Katherine, we need to be real, and that means me sounding like a jerk and you having to ask yourself some hard questions. I don't need the answers - YOU need them for yourself!
How much money do you honestly think you can make, from this per year? When he sells and walks out the door, does the business go with him? I mean, do people come there because he is known, and when he leaves, so does the reputation of the business, itself? If it is in a poor location, just why do people come there, anyway? Obviously, if the business is failing, many people do not really come there, so why the hell do you want to buy a losing operation?
You ask what is included when you buy it, and the answer is that it depends on what you negotiate. The bigger question is, if he is losing money, if he lost artists, what is he selling? If he has "failed", then what name and clientele are you really buying? In most small businesses, the price is determined as a function of profit; does he have profit? If he is failing, there is probably none; therefore again, what is he selling and what the hell do you want this for?
Get a loan for $5,000? On a failing business? No! You need to beg from friends and family or marry for money. (I am trying to keep the mood light!)
What do you think you can do to turn this around? Is that a real objective, or are you kidding yourself? And what would it cost you to set up your own location, in a better spot, where people might come to you, rather than to this losing location, precisely because his failed and you don't need that kind of reputation dogging you? Are you better off starting out cleanly?
Think about it, please. And by the way, I am not certain he is a real "friend".