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an offer

post #1 of 5
Thread Starter 
Today in one of our great snow storms, I ventured out to look at the possiblity of renting another kitchen, in my talk with the GM of the hall, he switched gears on me and asked if I would be intrested in disovling my company, and coming on board with them as a sub-contractor at a commisson of 30% after food purchase. As you can see by my post I can't sleep: my gears are turning. I could keep my menus, and current clients add their clients be my own boss no heat electtric rent or food purchases sale tax work comp ETC. I would bid out jobs let say total job was 1000.00 and food cost 200.00 so 800.00 was profit I would get 30% on the 800.00 plus tip and use of their vechiles.They also have cambros, china, glasses, linens,no more rentals. I have to say with the economy this year things as far as Christmas parties has been much slower and companies eating business lunches has slow down some this could boost my sales as far as being busy? What do you guys think? I guess in one way I am still my own boss? but a sub? God I need to sleep I have a Party tomorrow!!!:pI really think he needs me more than I need him? should I ask for more of a cut or do you think 30% is fair?:crazy:
post #2 of 5
I can see why you are not getting any sleep. A big decision. Go with your gut. I am sure you will be fine either way. Good luck.
post #3 of 5
Based upon my business, in which I have a concession agreement with a large hotel.

Here are some questions:

-Is there a need to dissolve your current company? If you are INC or better LLC, you can add a DBA name through your state, and continue to operate without changing a thing. No new books, checking accounts, cc machines etc. In fact, moving into a sub-contractor mode, you will be able to streamline your operations, and reduce your overhead, taxes and liability.

-What about alcohol sales? If they do sell it, are you getting a share of that as well? Will you be responsible for carrying the inventory?

- Even as a sub-contractor, you will most likely still need liability insurance. At least to cover yourself, in case of food borne illness claims. Can you afford it, based upon a 30% cut?

- Will you have an exclusive/no-compete agreement? Meaning, can you do jobs off-site, using their inventory, rental inventory and only use their facility to cook in, and will they have the option to bid out jobs, and you stand the chance of not winning the bid? If they are not willing to enter into an exclusive agreement with you, don't walk, RUN from this place.

- You mentioned employment costs. Now, is your 30% cut after food only, and they are covering employment and all the other overhead from their 70%? Or are they going to factor in their expenses, and only offer you a cut of the "real" profit? If it's 30% after food cost only, you have a deal worth exploring.

- Is the staff, facility, kitchen etc... going to make you look good? If it has the strong potential to damage your personal/corporate image, then perhaps it isn't the right fit for you.

- How many and how much in total sales do they have booked for the next 2 to 36 months? Are they willing to show you the contracts, or is it just conversation? How many sales people do they have seeking out contracts/banquets? If you bring in business, will they be willing to flip-flop the percentages?

I have probably 15 or more questions, and I know how hard you are thinking and trying to see all your options. I will wait for a reply, or you can pm me and we can talk more.

Bottom line, in my opinion of course, is why are you looking to move, if you met the guy under the impression of expanding? If you can afford to expand into a new/larger kitchen, or run 2 kitchens, then the sub-contractor deal is great. If you MUST move/dissolve your existing business in order to GET the sub-contractor agreement, I don't personally think it is worth it. Granted, I know nothing more then what you disclosed in your original question.
post #4 of 5
As a subcontractor, there is no reason to dissovle your current business. That's who they are subbing through. If they balk at contracting with a company instead of an individual, I'd be leery.

Maintaining your corporate status has several advantages, among them your current customers will continue relating to it. You are their caterer, not the hall.

Add in all the business benefits of a corporate identity, and I'd sure keep it.

As to the deal as you presented it, my first question was: 30% of what? Just the business you bring in? Or on everything they do? If it's just on business you bring in, what's the advantage to you? And does the 30% truely apply to everything after food costs? They're going to eat all other costs and expenses from their 70%? That really is the key question.

Does your piece of the action apply only to food? Or to alcohol and extras as well?

Consider not only the money but the risk. In effect, you'd be a company with only one customer. What sort of protection would you have if they decide they don't need you anymore? Consult with your lawyer on this, but if it were me I think I'd be looking at a guaranteed minimum, and a contract that lasted at least a year.

Look carefully at exclusivity; it should be a two-way street. Being as all the business you develop is going to them, you should be their exclusvie caterer---or, if they use other people, your 30% should come off the top of those jobs as well.

Seems to me this is a situation where you need to get your lawyer involved sooner, rather than later.
They have taken the oath of the brother in blood, in leavened bread and salt. Rudyard Kipling
They have taken the oath of the brother in blood, in leavened bread and salt. Rudyard Kipling
post #5 of 5
Thread Starter 
I think your right something tells me he needs me more than I need him......and I can do more for myself if I just keep doing what I am doing. When I knda of balked at it he first offered me 20% and I laughed I told him I was worth more than that he said" well if you just want to rent " we can discuss that. But I also don't think I want him knowing my Customers or seeing my products something smells fishy I have been used in this bussiness before. We had a bar/grill open and the bank wouldn't give them a loan till they had a GM on board so they took my dipolma and experience to the bank well after the first two months of operations guess who was let go?? I would hate to give them what I have then be told adios. And that is what my gut is telling me.
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