This question is from Hot Dog Cart News reader Rich. He writes…
Steve,
I need some advice. Have opportunity to buy a NY style cart plus location which is best in town. (town is 80 miles away) The owner prefers the girls there now keep operating the cart which suits me perfectly! I’m a shift worker. My question is what do I need to know before I take over a truly turn key business. The girls run the whole thing – couldn’t be better! 🙂 See any possible snags or essential info I need to know before I buy?
Sure could use some pointers on this business it’s a permanent location guess where? Right outside the newest WalMart!!! Meanwhile I’m stuck out on the tug I work on arrrgghh very stressful DON’T want to miss this one!!!
Cheers, Rich.
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Hey Rich,
Buying a business is a big subject, but at the minimum you should ask to see a balance sheet and a profit and loss statement for at least three years back (if they have been around that long).
Those statements should give you a good snapshot of the business. Look to see trends over time such as increasing sales, decreasing costs, etc.
You want to get a feel for where the business is heading. Also look for areas that can be quickly improved for more profit such as cutting silly expenses or adding high profit margin items like nachos, for example.
If you find easy fixes like these, you’ll know that the business can be run more profitably when you get your hands on it – and DON’T tell the current owner what he is doing wrong!
You want to negotiate a purchase price based on current conditions (hopefully undervalued), then be able to go in, clean it up, and realize the hidden profits from the underutilized assets.
Very interesting opportunity Rich. Let me know what you find…
– Steve
P.S. We all should be building our hot dog cart businesses so that we’ll be able to sell them someday, and the only way to do that is to keep good financial records. That can be difficult if you don’t know how, so we built the software that does it for you. You don’t need to know bookkeeping or accounting, just click a button and the software does it for you. Click the link below to try it for free…
Don’t wal-mart sell there own nasty little wieners inside..the one by me does there
like a buck an change, Disgusting but cheap..certainly not no Chicago Style Dog’s here..
Hey Rich my advise also is to take a day
and stake out the place..if it’s in plain sight just sit in your car and watch to see how busy it really is..
Then ask him to see if you can work the cart a few days BEFORE you buy it..sorta
like on the job training..weekends at wal-mart are always crowded by me..this way
you will definetly see how things go..
Good Luck.!!
Steve, the Cash Tracker is FABULOUS! My husband struggled trying to keep records and finally I just went ahead and bought it for him. It has changed his world. I recommend it to everyone. There really is alot more to running a hot dog cart than meets the eye.
Hi Rich,
Just want to wish you good luck on your new venture. I started my new hot dog cart business on May 1st. of this year. My business has grown so fast that I can no longer do it on a cart so I have purchased a trailer to expand my menu. My best advice to you ( and I swear no one is paying me to say this) is to buy the Cash Tracker software. It has saved my sanity. I was covered in paperwork. The business is so much fun but I dreaded to come home to the paperwork. Believe me , this software is well worth the price. Have fun!!
Good advice, Steve. In discussing the business with the current owner, Rich should find out if he hides any income from the IRS. If so, he is more likely to be hiding thinks from Rich. If he’s a cheat, he’s a cheat…beware!
Also, Rich should be reviewing the business’s tax returns (Fedl, State, Sales Tax), and the business bank records for evidence of income and expenses. One of the scariest things about this is having a cash business 80 miles away run by strangers. I believe most people are honest, but you have to make sure.
Good luck, Rich!
How much are you spending on this “turn key” hot dog cart operation? Does it come with a commissary you have to pay for?
Sounds like you will be buying way more than just the cart.
I try by all means never to be negative but if these girls run his business why is he selling?Why don’t the girls buy it?As the old saying goes if its to good to be true beware!!!!!Really hate to give negative ,but this sounds to good.Sorry………….
Yeah, I agree with all the comments so far. I once learned a saying when I owned a ServiceMaster franchise: “Inspect what you expect.” That applies to employee supervision. Good advise for any business. Are they being allowed to “eat” literally some of your profits. That’s okay if its approved by you. Also, you need to know what percentage your payroll is costing you. Are the employees being paid under the table or are they getting Social Security, Medicare and Federal taxes taken out of their pay. Remember, as their employer, you are responsible for half their taxes, so you have to add that to whatever their hourly rate is to figure your true cost. Talk to a good payroll service for details. They are very inexpensive to take the paperwork off your back. Plus they will file the quarterly tax statements for you and print paychecks. One other thing, why is the seller getting rid of the business if it’s so profitable. I always ask that question to see if they hem and haw. I recommend doing the business yourself first, even if only part time so you get a feel for it…then buy someone else’s great business (or headache.) Best wishes on you success. I love my hot dog biz!! Lots of fun if you love people…
Last week in my business class the instructor said the same thing that Yanks Franks did, always check the tax records when buying from someone else
Good points Yanks.
“Inspect what you expect.” I like it Dave.
Bob,
I don’t consider those nasty cheap hot dogs as competition. Two different products completely.
-Steve
Thanks Karen!
Meg, glad you like your Cash Tracker software!
