Would You Buy This Waterfront Restaurant for Millions?

0:00Hello, everyone. Welcome back to Acquisitions Anonymous. This is the internet's number one podcast on buying, selling, and operating small businesses. And today's episode was really fun for me because it is a restaurant in Buford, South Carolina, where I go on vacation. It's a restaurant that I know. But not only that, halfway through the episode, there's a surprise reveal. And we find out that the sister restaurant on the same street on the other side of the building is also for sale by the same owner. So we pivot the episode. It's not just one restaurant. It is a restaurant group that is kind of in the prime location in the South Carolina vacation town.

0:35It actually has three restaurants we figure out. all on the same strip that we think you can buy all together. So it's a really cool study in actually a pretty well-run transferable restaurant that operates three iconic properties in a South Carolina coastal town. So really cool. If you're interested in restaurants, this is a good one. So without further ado, please enjoy this episode of Acquisitions Anonymous. Well said, Acquisitions Anonymous. Hello, another episode of Acquisitions Anonymous. We don't have 100 % beers anymore. Thumbs down on just the plus inventory line. When you close a deal, you inherit the cyber and IT problems that have been piling up for years.

1:14Enzo Technologies, that's I-N-Z-O, helps acquisition entrepreneurs evaluate technology risk during due diligence and manage cybersecurity, IT, and voice after close. CEO Nick Akers acquired Enzo and recently led the company through its first add-on acquisition. He brings a buyer operator's perspective to what needs to be uncovered before the wire and stabilized once ownership changes hands. Enzo offers a complimentary IT risk audit of your target company to help surface the biggest risks in plain English and deliver a 30 day plan to reduce exposure and lower the risk of downtime. Visit Enzo Technologies dot com slash ETA and mention Acquisitions Anonymous.

1:59That's I-N-Z-O technologies.com slash E-T-A. Mills, happy Friday, man. If you weren't hungry already, this episode is going to whet your appetite. This is great. So it's just me and Mills today, which means we have to do a deal from North or South Carolina. So we found a good one. This is a restaurant in Beaufort, South Carolina. Mills, do you know where Beaufort is? Oh yeah. I've been many a times. Yeah. So Beaufort is, for those who are not South Carolina geography aficionados is in kind of the southern tip, the southeastern tip of South Carolina. I drive through there because we go to the beach near there.

2:38So I've been going through Beaufort since I was a kid. So I know this downtown really, really well. Beaufort is kind of like the last town before an archipelago of islands in southern South Carolina. It's kind of a beach destination. It's one of these old kind of antebellum South Carolina towns. Imagine like a mini Charleston, very mini, I mean, much smaller than Charleston. Um, but they have, uh, I saw this listing and this is one of the rare non-anonymous listings that we can do on the show because this is obviously for sale by owner and they just give us the name of the restaurant. So what's cool about this one is if you know, downtown Beaufort Bay street is the street, kind of the main street.

3:19It's right on the water. Uh, that's where all like kind of the restaurants and art galleries and the little ice cream parlor for the kids. And there's a big kind a park right next to it. Bay Street is prime for Beaufort. And this restaurant is called Saltis River Grill, and it has been there since 2003. It's got maybe one of the best pieces of real estate on Bay Street, smack in the middle of everything. So I saw this, and this isn't just any restaurant. This is kind of an iconic restaurant in downtown Beaufort. So let me tell you a little bit more about it uh it has gross revenue of 3.5 million uh which i think is pretty good for a restaurant in a pretty small town yeah like with seasonality with definitely seasonality so like 3.5 million they're moving they're moving food um this is kind of like a higher-end restaurant like there's a there's kind of fish over risotto here pictured like that's probably a 30 dish on this menu which is in a small south carolina town expensive it says an exceptional opportunity to acquire one of Beaufort's most recognizable waterfront dining destinations.

4:25Saltus River Grill combines an established reputation, coveted Bay Street location, and refined low country dining experience in the heart of historic downtown Beaufort. It's located at 802 Bay Street with views of the Beaufort River. Saltus River Grill is a rare combination of prime waterfront frizzability, elegant indoor dining, an inviting outdoor patio, and a menu known for fresh seafood, steaks, sushi, and classic favorites. Its setting blends the The charm of historic Beaufort with energy of sophisticated coastal restaurant, creating experience that's difficult to replicate. The highlights, of course, the premier Bay Street address, the waterfront views, the established brand and strong local recognition and visitor appeal.

