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Opportunities

Two Donut Shops with Over a Decade of Sweet Success

CASH FLOW
$120,953

Specifications

  • Price
    $365,000

  • Cash Flow
    $120,953

  • Revenue
    $719,657

  • Equipment
    $120,000

  • Location
    Omaha

  • Inventory
    $5,300

  • Reason for Sale
    Relocating

  • Franchise

  • Employees
    16 total – 4 bakers, 12 cashiers; employees are trained to do everything

These two great donut shops located in Omaha are absentee owned, and are a great, hands-off way to earn an extra $100K each year.  Customers at these stores enjoy these delicious donuts 60% carry out and 40% dine in.  With two reliable and experienced bakers, these shops have been in operation for 12 and 5 years respectively.  While the seller does not do any baking, the duties do currently include general management and supply ordering.  The seller is looking to relocate and would like to pass these stores onto dedicated buyers.

 

Each shop has 2 bakers that produce between 40 and 80 pounds of yeast donuts daily, and 20 to 30 pounds of cake donuts. In all, the franchise boasts 60 kinds of donuts and 8 varieties of dough. Corporate does suggest pricing, but each franchise location has the final say, with the goal of keeping food costs at 30% or below.

 

Including donuts, the shops offer coffee, cappuccino and fresh orange juice. Also available are bagels, sandwiches, muffins and some pastries. One location has a drive thru, making it extra appealing to all crowds taking advantage of the long operating hours. A new owner could do the same at the other location as an avenue for growth.

Business Highlights

  • Years in Business: 12
  • Location and Service Area: Omaha
  • Demographics: 60% carry out, 40% dine in
  • Franchise Fees: 5% royalty, 1% advertising
  • Building: Location 1 – 1,400 sq. ft. leased at $1,500/mo; Location 2 – 1,100 sq. ft. leased at $1,000/mo
  • Reason for Selling: Relocating
  • Employees: 16 total – 4 bakers, 12 cashiers; employees are trained to do everything
  • Hours: Location 1 – 6am to 6pm; Location 2 – 5am to 1 am
  • Seller Training Period: 90 days
  • Growth Opportunities: Additional advertising on top of what franchise provides; open drive thru in 1st location
  • Current Owner’s Responsibilities: General management and supply ordering, owner does not do any baking

Financial Highlights

  • List Price: $365,000
  • 2017 Gross Sales: $719,657
  • 2017 Cash Flow: $120,953
  • 17% Profit Margin
  • $125,300 in Assets included in purchase:
    • Equipment: $120,000 in tables, racks, mixers, microwaves, refrigerators, frying equipment
    • Inventory: $5,300 between both locations
    • Intangible Assets: Trusted brand name, client loyalty

Cash Flow Analysis

Description of Financial StatementP&L StatementTax ReturnTax ReturnNotes
201720162015
GROSS SALES$719,657$773,263$773,580
Net Income Shown on Financial Statement$69,794$63,881$52,339
ADDBACKS
Compensation to Owner$22,500$23,400$23,400
11% Tax on total W2 Salaries$5,248$2,574$2,574
Depreciation$8,639$7,957$10,130Less building depreciation of $3,350
Interest$0$0$72Non-onward going expense
Amortization$1,080$1,021$333Non-cash item
Insurance Premiums for Owners: Auto$3,600$3,600$3,600Owner's auto insurance of $300/mo
Meals & Entertainment$864$927$251Expenses unrelated to business
Auto-Personal Use$5,801$4,087$5,229Personal auto use unrelated to business
Travel$3,427$0$135Expenses unrelated to business
TOTAL ADDBACKS$51,159$43,566$45,724
Seller's Cash Flow = Total Addbacks + Net Income$120,953$107,447$98,063
Profit Margin16.81 %13.90 %12.68 %
  • 17% profit margin in 2017 with $719,657 in sales
  • 8.7% growth in sales between 2015 and 2016

Equipment & Inventory

$120,000 in equipment includes:
Refrigerators Cappuccino machines
Freezers Ovens
Hopper cylinders Mixers
Icing/glazing tables Coffee makers
Cooling racks Signage
Frying screens

$5,300 in inventory

  • Location 1
    • Roughly $3,500 in inventory at any one time
    • Weekly inventory orders are around $2,500
  • Location 2
    • About $1,800 in inventory at any one time
    • Weekly inventory orders total between $1,000 and $1,100
  • 60 types of donuts are on the menu
8 types of dough are used
Buttermilk Wheat
French Cake
Old fashioned Raised
Twist Filled

