Buying a Business

The decision to acquire an established small business is no doubt less risky and a lot easier than starting the business from scratch. There are multiple factors that can influence you to go for buying a business instead of a start-up. I have chosen two such examples, I will analyse both business to see which one is more suitable for me to invest my capital into.

Fonograf is my first option, a high end restaurant in the heart of Dubai marina, located on the marina walk. The business is owned by a Syrian businessman, who is looking for a client to purchase the business from him for AED 2.6 million. The amount requested is large, so there are some factors I will consider before making the decision to acquire this business.

The inventory cost after deprivation comes to just over AED 1 million. This includes an all glass extension of the restaurant that was renovated to accommodate more customers. This process involved took a lot of time and resources, getting permission from the municipality and for the construction work. The restaurant is furnished with high end furniture and the interior design was carried out by CASA SHAMUZZI, a high end interior design company.

Additionally it is very difficult to rent a place on marina walk as there is a waiting list of people who have applied to open a restaurant. In the case of Fonograf, the place is already provided. The owner of the building leases out the premises on a yearly basis. The restaurant already has well trained employees that will help the transition become easier. Most importantly the restaurant already has a loyal customer base, because of the quality of food that gets served. The owner is willing to share the information of past business and financial records so I can get a sense of how much money I will make.

However it’s a very large investment and if the past has been good, it does not necessarily guarantee the business will continue being profitable. The owner is also not open to any negotiations, which means he’s not in a hurry to sell the business. This is good because it assures you that the seller had a great package on offer, but it also means that you will have to pay the full 2.6 million that is being asked for.

My second option is KAUAI, a South African health food outlet which offers great freshly made smoothies and wholesome vegetarian salads and sandwiches. The company is based in South Africa, but they are not working on a franchise basis. They are asking for a once off payment for the name and recipes. I will have to find my own location and they will just send ideas for the layout, but I am still given the freedom to choose the layout. Their asking price is $150000 which is roughly half a million Dirham’s.

This is a huge amount to pay just for a logo and recipes. So I did my back ground research and figured that the South African Expat population in the UAE is over 100000. This figure