Jul. 09 2001

How To Broker Restaurnts and nightclubs

I grew up in the restaurant business.

My family owned 42 eating establishments and lounges, and as soon as I was old enough to get a liquor license, I opened my own place. But after owning 27 different eateries and nightclubs in 27 years (sometimes five at a time) throughout Georgia, Ohio and Florida, I decided it was time for a change. I wanted to keep a hand in the business, but with a wife and eight children, I didn’t want the long hours or the hassles. I had owned investment properties, so it was a natural progression for me to get my real estate license and open a brokerage company specializing in restaurant/nightclub sales and leases. Thanks to South Florida’s population boom and vibrant restaurant industry — people eat out often— my concept proved successful. Through hard work and persistence, in six years’ time I’ve built a $60 million-a-year company that has negotiated the lion’s share of restaurant and lounge deals from South Beach to Palm Beach. Here’s my approach:

1. Start Small but Be Bold
It’s a good idea to get an executive suite and have a shared secretary when you’re starting out. And don’t chase deals from one end of the state to the other. Stick with an area you know so you’ll have the resources to service your clients. Delray Beach and Boca Raton became our nucleus, and once we were known there, we expanded into other areas of Palm Beach County and into Monroe, Dade and Broward counties. But just because we were small didn’t mean I was about to miss the opportunity to compete with the more established firms. When a family friend and owner of the Delray Beach Yacht Club offered me a 30-day exclusive to sell the club before turning it over to a big commercial firm, I jumped at the chance. The $5.6 million asking price was a big deal then, but I already had a potential buyer in mind. I made repeated calls to a local investor, who was also one of the biggest landlords in Palm Beach County, but never got a response. Then it hit me: He doesn’t know what I have, so I’ve got to be persistent. One Saturday afternoon I drove to his home and rang the doorbell. He said I was one of the most determined guys he’d ever met and invited me in. He wasn’t interested in the yacht club, but he hired me to handle his commercial transactions, and I’ve sold him $20 million worth of property through the years. On the 28th day of the exclusive, I sold the yacht club to a group out of Chicago.

2. Spend Plenty on Marketing
We spend $250,000 annually on a combination of advertising and signage that brands us as the restaurant/nightclub experts for South Florida. Our made-to-order property signs include site-specific information, such as “This fabulous restaurant site available for sale or lease,” with bullets listing square footage, price, features, terms, our company name, logo, phone number and Web address. Every municipality has different codes, but we try to place the largest allowable sign. I constantly second-guess our marketing. Some deals have come out of the smallest amount of marketing, but by the same token, if you narrow it down too much you won’t get the publicity you need. One sale can bring a sizable commission and a relationship with a new client or customer, whether it came through e-mail or advertising in a specific publication. We advertise in Nation’s Restaurant News and in the business section of the Sun-Sentinel and the Palm Beach Post. We also advertise on major restaurant and commercial Web sites, including Restaurants-for-Sale-Online.com, BizBuySell.com and LoopNet.com. And, of course, we promote our listings on our Web site — PrakasGroup.com. Since a lot of our clients and customers come from New York, New Jersey and Philadelphia, The New York Times works well for us.

Our database includes 10,000 names for South Florida alone. Every three months we mail them a different marketing piece to keep our name out there. For example, we might send a slick postcard listing the deals we’ve done, asking them to call one of our associates when they’re looking to sell or find another location and telling them we’ll handle the transaction confidentially.

We also send colorful brochures and two-sided larger postcard mail-outs. The front asks, “What do the following places have in common?” and features the logos or signs of some of our high-profile clients. The flip side says, “They’ve all been brokered by The Prakas Group” and suggests the recipients call us if they’d like to add their logo to the list. We also send letters introducing our firm to all the businesses in our target counties that have a beer and wine or full liquor license.

3. Hire Experienced Associates.
Our average customer is making a $1 million-plus investment and can’t afford to deal with amateurs who might steer them into a bad lease or wrong location. When you’re working with customers who are making big decisions and investing large amounts of money, you have to be accountable, so we won’t hire anyone without restaurant experience. All 12 of our associates-brokers have previously been restaurant/ nightclub operators or owned their own businesses. They know the industry from the front of the restaurant to the back and what it really takes to succeed, in terms of demographics and location. Combined, they have more than 200 years of experience. I’m not saying it can’t be done without this experience, but at the very least you should be self-taught and familiarize yourself with the industry before you hold yourself out as a specialist.

4. Keep Reserve Funds
You don’t have to be wealthy to make it in this niche, but it’s a good idea to have money in the bank to fall back on during dry spells because some transactions take up to a year to consummate. You might even find yourself working numerous deals at the same time, with just one out of 10 coming to fruition.

Timelines aren’t applicable in this business, but with due diligence, insurance and lease assignments, deals take 90 to 120 days from start to finish.

5. Keep Your Eyes on the Future We close a deal about every 10 days now, but it took seven years to build up to that. When I was starting out, it would have been only in my wildest dreams that I would have been able to imagine the volume that my staff and I handle today. We’re planning to open an office in Orlando and then a satellite office in Tampa, which we project will double our volume. We don’t want to expand too quickly, but I think it’s an achievable goal because we have the infrastructure, a reputable name in the industry and we consistently get referrals and high profile transactions.

Athan “Tom” Prakas is president/broker of The Prakas Group Inc. in Boca Raton. In 2004, he expanded the company by opening a residential arm, Boca Brokers Inc., specializing in high-end homes and condominiums. Prakas is a member of the American Hellenic Educational Progressive Association, and a
member of both the Boca Raton and the Delray Beach chambers of commerce.