5:02Upscale dining room, full service bar, flexible space for private events. Menu featuring seafood, steaks, sushi, cocktails and wine. Attractive opportunity for an experienced operator seeking a flagship restaurant. It's positioned for continued success in one of South Carolina Lowcountry's most charming and walkable waterfront markets. That's a fair characterization. The restaurant benefits from steady local demand, tourism, nearby lodging, waterfront attractions, and Beaufort's reputation as the destination for history, culture, and coastal dining. For a buyer, this is more than a restaurant acquisition.

5:33It's the chance to own a signature hospitality asset with an established identity, experienced operating foundation, and a waterfront location. Few restaurant opportunities offer this combination of location, reputation, atmosphere, and growth potential. Saltis occupies a distinctive place in Beaufort's dining scene. The next owner can build a strong foundation while exploring opportunities like expanded private events, enhanced bar programming, seasonal promotions, catering, wine dinners, chef-driven specials, and broader marketing to Beaufort's growing visitor and second home markets. Inquire for more information.

6:05Financial details, lease information, staffing overview, and operational materials may be made available upon the execution of a confidentiality agreement. They do give detail on why the owner is selling. He is retiring. The business location is in Beaufort, South Carolina. The real estate is leased. It's 5 ,000 or so square feet. And the rent is$14 ,000 a month. To give you an idea of how small Beaufort is, this is a prime piece of waterfront real estate leasing for$160 ,000 a year. I think I saw the location to... I don't know if they said this in the description, but it's like, it's only 1300 square feet inside is what it said.

6:48But the patio is like, I think many multiples of that size, if I remember right. Yes. It's got a big patio that you could see the whole waterfront area from the patio. You can see, you can look through the park to the waterfront. It's very pretty. It's very nice location.

7:06So$168 ,000 of rent and you make 3.5 million in sale. I mean, So Mills, what do you think? I think this is really interesting. I am fascinated by the fact that they take the like, we're just going to put it all on the table. Like this is who we are. This is how much money we're making. They've outed themselves, which I feel like can be like kind of risky a little bit. But I mean, they're just owning it. Like this is who we are and this is what we're trying to do. I do think that this is in a family of restaurants. It looks like there's some people online who are associated with this business that are also, it looks like they also are employed by Plums Inc.

7:53and Hearth Real Fire Pizza. Yeah. So it might be like a small restaurant group. I will tell you. So Plums is 100 yards away, also on the same waterfront. It's much more casual. It has also been there forever. And then Hearth Pizza is in the same building on the front side. So Saltis is like on the back side. side facing the water and is a more upscale hearth pizza is on the front side facing bay street and is a little bit more like you take your kids yeah so it's not really clear if this is just one or all of them you know that are available but uh i think i can't i think you said it right before we hit record and we're like oh let's do this one the lease is like the majority of the equation here yeah the lease is the whole ball game i mean this is a great lease fourteen thousand dollars a month in a prime spot in Beaufort.

8:40But how much longer is left on the lease? Yeah. What I've seen a lot of times is the restaurateur realizes he's got two years left on his lease or one year left on his lease, or he's gotten the notification that his rent is going up materially. And he goes, I'm going to sell the business and then make this someone else's problem. Yeah. You just had a tweet about this in the last day. Well, not about leases, but about entrepreneurs exiting and being like, I don't want to exit when things are good. They want to wait until they're at that high. It's like, no, you've got to exit with some runway. Yeah.

9:15You got to exit while someone would be excited to buy it versus people like, oh, I know. I'll squeeze all the juice out of this, wait till there's one year left on my lease, and then try to get somebody to hold the bag. That's not how business acquisitions work. People who spend millions of dollars to buy businesses are not that dumb. So it creates like a little bit of a dilemma on, you know, is this really transferable? Is there enough to transfer? And maybe, but it all depends on the lease. But if this owner had renewed this lease and all of a sudden you've got 10 years worth of runway and they're like, great, like I've set the table.

9:50Now you just have to run with it. Very, very optimistic. If they're at the tail end of their lease and they're like, don't worry about it. We'll help you negotiate what you need. That creates a lot of uncertainty here. If I had to bet, I bet the guy owns this building. I'm looking into it right now. So it's owned by an LLC, 303 Associates LLC. And I'm looking into that right now. So if you're with us on YouTube, you can see I've got the building pulled up. This is Hearth Pizza in the front. It's like an old kind of Civil War era building on the old Main Street, as you guys can see. There's a little bit of residential above it.

