Considering the popularity of the product and the industry’s history of maintaining solid business during recessions, it should come as no surprise that many entrepreneurs seek to buy a yogurt business. And with warm weather approaching, the opportunity to sell cold refreshment is an added incentive to get involved in this industry--either with a franchise company or an independent enterprise that sells yogurt in carton, cone and cup.
To buy a business in this category that will succeed and provide a reasonable return on investment, an entrepreneur needs to be prepared with a bit of knowledge, including these three guidelines.
A critical ingredient in a successful yogurt business is a high traffic location. But a visible position on a popular street or in a busy strip or shopping mall often comes with lease terms that benefit the owner of the property rather than the business.
The smart buyer seeks businesses with long-term leases--at least seven years--at a rate that is readily supported by the business income.
A small shop with a low level of business may struggle to support a rent amount of a few hundred dollars per month. Meanwhile, the operator of a large yogurt business with high volume may have no trouble writing a rent check in the thousands.
Rather than getting confused by the wide variations in rent amounts, the informed investor seeking to buy a yogurt business looks at the rental amount--more specifically, the total occupancy costs--in terms of their relationship to gross revenues. The sum of rent, maintenance and utilities should not exceed 20% of total income. A business owner paying in excess of that ratio is probably working more for the landlord than for him or herself. The operator enjoying a solid return on investment is probably incurring occupancy expenses that add up to less than 18% of total revenues.
The amount an owner spends on product also can vary widely as a percentage of gross, depending on the type of business. A high volume store that sells mostly prepackaged product, or sweet dessert extruded by machine, and pays close to minimum wage for employees to handle the transactions--the fast-yogurt approach--can afford to expend up to one third of its total gross sales on its product. The other way of looking at this, of course, is that this model yields a slim margin, and the company will need to maintain that high gross to cover overhead and be profitable.
By contrast, the company offering more flavor choices and requiring more labor to serve the product will probably collect a higher dollar amount per transaction than the fast-yogurt model, and will need to keep its inventory costs closer to the 20% to 25% range.
Many business appraisers and experienced brokers believe that the best rule-of-thumb approach for valuing a yogurt business is to use a factor of 2.5 times owner’s annual net earnings, as calculated before the deductions for interest, taxes, depreciation and amortization.
The owner making $100,000 per year according to the EBITDA formula will likely be justified asking $250,000 for the business.
It may be appropriate for the investor who wants to buy a yogurt business to pay more than the rule-of-thumb figure if the seller is earning in excess of the 15% of gross, standard in the industry.
Added value is also indicated by a longer-than average lease--10 years or more, and a particularly attractive rental rate.
Willingness of the seller to carry back 25% to 35% of the purchase price also contributes value to the business. The price can climb another 10% or so if the package includes attractive financing terms offered by the seller.
The entrepreneur looking for an investment with a good future should consider the idea of buying a yogurt business, using these three guidelines to help determine the viability of each offering.
If you are searching to buy a yogurt business make sure you see all yogurt, frozen yogurt shops for sale throughout California that are currently on the market.
About the Author: Peter Siegel, MBA is the Founder of www.BizBen.com (established 1994 - 7000+ California businesses for sale, 200 new listings daily) and the Director of the BizBen Network (16,000 business buyers, 4,000 small business owners, 1,800 California business brokers & agents). He consults daily with business buyers, business owners, small business advisors, business brokers and agents on selling and buying California small businesses. He is also the author of three books on the topic of how to buy and sell California small to mid-sized companies. For a FREE consultation on the best way to buy or sell a California business, phone Peter Siegel direct at 925-785-3118.
|Helpful Resources To Assist In Selling And Buying California Businesses|
|Michael Davidson, Business Broker - Southern California
Los Angeles Business Broker providing M&A quality services for Small Business Owners. We leverage our technology and expertise to Simplify & Expedite the Business Sales Process. Matching the right buyer with the right business is how we define success.
|Shalonda Chappel: Escrow & Bulk Sale Services - Southern California
Escrow services to brokers/agents, sellers, & buyers. Established 43 years. Extraordinary service. Experienced with handling difficult transactions. One stop for all your escrow needs: Bulk sales, lien searches, UCC searches, liquor license transfers, publishing & recording services. 951-808-3972.
|Steve Zimmerman: Restaurant Broker Specialist, California
Steve founded Restaurant Realty in 1996. He has personally sold/leased over 1000 restaurants, bars & clubs, & completed over 3000 valuations. The author of "Restaurant Dealmaker- An Insider's Trade Secrets For Buying a Restaurant, Bar or Club" available on Amazon. Reach Steve direct at 415-945-9701.
|Cheryl Maloney, Business Brokerage Services: City Of San Francisco
I have over 20 years of small business experience, a law degree and well-versed in real estate regulations and best practices. I work tirelessly to create successful strategies & effective negotiations for those wishing to sell or buy a SF business. Call 415-309-2722 (Cell/Text).
|Diane Boudreau-Tschetter: Escrow & Bulk Sale Services - CA
California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.
|Mike Nova, Business Broker: North Bay Restaurant, Retail Specialist
I have over 30 years of direct restaurant industry experience, including my personal experience as a restaurant owner. For the last 7 years I have worked as a Broker specializing in this challenging and ever changing field of restaurant and bar sales. Contact me at 510-708-6682 Cell.
|AJ Rana - Business Broker, San Francisco Bay Area
Professionals who understand the importance of world class business brokerage service and the value it can create. Specializing in assisting sellers and buyers with retail stores, restaurants, hospitality & lodging, manufacturing operations, distribution companies, e-commerce and service businesses.
|William Park, Business Broker: Southern California
Highest Volume Broker in California, Simply Check our HUNDREDS of Listings! Over 25 Associates, Speaking Dozen Languages, Helping Buyers and Sellers of Small Business since 1982, Centrally Located between Los Angeles and Orange Counties, while Riverside & San Bernardino Counties are Very Accessible.
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