Daily Baking

  • Location 1
    • 40lbs of yeast-based donuts
    • Between 20 and 30lbs of cake donuts
  • Location 2
    • 80lbs of yeast-based donuts
    • Between 20 and 30lbs of cake donuts

Employees

  • 4 Bakers
    • 2 bakers at each location
  • 12 Cashiers
  • Franchise encourages all employees to train in every area
  • Seller handles general management and supply ordering

Menu

Bakery, Bagels, Muffins & Croissants                                                                                                          

  • 14 flavors of muffins
  • 17 types of croissants and pastries
  • 10 kinds of bagels

Fresh Donuts

  • Bar
  • Cake
    • White, chocolate
  • Buttermilk
  • Donut holes
  • Filled
  • French
  • Old Fashioned
  • Raised Ring
  • Mini
  • Twist
  • Wheat

Sandwiches                                                                          

  • Egg and cheese
  • Bacon and cheddar
  • Tuna
  • Black Forest Ham
  • Pastrami
  • BLT
  • Melts

Beverages

  • Coffee                                                                                                                   
  • Cappuccino        
  • Fresh juice
  • Tea

Growth Opportunities

  • Increase advertising
    • Currently the franchise provides standard advertising for a 1% fee
    • Additional efforts on top of what the franchise provides could work to increase traffic
  • Install a drive thru at the location without one
    • There is room for a drive thru, but a buyer would need to secure the correct permits and work within the lease requirements for landscaping
  • Add Wi-Fi in each location to entice night owls and students

Valuation Details

The Firm Business Brokerage used a Cash Flow Valuation methodology to determine the Purchase Price of the business.  The formula used is as follows:

Cash Flow       x          Multiplier          =          Price

Cash Flow is the sum of net income plus any owner perks and non-onward going expenses.

Multiplier is a prescribed number between 1 and 5 determined by a 100-point, 20-question rating system used to determine the business valuation (average is 3).

The Cash Flow for 2017 is $120,953, and the prescribed multiplier is 3.1.

With this information, the computation result follows:

$120,953         x          3.1       =          $374,954

The List Price for the business is set at $365,000.

Funding Example

Purchase Price:                               $365,000

15%Buyer Down Payment:          $54,750

15%Seller Financing:                    $54,750

70%Bank Loan:                           $255,500

Seller Financing 5-year term at a rate of 4.5% equals a monthly loan payment of $1,021.

Bank Loan 8-year term at a rate of 6% equals a monthly loan payment of $3,358.

After business expenses and annual loan payments, a buyer would retain a net operating income of $63,413.

A down payment of $54,750 results in an 125% return on investment in the first year.

A lender is required to have a minimum 1.5 coverage ratio for any business loans extended. At a proposed Purchase Price of $365,000 with the terms listed above, the coverage ratio is 2.3. 

Purchase Price:

$365,000

$
%
OR
$
%
OR
$
Years
%

Bank Loan Needed: $

Years
%
$
$
$
$
$

Funding Details

Business:

Offer Price: $

% Buyer Cash Down at Closing: $

% Seller Carry Back via Promissory Note: $

year term at a rate of %

% of Purchase Price secured by Buyer and Seller

Total Bank Loan Need: $

% of Purchase Price

Desired Loan Type:

Desired Bank Terms: year term at a rate of %

Total Business Assets, Inventory, and A/R: $

Total Undercollateralized Loan: $

Loan Payments

Monthly Payment to Bank: $
Yearly Payment to Bank: $
Monthly Payment to Seller: $
Yearly Payment to Seller: $
Total Monthly Debt Service: $
Total Yearly Debt Service: $

Conclusions

Fixed Charge Coverage Ratio

The bank will require a minimum ratio of 1.5 to be lendable.

Cash Flow:
2017 Cash Flow
$
Annual Debt Service: $
RATIO:

Buyer's Net Operating Income (NOI)

The amount of money the Buyer will retain as profit.

Cash Flow:
2017 Cash Flow
$
Annual Debt Service: -$
NOI:

Buyer's Return on Investment (ROI)

The rate of return on the Buyer's down payment.

Down Payment: $
NOI:
ROI: %

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210 N 78th St. 2nd Floor
Omaha, NE 68114

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