Start & Run a Catering Business. George Erdosh

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      Before you utter even one word expressing serious interest in purchasing the business, ask if you can work in the kitchen for a week or two with the crew and go with them to several events — at no charge, of course. Even better, don’t ask; insist on doing so. You will learn a lot about the business and whether it is for you. Remember, you are likely to be in a buyer’s market and the owner will try to bend over backwards to please you. You can do this frontline work while your lawyer and accountant are doing their work.

      Remember, total immersion in every aspect of the business is essential. Do nothing else. Drop your social life to a minimum. Live with the business you are interested in buying. Do your research, either in a library or on the Internet, on legal and financial aspects. Perhaps even check out the suppliers, but for now only a cursory check is needed.

      Whenever you have free time, work on your recipe collection and food preparation techniques. Work on your efficiency as well.

      Once you have worked in the business for two to three weeks, attempt to figure out the costs of labor, insurance, rent, utilities, taxes, vehicles, and so on. Compare your figures with those reported by the owner. Then estimate food costs, or even better, ask for a current monthly food and supplies total and calculate roughly what the current month’s gross and net profits (or losses) are. This exercise will certainly give you some indication of the authenticity of the owner’s records. Discuss your findings with your accountant. Keep in mind that catering income is seasonal and can vary from month to month. The two and a half weeks of Christmas holiday season could bring you 50 to 70 percent of your annual gross income!

      Then it is time to develop the purchase agreement and negotiate the price. The owner will likely come up with an asking price, and you will, in consultation with your lawyer, give a much lower figure based on what you feel the business is worth. No matter how far apart you start, eventually you usually can come to a mutually satisfactory agreement.

      How you are going to come up with the dollars is not the subject of this book; it could be cash up front, or payments over a year or two, or there could be conditions attached to your payments regarding the seller’s true representation of the business. It will depend on your situation.

      Before a purchase agreement is prepared, you and the owner should do a thorough inventory of all equipment and vehicles that are a part of the business. Prepare a complete list of everything, including vehicles; office furniture and equipment; even an approximate amount of china, glassware, silverware, napkins, and tablecloths. Make a separate list of items that will be excluded from the sale, if any. The owner is likely to have personal items, perhaps a collection of cookbooks, files, pictures, and so on. The list of items included with the business should show anything having an approximate value of $50 or more.

      The purchase agreement is now the lawyer’s territory. It should include the purchase price, the full list of all equipment and vehicles that are part of the purchase price, and any contracts or events in progress. For example, if much work has already been done on an upcoming event, the owner could be entitled to some of the net proceeds. That, too, should be outlined and included in the agreement.

      If the seller is willing to train you or assist you during the takeover period, contract with him or her for a specified number of hours over a period of weeks or months in the purchase agreement. Be specific about what the contracted work will include. For example, the seller might be contracted to attend all catered events for the first month.

      The agreement should also include a list of clients with addresses, telephone numbers, email addresses, and contact names; a copy of the rental lease; and many other clauses for mutual protection, like goodwill. Goodwill encompasses the client list, the name of the business, the value attributed to years of marketing, word-of-mouth recommendations, client satisfaction that generates future revenue, and everything else that is part of a successful business.

      The third major piece of the agreement is a covenant not to compete. Insist on this. Without this covenant, the seller could set up in another location and keep his or her faithful clients, leaving you sitting by a quiet telephone. The covenant should be for a minimum two-year period, preferably more, and it should specify a geographic area of a 30- to 40-mile radius around your kitchen.

      Chances are, once you take the business over, you will lose some clients: perhaps many. You cannot exactly duplicate your predecessor’s style, charm, food, and service. But why would you want to? You have your own style, cuisine, service, and presentation to develop. If you suddenly lose many clients, start worrying and ask clients what changes they would like to see in your service or menu.

      2.2 Buying through a business broker

      Another common way to buy a business is through a business broker. Business brokers are like realtors; the best way to find them is through recommendations. Your local chamber of commerce is also a good source. The broker finds buyers on behalf of a seller and takes care of the paperwork. According to contract law, a business broker represents the seller, because the seller pays the broker’s commission. A few brokers are willing to represent the buyer. The broker can also assist in selecting an escrow officer. He or she can help in reassigning the seller’s lease to you if there is one on the premises. Brokers’ fees are high since most of them don’t like to deal with small businesses. Their commission is about 12 percent and a minimum of about $8,000.

      If you are considering purchasing or expanding an existing business and you don’t have ready cash, your challenge is to borrow money or equity, either by selling shares or stocks or by bringing in partners with ready cash or equity. Both options have advantages and disadvantages, but it is beyond the scope of this book to delve into a discussion on this subject. I mention it here so you are aware of the possibilities.

      3. Buying into an Existing Business as a Partner

      If you buy into an existing business as a partner, make sure you know that business well: the owner, the staff, and the style of catering. There is only one way to know a business really well, and that is to work in it for some time. This usually means forming a partnership with someone who has common goals and interests, and complementary expertise. The business must be able to run profitably without serious friction between the two of you.

      Business partnerships are unpredictable. You may get along well with a partner today but you may grow in different directions later. Like marriages, some partnerships succeed, some fail, and some float along without much satisfaction for either partner. If you find a good business partner, you have many advantages, including shared workload, responsibility, expenses, and decision making. In a partnership you don’t have to be an expert in all aspects of catering. In the best circumstances, your weakness is complemented by your partner’s strength. It is also pleasant to take some time away from the business without worrying about leaving it in dubious hands. Taking a week or two off for a well-deserved vacation is especially hard when you are the only key person. There is an unwritten law that says that the week you take off for your own pleasure will be the week every client you have calls about an important event.

      You have two choices when buying into a business. You either buy or earn part of the business up to a predetermined share and become a partner, or you work toward becoming a full owner over a period of several years. For instance, you may have worked in a catering business for a while and the owner is approaching the age when he or she wants to retire. This is an ideal situation since you have the time to pay for the partnership slowly over time or add the so-called “sweat equity” of СКАЧАТЬ