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Old 05-22-2006, 04:48 PM   #1 (permalink)
 
Join Date: May 3 2006
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Good deal or bad deal?

Hi everybody, I’m new at posting here but I’ve been reading these forums a lot lately. Very helpful stuff!

This is my first time buying a tanning salon, or in this case 2 tanning salons. I'm very aware that it might happen in the summer time but I’m also prepared for that. I think it could be a good thing because it will give me time to get ready for the next season. So here it goes:

I'm looking at a couple tanning salons owned by the same person and who are only about 2 or 3 miles away from each other (I know....they are very close). He's asking $200,000 for both of them and is not willing to finance a penny. The reasons he's selling is because he has a full time job and when he opened the salons he didn't have kids, now he has 3 and also lives 45 minutes away. The salons are located in a town that has a population of about 30,000 and that only has 3 salons in that area, which 2 of them are the ones I’m looking at. The third one is a franchise and is only about 3 miles away from each of the salons.

Now 1 of the salons is literally only 2 blocks away from a college which (I think) is awesome. The only real problem I see with this one is the parking situation. It's located on a street and only has street parking but there is a parking lot in the back that belongs to a bank which I think the customers have been using.

The other 1 is on a major avenue with tons of houses and residential buildings. They are also building a whole bunch of other buildings nearby. This one has parking spots right in front of the place and a parking lot to the side of the place, so I’m not really worried about parking here.

This guy never does any advertising from what he told me and still gets plenty of business (which still needs to be verified). He's an absentee owner and only goes to his salons just to pick up the money a few times a week.

Still with me? OK good...lol

His beds (in both salons are between 7 and 2 years old. I haven't had the chance to get the models yet but I will very soon. He's got 7 beds total at the salon by the college and 8 beds total at the other salon.

The 2 salons are beautifully decorated and need no work at all. (As far as I know and as far as I can tell). They are pretty much twins, besides for the beds.

Here's the numbers:

Salon in the residential area:
Gross last year: 164k
Net: unknown
Expenses not including payroll: 34k (rent, phone, gas & electric)

Salon by college:
Gross last year 83k
Net: unknown
Expenses not including payroll: 23k (rent, phone, gas & electric)

(This also doesn't include bulbs or lotion.)

So basically from the spreadsheet he gave me, his gross between both stores last year was about 250K. I still haven't had my accountant look at the books yet so this is not verified and even if he did look at the books I’m sure it wouldn't mean much since a lot of people keep 2 books: 1 accurate one for themselves and another for when they are trying to sell the place and want to make it seem like it's making money (not saying everybody does this but from what I hear...some people do)....BUT I am planning on sitting outside each place for a few days to count how many people walk in....hopefully that will help me figure out if the place is dead or not...it's the only way I can think of so if you have any other ideas feel free to let me know about them.

Now this guy told me that between both stores, payroll is about $50,000 a year. I have a hard time believing that even though he only has 1 person working at a time at each salon. Somehow, I came up with about $80,000 a year for both together.

Also, yesterday I stopped by both stores just to have another look and when I went to the one by the college it was closed, while the other one was still open. There was a sign on the door saying that there was a power outage...So I called the owner and asked why the salon was closed (didn't mention the sign on the door about the power outage) but the other one was still open and he said that they close between 3 and 4 pm on Sundays (same goes for the other one). So THEN, I said: Oh OK because there is a sign on the door saying that there's a power outage....I think he got kind of nervous and said: oh yeah well that was yesterday (saturday).......

Even if that was true, it doesn't explain why the store was closed Sunday when I went, unless they did close a little bit earlier (I was there at about 3:20pm by the way) and forgot to take the sign down the day before...but this is not the end of the story....
I called the electric company today to find out if there was really a power outage on Saturday and they told me that there haven’t been any problems or complaints at that address since last August...I’m pretty **** sure the electric company doesn't lie about these things. So basically, he lied to me unless he just didn't call the electric company to report it which wouldn't make any sense. No electric, no tanning!

