Need Some Advice On A Possible Business Partnership...

Q-Dat · 10-01-2013, 02:50 PM

OK just a few miles from home is a gas station who's previous owner used to sell BBQ and do OK with it. Well he sold the gas station and in the year or so since the big nice Southern Pride Smoker has just sat there. I spoke to the owner today about possibly doing business with him and putting his cooker to work to make us both some money. I think he doesn't use it because he doesn't have anyone that knows how to produce a good product.

My question is this. Do you think it would be better to offer him a partnership type of deal where one of us would receice a percentage of the profits depending on whether he buys the meat and I cook it, or if I do the meat purchasing and the cooking.

Or would it be better to offer my services straight up to be put on the payroll?

Never been in a situation like this one so I greatly appreciate any advice that you folks can give.

deguerre · 10-01-2013, 02:51 PM

I'd do payroll with an option to buy in if it works out...

Marrs · 10-01-2013, 03:25 PM

If you really want to do this, my advice would be to work out a few different options that would make this thing worth your time, and his. Also, don't rush. Take your time, especially if you don't know this person very well. You need to get a feel for each other and decide if you can be in business together.

If you do make a deal, be as clear as possible on goals and roles. Put it all in writing. Partnerships are like marriages with a better chance of divorce. You need a good pre-nup.

Good luck!

cpw · 10-01-2013, 03:47 PM

Don't do anything without talking to a lawyer first. I know it's a waste of money, but you'll be thanking your self when/if anything goes bad. Tell the lawyer what you're thinking, and let them tell you what they think the best approach would be.

bizznessman · 10-01-2013, 05:20 PM

Personally I would not utilize a Partnership as a business format. These are the points of a Partnership that cause me to not consider them.

1) Partners in a general partnership are jointly and individually liable for the business activities of the other. If your partner skips town, you'll be liable for all the debts, not just half of them.

2) You do not have total control over the business. Decisions are shared, and differences of opinion can lead to disagreements, a "falling out," or even one partner buying out the other.

3) There is a chance that one business partner may not work as hard as the other, but will want the same rewards as the more valuable partner. If you have a low tolerance level for this type of inequity, partnership may not be for you.

I agree with deguerre. I would propose a "payroll" arrangement to start with. This will give you some sales data with which to evaluate the viability of the business. If the business is profitable you could then propose a purchase of the cooker and a lease for the space in the station. The lease could be a flat fee, a percentage of sales or a combination of both.

First thing to do is to work up a business plan. See if you can obtain information of past sales from the BBQ business which will help you to decide if your business plan is viable.

It sounds like an interesting venture. Good luck if you go forward with it and keep us informed.

Fooskey · 10-01-2013, 10:36 PM

Of course, if you go on payroll, there is no incentive to take you off and allow you to buy in if the business is profitable. If you want to share in the profits, you have to take on some risk.

Why not rent the space, buy the meat, and take 100% of the profits? Build your brand and then you have some leverage. Having the other guy pay you like an employee with the option to buy in is great for you, but not something I would consider if I was in his shoes.

landarc · 10-01-2013, 11:04 PM

Bizznessman gave you the best advice. There are a lot of issues with partnerships and the one that looms large is that you assume his half of all liabilities in your partnership. Will this be a separate business from his gas station? Will you have other responsibilities other than cooking? Do you trust him?

One of the rules I use, is would I marry this person? If the answer is no, then skip the partnership and work out a different deal. Even leasing the space and cooker, running the business as your own, and splitting profits, if there are any, is preferable.

Q-Dat · 10-02-2013, 12:59 AM

Ok so after reading what has been said as well as seeking advice elsewhere, I have decided that any kind of partnership is out.

He is going to check with his insurance to find out what kinds of allowances there are, but I'm leaning towards a rental offer on his equipment and carrying my own insurance. The biggest possible hangup is that he does sell food. He just doesnt use the Smoker so I would have to know what kind of profit he makes from his kitchen to know what kind of offer to make.

That being said I can also see the benefit of a payroll deal because the risk is minimal, but therefore so is the reward.

