How to Buy a Restaurant Company
Industry veteran Dick Holbrook says to invest in a concept with strong financials and potential.
By David Farkas, Senior Editor -- Chain Leader, 9/9/2008 11:17:00 AM
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| J. Christopher's Restaurants President Dick Holbrook |
Today, Holbrook and Haddock each own 25 percent of a new company called J. Christopher's Restaurants LLC, which will open company restaurants and franchise the brand. The new entity also controls the brand, concept and intellectual property. The concept's founders, Jay McCann and Chris Brogdon, own the remaining 50 percent and will continue to operate the 19 existing J. Christopher's units.
Chain Leader recently grilled Holbrook, 55, former president of AFC Enterprises, parent of Popeyes, for tips about buying a restaurant company.
*Find a concept with good food. "This is first and foremost. People get in this business every day and they dumb down food or don't start with great food, and, long-term, that's a problem."
*Heed the margins. "You have to look hard at them. Margins are not what they used to be. There's not as much room for error as when I came into the business 30 years ago."
*Define the financials. "What's bottom-line cash and how does that translate into cash-on-cash returns? You've got to understand these numbers and know you can nail them."
*Do a SWOT (strengths, weaknesses, opportunities, threats) analysis. "If [the concept] is trailing comps 1 percent right now, what are things I see in the market broadly? What is the concept's positioning? Negative comps should not be the determining factor of whether to buy or not buy."
*Find common ground. "As it relates to [sellers or founders], chemistry is an important component."
*Use your own cash. "Multiples may be a bit more reasonable for individuals trying to place personal equity than for private-equity firms."
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