10:28like two stories of residential above it and then retail on the street side in the front. Saltis, this business that's for sale is this one on the back of the building. You can see it has this really nice patio. This is Saltis right here. And it overlooks the park, which is beautiful, and the waterfront. So I bet the restaurateur either one has a master lease on the building and he's running two concepts in it, Saltis in the back and Hearth in the front, or he owns the building and is just trying to get it in the landlord business. I would say actually the latter is probably the best news for you as a buyer.

11:07Like if this guy owns the building, that definitely means he's willing to refresh the lease, you know, at a rate that gets the deal done. That being said, let's say, I mean, you're going to need, if you buy this business with an SBA loan, you're going to need a 10 year lease to match the term of your SBA loan. Now you might go, okay, great. I got a 10 year lease and a 10 year SBA loan. You got to think you're, what are you going to do at the end of the 10 years? Like if you want to sell this business, even after five years, you're going to need a new lease. So when you negotiate this lease, don't just think what you're going to need to buy the business.

11:42Think also what you're going to need to sell the business when you want to get out of it, because you don't want to be in the same position that we're talking about here, that you own a restaurant that's got two years left on the lease. The owner has all this power over you and he's going to triple the rent and you can't sell the business and your equity investments is zero. Now, maybe you've taken enough money out of the meantime, but still you can, you can mitigate that. All right. I'm going to steal your screen really quick, Bill. This is, this is the group that owns the building. Okay. Yeah.

12:10So they're a small town, but fairly professional real estate investment company and development company that is not going to just let this building go. It's kind of an old school looking. I'll show you another. We're seeing strip malls. We're seeing hotels. We're seeing multifamily roundup development. Yeah. This is the guy. I love that real estate records are all public. So you can just find all of them. So this is Dick Stewart who owns 303 associates and they're the ones who, who actually I'll show you. So you can, you know, this is all publicly available information again, because this is acquisitions anonymous, but I use land glide, which is a County GIS aggregator and just went to the address.

13:03here's saltus and 303 associates llc so there's at least somewhat of a veil that you can't get through but you can go to the south carolina secretary of state website which i'll pull up 303 associates yeah llc richard h stewart on boundary street in buford you look him up so that's how you get to yeah that's how you get to uh finding out the dick stewart and Boundary Street is like walking distance from this restaurant. So this guy lives in Beaufort. He's old school, South Carolina. He's probably wired in. The thing I was going to ask you, Mills, is whether they own the Plums building, which is just down the street.

13:42If 303 owns that also. If that's a different landlord or a different owner, that almost certainly locks in that this is leased space. Also, anyway, 303, this seems like a real estate development firm, not a restaurant operator. So I'm willing to bet that the operator has a master lease on this building. And point 1A here is the lease on the restaurant, the relationship to Hearth Pizza in the front and Plums. Because the other challenge here is if you have a restaurant, one of the biggest challenges is staffing. If you have three restaurants on the same street, things get a lot easier because you can have a bigger pool.

14:23You can flow people between restaurants. You can have, if one of your GMs is off, someone in the same building can run up front and babysit it. There's a ton of operational, not just cost synergies, but pain in the butt synergies. It's just like cross-pollination works in your favor. In a lot of ways. People get bored of working at one, they can go work at the other one. If someone wants a promotion, you don't have a manager spot open at this one, but you do at the other one. And there's just so much flexibility you have. So if - Even buying power with vendors, liquor distribution, food service, I mean, all kinds of things.

15:01I'd be willing to bet these two that are in the same building share a kitchen as well. Yeah, probably so. I did look, Plums is owned by a different landlord. Okay, so this is probably a restaurant group that is leasing both locations. I wonder if we dug, if we would find the other locations for sale as well. Yeah, that's what I was trying to figure out. but it doesn't look like it. Nils, I found it. Did you? Hearth Wood Fired Pizza also for sale. Ooh. All right, so we're pivoting this episode to include them both. Let me tell you, listener, here is Hearth Wood Fired Pizza that is in front of the same building in the front.

