Owner contract -- Pizza Restaurant w/ land incl -- Western WA

2 Replies

Hello Everyone,

I have had a fortuitous turn of events that takes me out of my comfort zone of Residential Investing. I had a family friend who owns five pizza restaurants approach me and offer to sell the Land and restaurant of one of her locations to me. This seems to be part of her broader strategy, as she is liquidating a few of her rentals, as well as her vacation house. I have the day to day portion of running the business covered with employees and a trustworthy general manager ready to step in on day one of the acquisition.


I have never made a purchase of a commercial property, let alone with a restaurant before. I am seeking a real estate attorney in my market (West of Seattle) to ensure the owner contract is completed flawlessly. We are meeting on Tuesday to discuss preliminary details of the owner contract. After that point, I plan on sending over the details to the attorney to have the contract drawn up.

Specific Details are:
--Tax assessed, the land is valued at 265k while the building is valued at 207k. Building is less than 20 years old. Location is prime, located near major retail outlets, hospital, and rapidly expanding residential developments. Building is in Good condition.

--Land is leased from owner to LLC of business. My plan is to continue to emulate this model. I will personally own the land, and then lease the LLC to the business in question. The LLC will be held between me and a business partner.

--3 years of books are provided to me.

--All equipment are provided as is. There are some defects with some equipment, seller is willing to negotiate price on this.

--I can provide 50K for operating income from my cash reserves for the business as a 'loan' to the LLC.

--Restaurant will maintain its name, but will be considered a franchise. We will retain the rights to expand the franchise as we see fit.

--Will be seeking to 'bake' in a 3 month trial period into contract where we can operate the business on a trial period before finalizing the transaction. 

--Owner is looking to part with business quickly.

Questions I have:

--How does one determine the value of a business? Once I have access to the books, I can send off pertinent details to a professional for valuation, but I am not sure what this process looks like.

--What are some important details I should consider during negotiation?

--Does anyone have any personal recommendations for an attorney in this region?

Thank you all!

Originally posted by @Stephan J Hagen :

Hello Everyone,

I have had a fortuitous turn of events that takes me out of my comfort zone of Residential Investing. I had a family friend who owns five pizza restaurants approach me and offer to sell the Land and restaurant of one of her locations to me. This seems to be part of her broader strategy, as she is liquidating a few of her rentals, as well as her vacation house. I have the day to day portion of running the business covered with employees and a trustworthy general manager ready to step in on day one of the acquisition.


I have never made a purchase of a commercial property, let alone with a restaurant before. I am seeking a real estate attorney in my market (West of Seattle) to ensure the owner contract is completed flawlessly. We are meeting on Tuesday to discuss preliminary details of the owner contract. After that point, I plan on sending over the details to the attorney to have the contract drawn up.

Specific Details are:
--Tax assessed, the land is valued at 265k while the building is valued at 207k. Building is less than 20 years old. Location is prime, located near major retail outlets, hospital, and rapidly expanding residential developments. Building is in Good condition.

--Land is leased from owner to LLC of business. My plan is to continue to emulate this model. I will personally own the land, and then lease the LLC to the business in question. The LLC will be held between me and a business partner.

--3 years of books are provided to me.

--All equipment are provided as is. There are some defects with some equipment, seller is willing to negotiate price on this.

--I can provide 50K for operating income from my cash reserves for the business as a 'loan' to the LLC.

--Restaurant will maintain its name, but will be considered a franchise. We will retain the rights to expand the franchise as we see fit.

--Will be seeking to 'bake' in a 3 month trial period into contract where we can operate the business on a trial period before finalizing the transaction. 

--Owner is looking to part with business quickly.

Questions I have:

--How does one determine the value of a business? Once I have access to the books, I can send off pertinent details to a professional for valuation, but I am not sure what this process looks like.

--What are some important details I should consider during negotiation?

--Does anyone have any personal recommendations for an attorney in this region?

Thank you all!

 I'd probably separate this out.  

The purchase of the land and improvements is usually pretty straight forward.  I'd use a standard commercial PSA and attach a method of payment addendum, also standard, outlining the terms of the SF.  Have a slow close date to get your 90 days of training in, but try to reconcile that with the owners desire to move quickly.  LOL 

Open escrow with a title co and one of their network attorneys will draft the financial instruments.  You'll have to select either a note and deed of trust or Real Estate Contract.   In general a Note and DofT provides more protection for you, a REC more protection (won't have to foreclose) for the seller.

The LLC is a different piece. Because you'll have a partner and want a full and thorough OA, an attorney that specializes in contracts and business matters would be ideal. Early on I paid such an attorney to draft me a cookie cutter OA that can be used with or without unrelated partnerets and have since established 4 on my own easily directly with the SOS.

I'd post my question for a local business entity attorney referral in the local Seattle Forum.  Keep the request simple and good luck.

@Stephan J Hagen If you and your partner end up as owners of the restaurant and the business, have your CPA group the entities for tax purposes. You can only do this in the first year of ownership unless there is a change in ownership down the road. Then, realize that there is a lot of tangible property in a restaurant that can be separated from the building structure with a cost segregation study and 100% depreciated in the first year you do the study. This can give you a nice bit of cash-flow up front in taxes you will not have to pay.

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