is not as important. 

Again, good staff tend to be poached and, if you are not prepared for the eventuality that you may find yourself back on the grindstone, it can come as a nasty surprise.

." Drinkers dream of being able to own & run their own bar. Alcoholism, Cirrhosis and bankruptcy claim them extraordinarily quickly. *"

Some do drink. Most people who fail, blame alcohol ( forcing to drink with customers) and they spent their wad on building out the bar( no cashflow).

I have never partaken of the booze while working. I used to average being offered between 20 to 35 drinks in an evening. It was easier to say no to all. The great pity is the number who do drink and lose everything.

". Staff problems are immense. They are difficult to find, difficult to train, difficult to keep and they often rob you blind. *"

One of the main reasons why acquiring an existing business is more successful. Good employees are worth their weight in gold. The previous seller has done all the hard work. As for robbing you blind? Thai employees are much more honest than most any other nationality. But you get one bad apple, it spreads fast. You better paid 100% as an owner. If you do, your employees will respect your character and will emulate that.

The most likely time for staff to leave is just after you take over a business, so this is the worst possible reason.

." Landlords are the most difficult people on Earth, particularly in Thailand. "

LOL. Finally something we really agree on. How bout also the most greediest!

Hear - Hear!!

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Sunbelt Asia Platinum Member

Sunbelt Asia

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Hi p1p,

Didn't see your post till now. If you worked with us in the past, then you know that much of our paperwork states their is risk. You probably remember signing docs like this..

Business opportunities by their very nature carry risk. Some of these risks include obsolescence or reduced demand for service or product, regulatory laws, ineffective management, changes in the local or national economic condition, and many others. Due to the risks inherent in business opportunities, a buyer could incur a loss, including but not limited to their entire investment. Buyer acknowledges that they understand these risks and that Sunbelt Business Brokers cannot and does not in any way warrant or guaranty the future vitality or prospects of any business.

Owning a business all is about risk. We find we lower the degree of risk for the buyer with an existing businesses but if a buyer is a bad manager, it simply won't work.

If he or she is a good mgr, odds go up dramatically with acquiring an existing business.

I would be VERY careful with a partnership. Unlimited liability if you get involved with management plus no protection as a shareholder. Under a limited company, you can get voting rights and the power to bind the company.

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Sunbelt Asia Platinum Member

Sunbelt Asia

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The most likely time for staff to leave is just after you take over a business, so this is the worst possible reason.
 

We really have not had a problem with staff leaving the Buyer. Its in the contracts of coursde the Seller can't hire them. Its really an art on transferring a business, we coach the Buyer and the Seller on the staff meeting. Up to this point, this has not been a issue of staff leaving. If the Buyer was an ass, it could happen but we  just don't have it with our clients.

An experienced professional advisor should help you put together a realistic business plan and point out the pitfalls. You will tend to pay a premium for a successful running business, whereas the fire sale bargain may well have picked up a bad reputation, which will take years to overcome. Starting from scratch, you have the chance to mould your own reputation from day one.

Fire Sale.. you better change the name of the business. Only reco for experienced operators.

On existing businesses, if you don't have the experience, its the only way to go. Its all about lowering the risk, sure you pay a premium but the odds are VERY high, you'll be much better than a start-up. For an experience mgr, that has a database of clients and a reputation... then that’s a different ballgame. 90% of our clients however are first time owners. They understand the risk and hardwork and the odds. They need their hand held and we do it.

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