BigBellyBBQ · 10-02-2013, 01:13 AM

if someone else or two diiferent people selling food under the same roof will not work. If you don't own the property you do not have the final say in product being sold..try to work a lease to buy...like a retirement for him..

bizznessman · 10-02-2013, 02:48 AM

I tend to lean toward BigBellyBBQ's last post. Sharing a kitchen may not be a good idea. However, if you decide it is something that you want to try then work up a business plan first. (it is very important and prudent to be detailed in your business plan as it is your best "crystal ball" regarding the success of your proposed business)

I would start my research, for a Business plan, with these points.

1) What type of access will you have to the kitchen, full or partial (time/equipment,etc)? (important for evaluating your cooking/serving process)

2) How will your supplies be purchased, stored, managed, inventoried? (important to be able to track yours separate from his)

3) What type of food does he currently sell? Will it compete for your BBQ receipts? If so what percent of total sales do you estimate will be yours? (important to calculate your projected Gross Sales)

4) How will sales be documented, your food and his? Is there an electronic POS system, etc? Will/can it be shared for both your sales and his? (necessary for ascertaining your actual Gross Sales from your product)

5) You mention that he is checking to see if his liability insurance would cover you. This will probably depend on the business arrangement. If you are an employe -Yes. If you are a separate business entity using his facility - could easily be No and you would need to obtain your own.

6) Will you offer any sales other than on premises? i.e. catering, etc This could affect the liability insurance aspect. It can also affect the need for access to the kitchen. You will also need space (at the Station or other location) to store your catering equipment such Cambro hot hold units, tables, etc.

These are just a few but imho are some of the more important points to be addressed.

Following this thread I am inclined to think that you may want to propose a separate business entity (LLC is my preference since a Sole Proprietorship puts all of your personal assets at risk) that would have a lease type agreement that allows you the access required to cook and sell your product out of his establishment using his smoker (a DETAILED lease agreement drawn up by an attorney). Both of you would need to have a "meeting of the minds" on the terms of the lease and it's details. This would allow for business liability protection for you and the LLC would also be a vehicle that can be used if things change in the future should the possibility of "going it on your own" arises.

Of course this is all just my opinion and not intended to be legal advice.

cynfulsmokersbbq · 10-02-2013, 10:40 AM

Are you only interested in the smoker portion of the food business? If not, offer to purchase all the food services from him. Possibly rent the space from him, but then you control the food. Or offer to purchase a fair interest in the food portion of the business.

I honestly don't see how he would want to partner with you if you only wanted to be involved in the BBQ portion of the business. I know some very good partnerships that own and operate a restaurants, but all the food that is produced is part of that partnership. One isn't saying, the BBQ is mine, and the chicken fried steak is yours. They are both in it to maximize profits.

Q-Dat · 10-02-2013, 09:37 PM

Thanks for the advice everyone. I'm abandoning the partnership idea completely. When I talk to him again I will inquire about leasing his equipment and taking over all hot food sales with my own insurance as well as a payroll deal with some type of commission.

One thing I have going for me is that the unit is mounted through the back wall of the building. I think the only reason that he hasn't sold it may be because he would need to get more than its worth to cover the cost of filling in the huge hole that would be left.

cynfulsmokersbbq · 10-04-2013, 01:12 PM

Quote:

Originally Posted by Q-Dat

Thanks for the advice everyone. I'm abandoning the partnership idea completely. When I talk to him again I will inquire about leasing his equipment and taking over all hot food sales with my own insurance as well as a payroll deal with some type of commission.

One thing I have going for me is that the unit is mounted through the back wall of the building. I think the only reason that he hasn't sold it may be because he would need to get more than its worth to cover the cost of filling in the huge hole that would be left.

Sounds like you have a plan! Good Luck and let us know how it goes!

Q-Dat · 10-04-2013, 04:23 PM

Ok. I spoke to him again today. He has suggested a deal in which I am responsible for all expenses in regards to BBQ (meat, rubs, sauce, sides, wood, supplies etc). He would continue to sell his regular items, but I would have full use of the kitchen and all food would go through the same cash register.