15:38Asking price, 1.2 million. Gross revenue, 2.8 million. So in aggregate, out of this building, they're doing 2.8 plus, what, 3.5? Yeah. doing over 6 million, like 6.3 million of sales out of this one building. On a lease, let's scroll down and find out what this lease is. This lease is 12 ,000. So your aggregate lease is 26 ,500 a month. So on$320 ,000 of rent, you're doing 6.3 million of sales. Now this is restaurant sales. So the margins probably aren't great, but it's not super low priced restaurant sales either. and they're probably selling alcohol. So I mean, I'm backing into this. Let's say your restaurant has 15 % margins, your aggregate restaurant here, 6.3 million in sales.

16:31Maybe you're doing 900 of EBITDA. Let's say you got 15 kind of margins kind of before rent and you're giving them 300. You're probably at 600K of EBITDA here between the aggregate restaurants. And they're asking for 1.2 plus 1.1. They're asking for 2.4. what's interesting bill is this uh sean joyce who has this listing they don't really pop up if you search them but then i searched her phone number uh his or her phone number and it's a uh it's a a restaurant specific uh broker it's called northeast restaurant advisors and they're based out of rye new hampshire interesting that's strange yeah that they end up you know getting somebody very, very far off the beaten path.

17:20But looks like Sean is a guy. I'm sorry, Sean. He has 30 years of restaurant industry experience. Okay. So broker probably knows what they're doing, at least a little bit. Yeah. I'm trying to see if I can find now plums for sale. Yeah. But at the very least, it's Hearth and Saltis and they're in the same building. So there's got to be, I think it's a little bit weird that they're listed separately. Like there's no way you you're buying one of these right you're buying both yeah yeah they go together they probably share a kitchen they probably share a staff like i just i think it's a little wacky here that sean has tried to sell them separately um but if you look at them together what you have is a pretty cool setup here you've got a whole building in the tourist core of downtown beaufort uh you've got two concepts that have been around for a long time and are working you know one kind kind of high end, one kind of lower end.

18:19And it probably is profitable. I mean, it ought to be on 6.3 million of sales in a building that only costs them 300 grand a year. There's a lot of room in there. Yeah. It's interesting because I'm wondering if this is a situation where something happened with the owner. Lance Price is the owner. It looks like he's about 60 years old because this kind of broker advisor from Northeast Restaurant Advisor, Sean, the services offered on their website is like interim president and CFO, So board of director appointment, reviewing organizational structure, helping with executive level and mid-level management recruitment, examine existing leases and contracts and renegotiate better terms.

19:20It seems like, I wonder if this is like a fixer that they brought in. And that's how Sean ended up kind of getting the listings. Like if they're, maybe they didn't set out initially to sell, you know, and there's some kind of story behind this where they brought in somebody who was kind of an industry expert. And then that person said, hey, look, you know, I'll help you kind of write the ship. But then I'm also now in a pole position to kind of help you divest. That's very possible. What's interesting, Mills, and I'm glad you gave me the idea to kind of creep on LinkedIn. There are a number of people on LinkedIn that seem to work for Plums Inc., which is salted river grill, plums, and hearthwood-fired pizza.

19:59But they have titles like director of catering, sales, and marketing, director of operations, vice president. So what this telegraphs to me is a pretty built-out management team under the hood, which is a very positive sign. So, I mean, you have a restaurant group here that has a great location in downtown, has a built out operations team that's been around since 2003, right? Has a good brand. You know, if you're talking about buying a restaurant, these are a lot of the things that are on your checklist. Buying a business might be the biggest financial decision of your life. And most people try to make it alone.

20:36Cold emailing brokers, reading financials at midnight, and guessing what are the numbers actually hold up. Acquisition Lab exists so you don't have to. It's the leading community, platform, and fund backing serious vetted acquisitions entrepreneurs with a standing board of advisors who've actually done this. People who will talk you out of a bad deal as fast as into a good one. The education and the deal search tools are free and open to everyone before anyone asks you for a dime. The easiest way to field that is a roundtable. It's a free live conversation where you talk through what you're actually stuck on with other buyers and advisors who've been exactly there.

21:10Nothing recorded, so it always stays in the room. Sit in on the next one for free. at acquisitionlab.com slash roundtables and tell them that Acquisitions Anonymous sent you. It's interesting because I think like to own a business like this, you've got to be so ingratiated into the community that you're kind of synonymous with the restaurant and you have to be a local. I mean, Lance Price, the owner here, I mean, they're written up in a ton of different, you know, local publications. They're featured on like Visit Buford SC's Instagram. Like there's a lot that goes into owning a business in a small seasonal town like this.

