Do I pay off my mortgages - or start a sandwich shop?!

Not enough information.

How much do you have to live off/survive on while the busainess is getting off the ground? I see you said another 40K, but what does that represent? Are your own living expenses in that? Are you single,married? Are other depending on you to survive?
Do you have any experience in both running a business,any business, and any experience in the sandwich/restaurant business? There is a lot more to it than meets the eye.

If you pay off the mortgages and are netting $800 a month, is that just from renting or are you also holding down a job?
That is just a few questions for starters.

All amazing questions - Many thanks!

40K what does that represent? - the amount i would like to spend to to complete the shop.

Are your own living expenses in that? No - I get my monthly money from websites/other property rent/etc -- so i'm covered for basic wages.

Are you single,married? Are other depending on you to survive? Single, No kids, don't support anyone else.


Do you have any experience in both running a business,any business, and any experience in the sandwich/restaurant business? None at all! No clue. Just something i've always wanted to do. I was hoping to learn as i got started.

Thanks again for the help!

1st thing I would do is find a good business accountant and let them crunch some #s for starting the sandwich shop. It'll cost you some money but it will be $ well spent.

KimW's questions are a good starting point. if that doesn't fit then No sandwich shop. You need operating capital in any business otherwise you can't afford to keep the lights on until you start making money.

Too many people dive into business before they are prepared and end up failing.


Good luck in what ever you choose.

I have more, but lets see if anyone else chimes in.

By the way, growing up my family had two drive in restaurants.
Also growing up and into adulthood I worked in every aspect of the food service industry from garbage man and dishwasher to manager.

Totally agree with Claude, Kim, and donb01.

I really question the 80k sales price. Probably the majority of Mom and Pop business for sale are not profitable and the sellers are desperate.

Restaurants especially. Likely worth the cost of the real estate (if any), used equipment and fixtures only.

Are the revenues and expenses accurate?

Are they claiming "good will" (customer base and community reputation...) as part of the purchase price and is "good will" worth anything to a new owner? Is the customer base recorded so you can re-market previous customers?

Dan

Nobody has hit on another option I thought of,but bizgrower mentioned some good things.
Ny other option, pay off the morgage ( getting you 800 a month income) and then negotiate and finance the sandwich shop.
If it is in your town you should be able to see how their business is.
Also, form an LLC, or your country's equivalent. This will protect your paid off houses if the business fails. Usually,I am lot a lawyer and don't give legal advice.

Sometimes good will is worth something,sometimes not.
Is their repuation good that you could use it as a selling point,or have they run the business into the ground where people tell other people not to eat there?
If they are selling because they are old and retiring,but still have a good business,that is one thing. But if they are selling because they had a dream like you,but couldn't make it work,that is another thing.

Not a finance guru here, but I've taken a few business & economics classes in my day.

My (non)expert advice is to pay off the mortgage first.

I like to make logical metaphors when making life decisions.

It's kinda like asking "should I get rid of this monkey off my back first, or climb the mountain?"

My logical & metaphorical analysis dictates, that you should probably take the monkey off your back first.

(Maybe better to ask a lawyer/financial consultant or do some hard number crunching first?)

If the sandwich shop is what you really (seriously) want to do long term, I would go for it.

You only live once, do what makes you happy.

I guess you pretty much know a lot about the area/traffic, you said the shop is in your hometown.

Actually, I don't think it's an either/or thing on the mortgage.

You probably want to sit with a financial planner type
because mortgages do provide financial leverage.

Especially if you can finance the sandwich shop
and not lose you life savings if it does not work.

Dan

I don't think your sums are as simple as that. If you leave things as they are and don't pay off your mortgage, you will still get £800 in rent. My question is how much would that go to cover your existing mortgage?

Even if you don't use the £100k to buy the sandwich shop, it doesn't mean that you cannot use it to earn more money than putting in a bank account. For example, you buy relatively safe blue chips stocks with a high dividend yield, or that you can buy bond funds with yields that can go over 5%.


You will find almost every successful businessman is a large borrower. Unless your existing mortgage rate is unreasonably high, I would leave things as they are or just pay off a small proportion. Another thing to bear in mind is that if you are self-employed on the Internet, it will be very difficult to get another mortgage later on if you need it.

Pay off the mortgages. They are and will generate a continuous and reliable revenue stream. Your sandwich shop idea may be a flop.

Pay them off, enjoy the extra 800 pounds a month, and THEN consider your shop idea. Positive cash flow is where you want to be.

Additionally, one sandwich shop is not really scaleable (you can only serve a few people in one location a day)...and it requires you to be there a lot, or pay for a manager to be there. It'll suck up your time. Now open up 10 sandwich shops...then you'll have scale. Otherwise you'll probably find yourself tired out and sick of sandwiches two years from now, wondering what happened to your dream.

The problem with the rate of business failures is people don't always know the cause of the business failure.
I was loaned $20K to open a business because a friend believed in me.
I was starting my 3rd year. I wasn't an overnight sucess,I wasn't living the life of Reilly,but I was making money.
Then,as many long time forum members know,I was struck overnight with kidney failure. Within months of being diagnosed I was on dialysis,first 3 times a week and then it went to 6 times a week. There is no way you can keep a small business open in that situation. So,statistically I failed within the failure rate statistics,but I did not fail because of bad business,or not knowing what I was doing or any of the other possible reasons.

Restaurant work IS very hard. Yes You should not go into it without some experience.
You may even be able to get the seller to let you work there with him for 30-60 days before purchasing so you can get an actual feel of it. You may decide in that time frame that it isn't for you.