He has proposed a commision for himself of 15% of my gross in exchange.

Opinions???

bizznessman · 10-04-2013, 06:59 PM

Do you feel comfortable with this arrangement? Have you estimated your gross/net sales under this arrangement? Have you estimated your profit margin?

Without some real data on gross/net sales it is very difficult to levy an opinion. I will go back to my original suggestion of working up a detailed business plan, base on his proposal, and decide if it is something worth doing.

If you are looking at this as a chance to gain some bbq business experience without all the upfront capital expense then it may work out. The way it is being proposed it sounds like he is looking to "hire" a cook.

The 15% of Gross sounds a bit high to me unless you are able to keep your costs low and maintain a high profit margin.

10-01-2013, 02:50 PM	#1
Q-Dat Babbling Farker Join Date: 12-03-08 Location: Pearl River LA	Need Some Advice On A Possible Business Partnership... OK just a few miles from home is a gas station who's previous owner used to sell BBQ and do OK with it. Well he sold the gas station and in the year or so since the big nice Southern Pride Smoker has just sat there. I spoke to the owner today about possibly doing business with him and putting his cooker to work to make us both some money. I think he doesn't use it because he doesn't have anyone that knows how to produce a good product. My question is this. Do you think it would be better to offer him a partnership type of deal where one of us would receice a percentage of the profits depending on whether he buys the meat and I cook it, or if I do the meat purchasing and the cooking. Or would it be better to offer my services straight up to be put on the payroll? Never been in a situation like this one so I greatly appreciate any advice that you folks can give.

10-01-2013, 02:51 PM	#2
deguerre somebody shut me the fark up. Join Date: 07-15-09 Location: Memphis, TN...Formerly of Decatur, AL	I'd do payroll with an option to buy in if it works out... __________________ Guerry [FONT=Book Antiqua]Pit Beeatch for Team Munchkin[/FONT] [FONT=Book Antiqua][B]Avatar by Northwest BBQ [/B][/FONT]"...In nature, there are predators. I believe the common denominator of the universe is not harmony, but chaos, hostility and murder..." Werner Herzog

10-01-2013, 03:25 PM	#3
Marrs On the road to being a farker Join Date: 04-04-12 Location: Dutchess County, NY	If you really want to do this, my advice would be to work out a few different options that would make this thing worth your time, and his. Also, don't rush. Take your time, especially if you don't know this person very well. You need to get a feel for each other and decide if you can be in business together. If you do make a deal, be as clear as possible on goals and roles. Put it all in writing. Partnerships are like marriages with a better chance of divorce. You need a good pre-nup. Good luck! __________________ [B]Marrs [/B] A New Mexican transplant smoking and spicing up a suburban New York neighborhood. WSM 22.5 modified, Mini WSM. 22.5 OTG. Genesis Silver. Flowerpot Tandoor 19. Proud Supporter of Operation BBQ Relief!

10-01-2013, 03:47 PM	#4
cpw Babbling Farker Join Date: 02-28-11 Location: Savannah, Georgia Name/Nickname : Chad	Don't do anything without talking to a lawyer first. I know it's a waste of money, but you'll be thanking your self when/if anything goes bad. Tell the lawyer what you're thinking, and let them tell you what they think the best approach would be. __________________ ________________ [COLOR=Orange]Outlaw 2860 Porch Model[/COLOR] Lang 84 Deluxe Yoder YS640 Savannah, GA [URL="http://www.facebook.com/yesdearbbq"]Yes, Dear BBQ on Facebook[/URL] Proudly sponsored by Royal Oak Charcoal and [URL="https://www.atlantabbqstore.com/"]The Atlanta BBQ store[/URL]
	1 members found this post helpful.

