Pizza Today - July 2020 - 16

BUILDING BLOCKS

NICK BOGAC Z

Buying a Restaurant
with Zip and Zilch

op quiz: What's the first step to
opening a new store?
If you read Volume 1 in this
series, you know it's all about securing the
right deal for the new location. You'll also
know the first two components to this are
finding a restaurant owner who has a pain
point (therefore, looking to sell quickly) and
a location that was once popular with the
community (but not now). And if you're
going for extra credit, you know there's one
more piece to getting the right deal: owner
financing.
When it comes to the financial side of

the deal, I'm not traditional - or maybe
I'm too traditional. I don't believe in using
banks unless you have to, nor do I believe in
a business plan because too many obstacles
get in the way. I believe in a good oldfashioned handshake between the buyer
and seller.
Owner financing, or when the property's
seller finances the purchase directly with
the buyer, is how I paid for five of my six
restaurants. Remember, when buying the
property, as excited as you are, the seller
should want to sell even worse than you
want to buy. That makes owner financing a

more viable option.
Now, negotiations start. I buy
all the equipment in the building,
full liquor licenses (which can have
staggering values) and any goodwill
the former company may have. I also
prefer to buy a place that is still open,
because it makes obtaining permits
easier and customers are used to
visiting the location. However, while
these pieces are significant, the actual
financing terms are most important
- even more than the price. The price
matters, of course, but even if it's a
little high, you can consider it a premium for the seller holding the note.
My first restaurant is a great
example.
The owner wanted $180,000 for
all the items described above. It was a
fair price, so I told the seller I would
be happy to pay full price and take
over right away. He was ecstatic, but
there was a catch - I had no money.
I mean, zip, zilch, zero.
As he got past his shock, it was
time to deal. We settled on this:
For nine months, I would run the
restaurant, giving him all the money I
was able to save as the down payment.
He would finance the rest over five
years at an interest rate I negotiated
(six percent). So, by bootstrapping and
watching every penny, I was able to
save $80,000 over those nine months.
We then drew up paperwork, and I
paid the remaining balance over the
next 60 months.
With minor adjustments, I've used
that formula for nearly all my restaurants. Few consider the idea to buy
a restaurant with little or no money
down, but I've tried it and perfected it.
You can, too.
And once the deal's in place, we
move on to the next big question:
"Now what?"
Here's a hint: "Eat the elephant one
bite at a time." ■

NICK BOGACZ is the founder and president of Caliente Pizza & Draft House in Pittsburgh. Instagram: @caliente_pizza

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Pizza Today - July 2020

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