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acroBios said:   Is all the profit in the rent collected by an entity he is not proposing to sell to you?
That is the million dollar question OP keeps avoiding.

OP have you thought about maybe trying to do the jobs for a while before taking a franchise over? As in, start working the front lines, then take over the least successful store's manager spot and improve it? You'll get a much better feel for how the business works and what is and isn't important if you're at least familiar with what's involved day to day.

I'm guessing Little Ceasers.....Colorado?

psychoslowmatic said:   OP have you thought about maybe trying to do the jobs for a while before taking a franchise over? As in, start working the front lines, then take over the least successful store's manager spot and improve it? You'll get a much better feel for how the business works and what is and isn't important if you're at least familiar with what's involved day to day.
He at least implied he had already done that, presumably through school until he moved away.

So an update, I met with him in person and he says he wants to sell, but after looking at things, he's not ready. Too many wheels turning, but it got him working on how to structure it to sell. From what I gather, there is a separate s-corp(?) the holds the real estate for 6/12 locations and it also has some other unrelated real estate. I think he said the income 'flows-through' because it's an S-corp.

He wants to sell slightly below FMV to me, but we need to agree on what FMV is. He thinks of all the business as a whole and what it makes him, so he values it at $N. Him and I (after he gets structured), need to spend a great deal of time, defining that the franchise portion is worth X, franchise real estate is worth Y, other real estate Z, and X+Y+Z=N. The problem now is he just blurs it all together to N...but he's sensible/reasonable so once it's clearly laid out. He just doesn't bother with stuff anymore because his accountants do everything. He plays tennis, mows the lawn, and grandkids now.

I worked at the locations for 7 years (some part-time) so I know the business, albeit not as a manager...which I think is invaluable.

Regarding the other siblings/heirs, this has nothing to do with anything. They're mostly all employed with their own career paths. He's in his 50s and isn't going anywhere soon. If he suddenly did, that'd be devastating and I could care less what happened to the business/money/etc. I can't figure out what family comment I made, that made people think it was a bunch of hands in the pot. His brothers and some other extended family is employed, and they may have a pipe-dream of 'running' the business, but they have no skills or legitimate interest in it, so it'd just be me laughing and telling them no.

So the current status is, holding pattern, while he figures out how to structure things. He's going to talk to his accountants too and start figuring out how to split/value the business. He relies on the income now, so he needs to either make sure the selling price plus 401k/etc is enough for him to retire on, or he might need to hang on a little longer.

qwerty12345otron said:   
acroBios said:   Is all the profit in the rent collected by an entity he is not proposing to sell to you?
That is the million dollar question OP keeps avoiding.

Sounds like the case. But then from an accounting standpoint he gets to say "oh well thats xyz rent cost" "rents expensive because property values are going up so its not doing that well" then steps over to the real estate business where you can easily overvalue any commerical property and call that rent/income breaking even. Nevermind the tax avaision..but on paper this seems like business suicide. These are the numbers that all of these young investors with east coast old estate money are lurking around to buy. Am I reading this wrong?

gdrum said:   qwerty12345otron said:   
acroBios said:   Is all the profit in the rent collected by an entity he is not proposing to sell to you?
That is the million dollar question OP keeps avoiding.

Sounds like the case. But then from an accounting standpoint he gets to say "oh well thats xyz rent cost" "rents expensive because property values are going up so its not doing that well" then steps over to the real estate business where you can easily overvalue any commerical property and call that rent/income breaking even. Nevermind the tax avaision..but on paper this seems like business suicide. These are the numbers that all of these young investors with east coast old estate money are lurking around to buy. Am I reading this wrong?


for the franchise business, you can easily get that appraised by an independent third party appraiser. Any franchise lending institution can probably recommend one or his accountant may know someone. Hopefully his accountant deals with a lot of franchise businesses as they should be familiar with a lot of franchise sales and their sale ebitda multiple.

One option, is to get the business appraised, and you buy a stake in the business at fmv or below. Your dad will retire but still receive income from the profits of the business.

second option, is for you to buy the franchise business, but your dad keeps the real estate. At least in his retirement, he will receive a steady income from the rent paid.

lastly, he may not be ready to retire. I have seen franchisees work till they die because they love the business they are in and retirement is boring. The old guys still like coming into the franchises acting like the big boss. Maybe buying a stake in the business and running it with your dad will be the best option, albeit you dont kill each other in the process. If you ever worked with family, you know exactly what i am talking about.

ecoatrain;17964703 said:I think he said the income 'flows-through' because it's an S-corp.

I can't figure out what family comment I made, that made people think it was a bunch of hands in the pot. His brothers and some other extended family is employed, and they may have a pipe-dream of 'running' the business, but they have no skills or legitimate interest in it, so it'd just be me laughing and telling them no.


Subchapter S election for a corporation means it's taxed similar to a partnership, the owners pay the taxes, not the company.
S-Corp files an 1120-s for corporate income, passes out schedule k-1(s) to the owner(s), who report their k-1 income on schedule E of their 1040.

What you said about siblings that I recalled:
"Glitch99 hit it pretty spot on with his last post. He can't just "give" anything, and he's <60 so he's not about to die (this sounds awful to say) and it's his retirement. And the other siblings would be pissed if he just gave me $3.5-6mil. Even though I've received the least amount of handouts...mostly because I don't need them like the others."

ecoatrain said:   So an update, I met with him in person and he says he wants to sell, but after looking at things, he's not ready. Too many wheels turning, but it got him working on how to structure it to sell. From what I gather, there is a separate s-corp(?) the holds the real estate for 6/12 locations and it also has some other unrelated real estate. I think he said the income 'flows-through' because it's an S-corp.

He wants to sell slightly below FMV to me, but we need to agree on what FMV is. He thinks of all the business as a whole and what it makes him, so he values it at $N. Him and I (after he gets structured), need to spend a great deal of time, defining that the franchise portion is worth X, franchise real estate is worth Y, other real estate Z, and X+Y+Z=N. The problem now is he just blurs it all together to N...but he's sensible/reasonable so once it's clearly laid out. He just doesn't bother with stuff anymore because his accountants do everything. He plays tennis, mows the lawn, and grandkids now.

If the real estate is set off in it's own corporation, it shoud be very easy to isolate the business operations performance. Separate entities have separate books, even if it all ends up being reported on one tax return.

I can't figure out what family comment I made, that made people think it was a bunch of hands in the pot.

You answer your own question in the very next sentence:

His brothers and some other extended family is employed, and they may have a pipe-dream of 'running' the business, but they have no skills or legitimate interest in it, so it'd just be me laughing and telling them no.


So the current status is, holding pattern, while he figures out how to structure things. He's going to talk to his accountants too and start figuring out how to split/value the business.
This is the time to start getting involved, before getting all the responsibility dumped on your lap as owner. Either taking the responsibility of running a single unit as the manager (which you admit you have never done), or creating a new executive position for you to essentially intern.
He relies on the income now, so he needs to either make sure the selling price plus 401k/etc is enough for him to retire on, or he might need to hang on a little longer.
I'm sorry, but something is wrong with this picture as you've presented it, if he still has to rely on the supposed $600k/year income.



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