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BUYING A SMALL BUSINESS

Business for Sale: Northeast Bagel-Bakery Chain

An upclose look at a business offered for sale complete with price rationale and some pros or cons of the purchase.
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THE BUSINESS Who can start the workday without a bagel and a schmear? So chew on this tasty prospect: a chain of six retail outlets that sell 6 million bagels a year, mainly in college towns in Vermont and New York. The chain has plenty of growth potential, thanks to its popular recipe, underutilized production facility, and thriving new wholesale business. The two owners, who bought in when the operation consisted of just two shops, now want to cash out and move on. Two key managers are willing to stay; also on the menu are a cutting-and-shaping machine, some boiling kettles, ovens, proofing cabinets, and two refrigerator trucks, all worth about $600,000 in depreciated values.

PRICE $2.5 million. (The owners will finance $500,000.)

OUTLOOK Mouthwatering. Americans spent $2.3 billion on bagels last year, up 45% from just five years ago, thanks to new twists like jalapeÑo bagels. Five national companies are consolidating quickly and betting they can win consumers away from taste-challenged supermarket and frozen competitors. Success here will depend on boosting customer demand and cutting costs through production economies of scale. With a production facility that runs at about one-third capacity, this chain logs average sales of about $450,000 per unit, compared with an industry average of $800,000 to $1.2 million.

PRICE RATIONALE A market-based valuation suggests about 60% of sales, or $1.68 million, but prospective buyers should discount that value if any of the chain's units have problematic long-term leases or weaker performance levels. The owners may be looking for top dollar in a market that is becoming too competitive too quickly.

PROS Finally! A chance to stop kicking yourself for missing out on the coffee craze.

CONS What if the bagel trend fades faster than
kiwis did? -- Jill Andresky Fraser

FINANCIALS 1993 1994 1995
Gross Revenues $2,423,086 $2,726,110 $2,823,085
Recast Earnings* $526,008 $490,840 $507,618

*before depreciation, interest, taxes, and owner compensation

Inc. has no stake in the sale of the business featured. The magazine cannot confirm the accuracy of financial or other information offered by the seller. Inquiries should be directed to Robert Marlowe at Coburn & Feeley, 802-658-6666.

Last updated: Oct 1, 1996




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