-Steve
Jeff,
If it’s too good to be true it usually is – but there may be some circumstance that is causing the owner to undervalue it. Maybe he has debt problems, I don’t know.. My point is, don’t dismiss the deal without doing the due diligence. It may be a bad deal or it may be a diamond in the ruff.
-Steve
Thanks for the info Steve!
Some of us get so excited getting into the business that we forget some of these simple things to check out.
Jeff;
It sounds like a great opportunity, for you to operate it and keep the profits for yourself. Absent business ownership, can be a recipe for disaster. You know, the cats away, the mice will play. If you are not close at hand, and they know it, you will never know what is going on in your absence.
Chappy
I would verify the deal with Walmart and make sure there is future security there.
Steve that is why you are right,and that is why i hate to have a negative attitude…………
Most food licenses are no longer transferable. Be sure and check that, and what new inspection, license and permits will cost. No matter who operates the cart, a new owner will determine the permits and license.
wow! you guys seem to make it sound too confusing! Just get the software and follow common sense! Cash, Cash, Cash! ya know what I mean.
My question is, how did you get to set up at Walmart. Every Walmart here in Kansas City, Mo stated that they have a contract with Subway, so they will not allow anyone to set up outside. So my question is how are you doing that?
Are there anti-competitive laws that would make the walmart/subway contract illegal?
Talk w/the manager at Walmart first. Make sure there are no changes coming down the pike. ie: we’re going to be putting up the location to competitive bids, etc. How long is the lease locked in for?
Wow terrific advice all thank you. Turns out many of you were right I asked for financial records and presto the deal was off. Very interesting point on checking with WalMart first to see how secure this contract is but I already have a red flag in that he is not quick to sell. I will suss out the operation. Very sweet by the sound of it. The girls just sell and handy le money the security guards set up and stow cart right in WalMart. I haven’t been able to devote as much time as Id like but will take lots of good advice here and put it to practice before I buy.
The cart and business was going for $15,000 the guy was willing to go cheaper if I kept the current girls working the cart employed. The long distance between does worry me as it will breed contempt for me the owner especially if I am rarely there encouraging any cooking of the books or whole host of problems so I will need to proceed very carefully. The fact he does not have or want to produce financial records is not necessaily all bad as the WalMart just opened but I have taken on board the cautionaries thank you very much for all the help everyone especially Yanks Franks you pretty much nailed it but hey lesson learned! 🙂
For those who have problems with WalMart here is a good way to get there at least temporarily. Just arrange a fundraiser for the SPCA or Hospital Auxiliary any charity yo like. Have some placards made up (your charity probably has some ready to use) then approach WalMart with the fundraiser idea. Eventually of course you will outstay your welcome so don’t plan on setting up shop but you should be able to do this every season for at least 2 possibly 4 weeks a summer which should really boost your bottom line. Best of luck everyone and thank you kindly for the friendly and very useful advice. I’m a shift worker working out of town and this summer has been uncharacteristically busy for my present profession, so closing this deal has been especially tedious and difficult but will post again in a week or so to update.
Cheers, Rich.
Stay on the tug, you do not need a cash business that you are not able to drop in on anytime , just don’t do it save your self a huge pain in the posterior, you could not even start to imagine the ways you will loose money,
In California be sure the health permits are current. If they are not, you may get stuck having to rtro-fit the cart to the new 2010 health standards. I had a friend who could not sell his cart because of it.
You mention “the girls” a few times. Have you interviewed them, since they will become your company’s best asset?
Please, in the future, refer to them as “future contractors/employees”–it’s lots less sexist.
I don’t think calling them “the girls” is sexist. They are girls, aren’t they?
They definitely shouldn’t be called “the guys”, and if they were guys then they shouldn’t be called “the girls”.
Guys are guys. Girls are girls. Dogs are dogs. Cats are cats. Tires are tires. Fire hydrants are fire hydrants.
You shouldn’t be ashamed to be called what you are.
You have to go through Arkansas home office. Which is hard to do. But if Walmart is in a strip mall you can bypass Walmart and go to other stores in the mall or go to owners of mall. I am in talks with owners of the mall where Walmart sits in my hometown and it is looking good so far. I have several other store owners who want me there next to them. I will be seen by the Walmart crowd. Just try every angle it can be done.right now I’m at a local t hi ire company who sits 1/4 mile from Walmart and 80% of wal mart traffic goes right by me business is growing every week I get more sales. Just don’t give up this is your dream. Keep Slinging!
Great tips, thanks Mike!
I like what was said above. Generally speaking, many people keep two sets of books. One for the IRS and the real books. Never buy off the second set of books. The value of the business is what he’s reporting to the IRS. Whenever I buy a car I ask if my mechanic can look over the car. If the person says no, you know they’re hiding something. I’m glad you asked about the IRS records.
What is the reason he is selling the business? If it is being run by someone else, “The Girls”, why is he selling? I could see if he was running it by himself and his health was failing, etc., good questions to ask among others. You’re doing a great job by checking all of this out. Keep brainstorming and do a Google “fuzzy search” for questions to ask when buying a vendor business or something like that.
Good luck and I know this will help future folks that are thinking about buying a business.
Thanks Kevin!