10-01-2013, 05:20 PM	#5
bizznessman is one Smokin' Farker Join Date: 03-20-09 Location: Kansas	Personally I would not utilize a Partnership as a business format. These are the points of a Partnership that cause me to not consider them. 1) Partners in a general partnership are jointly and individually liable for the business activities of the other. If your partner skips town, you'll be liable for all the debts, not just half of them. 2) You do not have total control over the business. Decisions are shared, and differences of opinion can lead to disagreements, a "falling out," or even one partner buying out the other. 3) There is a chance that one business partner may not work as hard as the other, but will want the same rewards as the more valuable partner. If you have a low tolerance level for this type of inequity, partnership may not be for you. I agree with deguerre. I would propose a "payroll" arrangement to start with. This will give you some sales data with which to evaluate the viability of the business. If the business is profitable you could then propose a purchase of the cooker and a lease for the space in the station. The lease could be a flat fee, a percentage of sales or a combination of both. First thing to do is to work up a business plan. See if you can obtain information of past sales from the BBQ business which will help you to decide if your business plan is viable. It sounds like an interesting venture. Good luck if you go forward with it and keep us informed. __________________ Do I smell SMOKE?????

10-01-2013, 10:36 PM	#6
Fooskey Got Wood. Join Date: 04-18-13 Location: MD	Of course, if you go on payroll, there is no incentive to take you off and allow you to buy in if the business is profitable. If you want to share in the profits, you have to take on some risk. Why not rent the space, buy the meat, and take 100% of the profits? Build your brand and then you have some leverage. Having the other guy pay you like an employee with the option to buy in is great for you, but not something I would consider if I was in his shoes.

10-01-2013, 11:04 PM	#7
landarc somebody shut me the fark up. Join Date: 06-26-09 Location: sAn leAnDRo, CA	Bizznessman gave you the best advice. There are a lot of issues with partnerships and the one that looms large is that you assume his half of all liabilities in your partnership. Will this be a separate business from his gas station? Will you have other responsibilities other than cooking? Do you trust him? One of the rules I use, is would I marry this person? If the answer is no, then skip the partnership and work out a different deal. Even leasing the space and cooker, running the business as your own, and splitting profits, if there are any, is preferable. __________________ [COLOR=DarkGreen][COLOR=DarkRed][SIZE=1]me: I don't drink anymore Yelonutz: me either, but, then again, I don't drink any less [/SIZE][/COLOR][/COLOR][SIZE=1][COLOR=DarkRed] [COLOR=Pink]SSS[/COLOR] [/COLOR][/SIZE]

10-02-2013, 12:59 AM	#8
Q-Dat Babbling Farker Join Date: 12-03-08 Location: Pearl River LA	Ok so after reading what has been said as well as seeking advice elsewhere, I have decided that any kind of partnership is out. He is going to check with his insurance to find out what kinds of allowances there are, but I'm leaning towards a rental offer on his equipment and carrying my own insurance. The biggest possible hangup is that he does sell food. He just doesnt use the Smoker so I would have to know what kind of profit he makes from his kitchen to know what kind of offer to make. That being said I can also see the benefit of a payroll deal because the risk is minimal, but therefore so is the reward.

10-02-2013, 01:13 AM	#9
BigBellyBBQ is One Chatty Farker Join Date: 11-15-08 Location: Lake View, New York	if someone else or two diiferent people selling food under the same roof will not work. If you don't own the property you do not have the final say in product being sold..try to work a lease to buy...like a retirement for him.. __________________ [I][FONT=Comic Sans MS]TwinTech Pro Double, Backwoods Fat Boy, TwinTech Hawg Kooker, FE 400, SP SPK 700, Empty check book and understanding wife...sometimes..[/FONT][/I]