22:00And this is a seasonal small town that thankfully we have, you know, pretty good weather in South Carolina, except just when it's blazingly hot. This is not like, you know, you can only visit this place one or two months out of the year. And there is a lot of net population growth here. So especially in Hilton Head, not that far away, you've got a lot of retirees kind of, you know, uprooting their lives in another part of the country and then kind of putting down roots there. So I'd be curious about their monthly revenue. You could look in, you know, 60 seconds at the monthly revenue across both of these restaurants and figure out seasonality.

22:39And if you get hosed, in the down months. Yeah. So that's the challenge, right? Because the whole challenge is the staff. What do you do with the staff in the down months? Obviously, the rent keeps going, but the rent is a relatively small fraction. You have 5 % of revenue on rent for this restaurant group here of two restaurants. But it's the staff. Yeah, you can cut them, but then where do they go? Can you get them back? So it's booting them back up. And can you get the same people? Are you retraining fresh people? and just makes it so much harder to run a seasonal business because of the de-staffing and the restaffing.

23:17But that being said, obviously this restaurant group has been around since early 2000s. They've figured that out. That's what I like about this is it's been around for 20 plus years. They've renewed their lease a couple times probably. They've got people with the title of vice president of operations. The owner, yeah, you probably got to be local, but you're probably not in these restaurants every night, which you can't say for a lot of restaurants. Yeah. Yeah. It is interesting. It looks like the owner also owned and maybe sold or closed a, and then subsequently it closed a coffee shop next to Plums.

23:55So like this is a serial entrepreneur in a town that, you know, there's a lot of overlapping customer base. You're literally walking from the coffee shop to the lunch place, to the pizza place, to the fine dining place, all in the same stretch. It seems like that could really work to your advantage, but it's also a massive risk. If people just think you're an a-hole, when you come in and run this thing, all of a sudden, all the businesses get on the blacklist. Yes, there's definitely the key man risk here. Let's talk a little bit about growth because they keep saying about, here's how you would grow it.

24:34You start doing wine dinners, et cetera. The challenge for me is so goes Beaufort, so goes your business. There are so many tourists each year, and you capture a certain percentage of the dining nights. And I know these restaurants, they're already executing pretty well. So I just don't see much growth here. I mean, now I'm not a restaurateur, but you could maybe execute a little better. You could start doing these wine dinners, but that's going to give you an extra couple points of growth. There's just no way to triple this business, even double this business. You got to make your money on the buy.

25:20You got to set it up for long-term ownership, and you've got to say, hey, I can math this out to a 20 to 25 % IRR. And I got to also think more about cash on cash because I have functionally no expectation of terminal value here. Yeah. Which tells you, right, you've got to, you know, okay, you got to price in little to no growth because this owner has already figured out, hey, coffee doesn't work. Pizza does, you know, fast casual does, fine dining does. Like they've already kind of optimized everything probably way better than you or I could. And then you've got to say, okay, so not only are we not going to grow this thing materially top line, but we're going to have to really, really fight to maintain our market share because other restaurants are going to close and reopen and that's going to be all the buzz, you know, and the locals are going to want to go there and you're going to have to fight just to maintain, not fight to grow.

26:14So I think you've got to underwrite around declining growth over the long term at the very least. Yeah. Or at least flat. I mean, as you said, I think Beaufort is growing. So one of my big points of diligence would be some data on population trends in Beaufort, like what's driving that, et cetera. The challenge with Beaufort is there's just not a ton of industry there. It's a vacation town, but it kind of runs on tourism. It runs on restaurants like these, which is good and bad. You are core to the economic engine of the town. But if the town dies, I mean, these businesses, they survive COVID though, which shocks me.

26:54I mean, these businesses were probably cooked during COVID. I feel like the tricky thing about a business like this in particular is that you and the landlord have to be totally ingratiated to each other. And neither one of you can have zero-sum thinking, which is really hard to find. If the landlord and the building owner has zero-sum thinking, then they're just going to think, well, you're totally replaceable and you're going to feel that at least renewal. I'll pay what I want or I'll find somebody else. I think a very judicious and long-term focused landlord is going to say, I've got a bird in the hand.