Well that's about it, if I left anything out please let me know. I really need to know if I’m making the right decision here. I gotta take out a $200,000 loan so it's a HUGE risk but I also really think it's a good deal knowing he's grossing this much (if it's true...) and hasn't done any advertising and there's barely any competition.

Any help would be greatly appreciated, thanx guys!
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Old 05-22-2006, 05:17 PM   #2 (permalink)
 
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Re: Good deal or bad deal?

His excuse for selling seems a little lame. He claims to be an absentee owner with very little input but his estimated take seems very nice. That aside, he claims to be grossing $250k/year for both stores with 15 beds total. Seems a little rich but you havent said where this is located or what type of beds he has. What's his pricing structure?
Who's the big chain in town?
What is the rent for each location?
Years left on lease?
Have you spoken to the landlord?
What's his full time job?
What salon software? Can he provide you with reports?
I'd keep sitting outside for awhile and watching.
Have you ever owned your own business before?
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Old 05-22-2006, 06:04 PM   #3 (permalink)
 
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Re: Good deal or bad deal?

WOW

looks like you have a lot of homewrok to do. so many questions there bud....
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Old 05-22-2006, 06:31 PM   #4 (permalink)
 
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Re: Good deal or bad deal?

Ok just got off the phone with him. The lease is up this june for the one by the college and March for the one in the residential area.

I don't really want to give the location out because i haven't signed a contract yet, i only made an offer so far. I'm still working on that loan. But i can tell you that it's in the Tri-State area...if that helps.

The franchise is just a local one, not national but they do use good beds and plenty of them. Around 13 to 15 beds in each of their salons. There's a few of them in the state. I'm sorry but i really don't want to give too much info! like names, towns and stuff...sorry!

Rent for each location right now is:
Salon by college: $1723 a month
Salon in residential area: $2202 a month

Haven't spoken to landlord yet...

He's a police officer...and this is one thing that bothers me. He can't be making that much money being a cop.

He uses Helios in both salons. I'm sure he could provide all the info i need from his database, just didn't get to that yet.

This is my first time owning a business but we've had and have many businesses in the family. They just don't know anything about the tanning business...lol...and i'm learning!

By the way, i know he has beds with 24 bulbs, some with 36 bulbs and some standups, 1 of them is the Cyclone. That's all i know as far as beds go...i'm going out there on wednesday so i'll get all that info then.

I beleive he charges $55 for 10 sessions and $2 for superbed upgrade. I'll get exact pricing when i go out there.
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Old 05-22-2006, 06:51 PM   #5 (permalink)
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Re: Good deal or bad deal?

there is 1 thing you need to answer all questions........tax returns for 3 previous yrs. if he didnt claim it he cant prove it. bottom line.
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Old 05-22-2006, 07:08 PM   #6 (permalink)
 
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Re: Good deal or bad deal?

I'm definitely going to have a look at them but i'm sure he wasn't honest enough to claim it all....mostly cash business, don't think so.

I appreciate the input caribbean tan man
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Old 05-22-2006, 07:12 PM   #7 (permalink)
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Re: Good deal or bad deal?

yeah im sure he wasnt honest enough either but when it comes to selling a business its the only way to prove the salons profit. its a plus on your side. besides if he knew he was going to sell he might of "did it right" just for this reason.

oh yeah ask to see his credit card statements...80% of my business is plastic seems "mostly cash" is out the window with the economy lately
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Old 05-22-2006, 07:29 PM   #8 (permalink)
 
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Re: Good deal or bad deal?

I'll do that to. Do you have EFT setup at your salon? i hear it's a good thing to have but i'm not really sure. He doesn't have it setup at his salons but he was thinking about doing it.
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Old 05-22-2006, 07:36 PM   #9 (permalink)
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Re: Good deal or bad deal?

im in the starting process now! its detailed and specific to each salon. what looks great for one salon could be horrible for another. there is alot of info on this site about it.
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Old 05-22-2006, 08:22 PM   #10 (permalink)
 
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Re: Good deal or bad deal?

thanx i'll check it out!

Any other input guys?
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