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What exactly is cash flow? Is that /month or /year? Is that profit?

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You have to be careful with cash flow listings especially for restaurants. As Don wrote different people do different things. A lot of times people will give you cash flow figures based on what if's and unrealistic potential (NEVER pay for potential.) Keep on asking questions and don't stop until you get the answer. Things that I have heard over the years include: cash flow listed 144k asking price 200k. Call the broker or owner and sign and send in NDA. Talk to the broker or owner thouroughly and ask questions. Broker or owner finally admits that the cash flow listed is based on if you changed the menu, controlled costs, fired some of the staff, did more advertising, remodel the place you SHOULD make 144k. I ask what is the place making now the way it is being run now. Answer: 12k A YEAR not a month. Of course you will figure that out well before you buy but you will at least one day of your time.
I learned to tell a broker or owner that i wanted to know what the place was making NOW the way it was being run NOW before I would sign an NDA.
Also, a word of advice...... NEVER pay more than 2x cash flow for a restaurant unless it is making a ton of money absentee. I own a restaurant and I am telling you this because it isn't worth the crap and the crappy lifestyle you will lead beacause of it (Mom and Pop restaurants are 24/7 365 days a year with a TON of headaches.)
Last word of advice. A great lease is one of the very major things to look for. A great lease will allow to adapt your biz to different economic realities and competition. You can make more mistakes if you have a great lease. Remember the saying "Location, Location, Location!?" well it really is "Location, Location, Location--- as long as I have a great lease." A subway I was looking at a few years ago had a lease of 10k a month (mall.)Do you realize how many 5 dollar subs you would have to sell to make the rent? It isn't worth it.

Mar 28, 2012
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The BAF Group LLC
MD

It is usually quoted in annual terms, but always ask. Different people do different things! For a relatively complete answer, go to our blog: http://combrokerbusiness.wordpress.com/2012/02/07/cash-flow-what-the-heck-is-it/

Mar 28, 2012