TFranssen

Great questions!!! Genius you're a Genius!!

MATT A

~BLUSH~

TanningGhost

Okay, let me set the scene.

Salon Details - 9 units (plus one more room plumbed and tiled for a Mystic Tan), 1,500 sq ft., FF&E is 1 1/2 years old (estimated at $95k), build-out estimated at $35k, demos are upper-middle to upper class (several celebs right around the corner)-suburb of major city, I don't have a customer count yet. I've asked for that info.

Sales - To be more accurate, gross sales are closer to $35k. Expenses in the first year were about $60k. So, yes, the salon was in the hole $25k in it's first year. These figures are from the P&L. I have not seen the tax returns yet. Sales are up for the first 5 months of this year...about 30%. The owner hasn't changed his ways with respect to advertising or promotions. I believe this is just an increase in walk-in traffic (salon is anchored by large grocery store). So, if the salon goes status quo for the rest of the year, sales will probably be around $50k. That's a 43% increase..great percentage increase, however, not where this salon should be operating with 9 beds.

Timing - Terry, you are correct about the timing. The salon opened in mid-January.

I still have more homework to do with respect to the surrounding competition. There is an independent salon across the street. Facility is not as nice, but they do have a Mystic Tan which the salon I'm looking at doesn't. However, it is plumbed for it.

So, my question is...can you put a value on the benefits of it being a franchise (i.e. name recognition, training, support, advertising, etc.)? Based on the FF&E and buildout, I couldn't see offering more than $100k based on FF&E and build-out. Thoughts?

I'm meeting with the area rep this afternoon.

RDKJ

You would be certifiably insane to buy that salon. Those are the worst revenue numbers I've ever heard. Is it a PB or ET? I would bet a PB.

Would I pay 100k? Absolutely not! Value of name recognition? It appears there is no value. 35k is beyond horrific, by any standard.

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[ This Message was edited by: RDKJ on 2005-07-24 09:42 ]

TFranssen

Precisely what I was thinking after tanningghost's last post.

Listen, I was NOT correct with my evaluation if that salon opened in mid-January!!! A mid-January opening would ensure a solid year of income!! DON'T DO IT!

No HOMEWORK necessary!! That is a grenade!

I'd bet the financing associated with that salon is non-assignable, as well - hence the high price! There are probably liens on every piece of equipment within!

One salon owner called me absolutely crying after taking over the payments on a loan for a salon. After paying an outrageous down payment to the previous owner and making almost a years worth of payments on the loan - the bank noted the check writer was not the person on the loan and called it!! Therefore, all the hard work done to re-establish the name and the money invested - caused a disaster and a very bad outlook on tanning!

This is an awesome industry and I would not want you to step in ~pooh~ when you make your dreams come true! You want a great beginning with a very prosperous future? Then a fresh location, one with the support that you would want from a franchisor - or if you don't want the hassles of doing your own build-out, etc - then at least buy a location that is profitable!

TanningGhost

Thanks to you all for your comments. With respect to the current financing, I've been told through the broker and owner that he has liens on nothing. Everything is paid for. I have the impression that this guy isn't short on cash. I wouldn't be assuming any liabilities. I'm meeting with the area rep this afternoon. I'll see what he says and post our conversation.

movieking

I agree with all the comments.

When you're with the area rep be sure to ask why they allowed him do so poorly. The success of the francise is based on the success of the franchisees.

RDKJ

Quote:I have the impression that this guy isn't short on cash.

He will be in about 6 more months. Add up his monthly expenses, multiply them times 6 months and that will be how much money he will lose the remainder of the year. If he only did 35k in the first half, he will be very lucky to do 20k the last half.

Moses

When I was 24 I bought a video store franchise from a company. We were paying them 5% off the top but they were not paying their bills. I was paying them to use a name that they were destroying. Is the franchisor doing anything to help this bomb? I'm not sure if I would take this deal if they paid ME to take it. I certainly would not pay them anything.

Steve Underhill

If you really want this location, just wait. It will be available in a few months by just taking over the lease and putting your own equipment in. At this rate I don't understand how they are still in business. Email me the demographics so I can see how much business the salon should be doing. Do not buy this salon. Go to the landlord and tell them that you want the lease if they ever leave. Well here is another Franchise that paid and got nothing.