10-02-2013, 02:48 AM	#10
bizznessman is one Smokin' Farker Join Date: 03-20-09 Location: Kansas	I tend to lean toward BigBellyBBQ's last post. Sharing a kitchen may not be a good idea. However, if you decide it is something that you want to try then work up a business plan first. (it is very important and prudent to be detailed in your business plan as it is your best "crystal ball" regarding the success of your proposed business) I would start my research, for a Business plan, with these points. 1) What type of access will you have to the kitchen, full or partial (time/equipment,etc)? (important for evaluating your cooking/serving process) 2) How will your supplies be purchased, stored, managed, inventoried? (important to be able to track yours separate from his) 3) What type of food does he currently sell? Will it compete for your BBQ receipts? If so what percent of total sales do you estimate will be yours? (important to calculate your projected Gross Sales) 4) How will sales be documented, your food and his? Is there an electronic POS system, etc? Will/can it be shared for both your sales and his? (necessary for ascertaining your actual Gross Sales from your product) 5) You mention that he is checking to see if his liability insurance would cover you. This will probably depend on the business arrangement. If you are an employe -Yes. If you are a separate business entity using his facility - could easily be No and you would need to obtain your own. 6) Will you offer any sales other than on premises? i.e. catering, etc This could affect the liability insurance aspect. It can also affect the need for access to the kitchen. You will also need space (at the Station or other location) to store your catering equipment such Cambro hot hold units, tables, etc. These are just a few but imho are some of the more important points to be addressed. Following this thread I am inclined to think that you may want to propose a separate business entity (LLC is my preference since a Sole Proprietorship puts all of your personal assets at risk) that would have a lease type agreement that allows you the access required to cook and sell your product out of his establishment using his smoker (a DETAILED lease agreement drawn up by an attorney). Both of you would need to have a "meeting of the minds" on the terms of the lease and it's details. This would allow for business liability protection for you and the LLC would also be a vehicle that can be used if things change in the future should the possibility of "going it on your own" arises. Of course this is all just my opinion and not intended to be legal advice. __________________ Do I smell SMOKE?????

10-02-2013, 10:40 AM	#11
cynfulsmokersbbq Full Fledged Farker Join Date: 09-05-11 Location: Wapello, Iowa	Are you only interested in the smoker portion of the food business? If not, offer to purchase all the food services from him. Possibly rent the space from him, but then you control the food. Or offer to purchase a fair interest in the food portion of the business. I honestly don't see how he would want to partner with you if you only wanted to be involved in the BBQ portion of the business. I know some very good partnerships that own and operate a restaurants, but all the food that is produced is part of that partnership. One isn't saying, the BBQ is mine, and the chicken fried steak is yours. They are both in it to maximize profits.

10-02-2013, 09:37 PM	#12
Q-Dat Babbling Farker Join Date: 12-03-08 Location: Pearl River LA	Thanks for the advice everyone. I'm abandoning the partnership idea completely. When I talk to him again I will inquire about leasing his equipment and taking over all hot food sales with my own insurance as well as a payroll deal with some type of commission. One thing I have going for me is that the unit is mounted through the back wall of the building. I think the only reason that he hasn't sold it may be because he would need to get more than its worth to cover the cost of filling in the huge hole that would be left.

10-04-2013, 04:23 PM	#14
Q-Dat Babbling Farker Join Date: 12-03-08 Location: Pearl River LA	Ok. I spoke to him again today. He has suggested a deal in which I am responsible for all expenses in regards to BBQ (meat, rubs, sauce, sides, wood, supplies etc). He would continue to sell his regular items, but I would have full use of the kitchen and all food would go through the same cash register. He has proposed a commision for himself of 15% of my gross in exchange. Opinions???

10-04-2013, 06:59 PM	#15
bizznessman is one Smokin' Farker Join Date: 03-20-09 Location: Kansas	Do you feel comfortable with this arrangement? Have you estimated your gross/net sales under this arrangement? Have you estimated your profit margin? Without some real data on gross/net sales it is very difficult to levy an opinion. I will go back to my original suggestion of working up a detailed business plan, base on his proposal, and decide if it is something worth doing. If you are looking at this as a chance to gain some bbq business experience without all the upfront capital expense then it may work out. The way it is being proposed it sounds like he is looking to "hire" a cook. The 15% of Gross sounds a bit high to me unless you are able to keep your costs low and maintain a high profit margin. __________________ Do I smell SMOKE????? Last edited by bizznessman; 10-04-2013 at 07:18 PM..