Claude and many others here have made many good points.
What ever you decide to do, I hope you sucess!

Restaurants are one of the few business where you can do everything right and still lose money. Most of the other business types that fall in this category are also in the Hospitality industry.

Nevertheless, 100's of people still enter the industry thinking they can do it better than everyone else.

One of my golden rules is never buy a business in the hospitality industry, or even shares in hospitality companies listed on the stock exchange.

The only exception to this rule is established franchises such as McDonald's, etc..

I do however, hold shares in a company that leases equipment to restaurants, pizza parlours and takeaway joints.

Sort of the equivalent of buying shares in companies that sell picks and shovels to miners, rather than buying mining companies.

Pay off the mortgages and get that Extra £800 a month. You can always get another mortgage later on if you need more money... Get rid of that debt/interest ASAP.

When I was younger and dumber, I had the chance to pay off my mortgage. Instead I sold the place.
Bought it in 1979 for 25K, sold it in 1999 for about 80K, today it is valued at almost a quarter of a million dollars.
If I had paid off the mortgage instead of selling it and rented the place out I would have a great monthly income now.

It sounds like you don't have a clue. There are licenses, methods, wastage, possible licenses, and expenses you have to deal with.

On I love lucy, there was an episode about a guy that kept reselling a cafe. On king of queens last night, a guy kept reselling an ice cream truck. OK, OK, I get it, SHOWS!

How about THIS! I know a family IN REAL LIFE that makes a lot of money reselling ******THE SAME******* shops. People ask them to sell and eventually they laughingly do, and end up buying the restaurant back. I've been to one of those restaurants. It is NICE, POPULAR, HIGH END, and makes money! It is the kind of place even the richest guy on the planet would be happy having a dinner reception with a couple hundred people in, but is priced low enough that a low end middle class family would be OK having a meal there once a week. Somehow others just never succeed!

Make ONE mistake.... Get vermin/bugs, too much dirt, miss some license, improperly store food, buy too much or too little, and you may be in trouble.

STILL don't believe me? Watch shows like kitchen nghtmares. Food seems SO simple but if you do it for yourself, family, or a small gathering, it is PLANNED, CONTROLLED, LIMITED, and you don't have the trust issues and possible complaints/lawsuits to deal with.

Steve

Something is missing here. There's an existing shop for sale for £80K. Then you say you'll sink another £40 in getting it the way you want it. Hmmm.

I know the cost of living is higher in Europe than the states but £80,000 for a sandwich shop seems very high. One thing you haven't mentioned is how much this shop is currently netting per month. That's the real question. It that number works then it's a go and if not, screw it.

My dad's life long ambition was to have his own restaurant. He finally realized his dream when he was about 54 years old. There was a small diner for lease in a city with a population of about 60,000. The woman who had the diner couldn't make it pay. The reason for that was the the local public utility was only a block away. The off-going night shift and the incoming day shift would occupy the diner until 10:00 every day. Most only drank coffee. They didn't care for breakfast.

My dad leased the place and the second day in business he made an announcement to the clientele. It went something like this:

"All you sons a bitches that aren't eating get the hell out and don't come back unless you're going to order food. I'm not running a goddamn social club for the power company." Everyone was a bit shocked at first, all looking at each other and then they started nervously laughing as though it was a joke. This pissed dad off so he went to the cash register, and pulled out a bunch of one dollar bills. He went from table to table giving each customer their coffee money back telling them to get the hell out and not to come back.

Word of this got around and people started coming in to see this weirdo. In a short time business began to pick up. My dad was the original soup Nazi long before Seinfeld came along. Every day he'd do do something weird. People were literally flocking to the place to see what he'd do on any particular day. The place was always packed with a waiting line.

I was there one morning when the old man turned around from the grill with one of those big spatulas in his hand.

He was facing two guys sitting at the counter eating their breakfast. These two didn't know each other. My dad looked at both of their plates and then scooped some hash browns from one guy's plate and put them in the other guy's plate. Dad simply said, "you got too many hash browns." Everyone in the place went apeshit laughing.

It was all in fun. He'd insult people. He'd insult himself. He had a sign on the wall: Regular soda $1.00 Regular Soda without ice: $15. People used to come in and take pictures of that sign. Every so often he'd give food away. It was always something. People loved him. And needless to say he made a pile of money. He was open only for breakfast and lunch.

I sort of got off point here but I know the old man didn't even have a thousand dollars into the place when he started. So why does a sandwich shop in the UK command such a high price?

traveling guy,

You said your father LEASED! Buying a sandwich shop usually costs well into the tens of thousands! EVEN if they only sell COLD sandwiches. If they sell HOT sandwiches, MORE SO! How about SUBWAY? A primarily COLD sandwich shop that is popular in the US?

Franchise Fees: $15,000
Total Investment: $80,000 - 300,000

And if you had the $80,000 to $95,000 to invest in subway, and just that, subway would tell you to GET LOST! You ALSO need startup and working capital! ALSO, there are purchase requirements, and coop involvement. THAT could be $50K+!

A franchise like mcdonalds costs even MORE!

steve

I realize a leased shop would be considerably less. You're also talking franchises. We don't know that this thing is. The first line in my post was, "Something's missing here."

There's actually a lot missing. We could guess at the size of the place, the age of the equipment and fixtures, the revenue, etc. But still, £80K to purchase and another £40K for renovations or whatever... Hell, unless the Queen occasionally drops in for tea, that's a lotta beans for a sandwich joint.

lots of bread in a sandwich shop