As I’m sure you know, it is difficult to operate a business in today’s economic climate. It is more difficult to operate a start-up business, particularly a restaurant. That’s why I bought a going concern. During the course of my due diligence, I was given P&Ls for the previous six years of operation, all certified by a CPA. The most recent six months’ financials, however, were not available. I did, however, have numbers from the previous owner that showed consistent sales for those last two quarters, as well the owner’s certification of his full regulatory compliance at the time of the sale. Not being able to futher verify the information, I decided to purchase the restaurant anyway. I know what you’re thinking… and you’re right!

As it turned out, sales for the last six months were well below (less than half) the historical sales, and the latest information given me was fraudulent. Additionally, the restaurant (I later got detailed inspection reports from the county health department) was not in regulatory compliance, and was in danger of being closed. Clearly I could have done a better job in my due diligence. The good news is that we have courts to protect buyers from fraudulent representations of sellers, and there is now pending litigation that will hopefully compensate me for much of, if not all of my loss.

I also assumed a commercial lease that was 5 months in arrears when I bought the restaurant. I assumed that having a paying tenant would be enough to assure a great relationship with my landlord, who was responsible for all landscaping. When I took over, the restaurant was overgrown and looked like it was owned by the Adam’s Family. I requested several times that the landscaping be addressed in time for my grand re-opening to coincide with the face-lift we had given the building. When we got to the weekend of the opening and the landscaping wasn’t done, so I hired a landscape company to make the business look good, at my own expense, of course.

The new landscaping was a source of irritation to the landlord who eventually sued me wanting me to reimburse him for replacing 20 boxwood bushes which had been cut back a lot but were still healthy and growing fine, albeit much shorter and smaller. Our relationship deteriorated from there, and soon I was not afforded electricity to my road sign (on the shopping center’s circuit) even though I offered to pay for the power. We went for months during the summer when the sign didn’t illuminate until nearly 9PM (well after the dinner hour), and we had many guest stop in to see if we were open. The sign was on a timer and an electric eye system and wouldn’t illuminate until there was not a ray of light in the sky. The final straw was the landlord’s removal of our Muzak satellite dish from the roof (it had been there for 5 years) with no notice, and on Valentine’s Day (the biggest day of the year for a fine dining restaurant).

I made the decision that I would not continue to swim while carrying these lead weights. I felt I could certainly use the energy for my core businesses, and the ongoing financial drag on the corporate checkbook made the decision an easy one. I had been given the perfect opportunity to get out, by an unreasonable landlord who had breached our lease again and again. I took the opportunity, although I very much liked the business and was continuing to grow sales and manage expenses. I kept my general manager on the company payroll and now we’re using his skills at FavoriteAgent.com.

In making the tough decision to close, I had to detach myself from my emotional reasons for keeping the business and simply look at the numbers. It was a business. Was it the highest and best use of my time and resources, when I had been given the opportunity for a legal “do-over” by the actions of both the seller and the landlord? It took me about 15 seconds to realize that it was not. I didn’t like the prospect of facing friends and their feeling sorry for me. My pride was injured but I’m confident it will heal. Perhaps one day I will own another restaurant. It is nice to buy wine wholesale!