A Guide on Analysing Which Pub For Sale Is The Best Fit For You
A Guide on Analysing Which Pub For Sale Is The Best Fit For You
Who could forget the iconic Walkabout Creek Hotel from Crocodile Dundee or the murals in Broken Hill’s Palace Hotel in Priscilla, Queen of the Desert?
Australians love to visit a good hotel or pub and it forms the centre of many communities, especially in regional Australia. If you dreaming of your own business and considering the many pubs for sale, this guide is here to help you find the best fit for you.
A pub for sale differs from a hotel, in that it usually focuses on food and drink and doesn't offer accommodation. A good pub for sale will have a well-established clientele, profitable books and good team members. What drives people to visit pubs is varied but it's usually the quality of the food, uniqueness of the drinks such as a brewhouse or the quality of the entertainment such as a live band.
Recently in 2021, there was the rumoured sale of five assets (hotels and pubs) in NSW’s Central West for $75 million. There are some very profitable pubs for sale in Australia.
What to Analyse When Comparing Pubs for Sale:
1. Pubs Current Offerings
Pubs can be located in capital cities like Sydney, Melbourne, Brisbane or Perth or they can be in a country town like Ballina, Bendigo or Broome. The difference in the pub's offerings is usually suited to the clientele. You will find some pubs offer “pub grub” which is a standard type of menu with classics such as chicken schnitzel, burgers, steaks and so on. Whilst your up-market pubs will offer a more expensive menu with items like seafood, pasta and fancy desserts.
Pubs work on their menus and types of entertainment to draw in the clientele. If they want to appeal to a younger crowd and drinkers, they may provide a cover band every Friday and Saturday night. If they want the middle-aged or retirees the focus may be on good quality whiskey, high tea or comedy shows.
The type of business owner you are and the experience you have may adjust your decision. If you are chef looking to own a business, then a pub for sale with a similar style may be preferable. If you’re experienced in fine-dining french cuisine, it's important to choose an establishment that will embrace your style. The current clientele need to continue to feel welcomed, whilst you try to bring in new customers with your own unique flair and style.
Understanding the pub for sales current offerings, how you can fit in, adjust and enhance it, is important. There is no point buying a pub, unless you can understand its clientele and what it wants.
2. City or Country Pub for Sale
When you look at pubs for sale you will notice the majority are in the centre of town. Usually built over 10 years ago, pubs are the centre point of many communities. When towns were first being built there were usually 4 main establishments; a supermarket, a post office, a church and a pub or hotel.
A local pub relies on foot traffic and they were built when towns were first being established which is why they are located so centrally. If you think of any country town, such as Orange NSW you will see the main street lined with classic pubs and hotels like the Hotel Canobolas built in 1875, originally named the Club House.
If a pub for sale has been established a long time, over 10 years, which most are, understanding the location is important. You can ask yourself a number of questions about where the pub for sale is actually located:
- Is it on a busy main road?
- Is there ample parking?
- Are there any planned developments in the area? Check with the local council.
- Are there any new restaurants opening?
- Are there any new shopping centres or house estates being built?
- What makes this particular location good or bad?
3. Leasehold or Freehold
When you buy a pub for sale, the lease is everything (or the title). When you buy a pub that is leasehold you are buying a business and taking on the lease agreement. With a commercial lease of this type, you will be looking at a long lease term such as 10x10x10 (or even longer). It's important to understand where you are in the lease agreement, any expected increases and the relationship with the landlord.
Transferring the lease to the new owner should be simple with this type of business (compared to say a retail space in a major shopping centre) as the business is well established and will generally continue to operate the same/similar type of business. Understanding the lease is extremely important. Without a lease - you basically don't have a business - you could move the pub for sale - but if that's the case, why are you paying so much? The current clientele of the pub for sale are drawn to its location, not necessarily the name. So check the lease agreement.
If you are buying the pub for sale and it’s a freehold sale, you are also purchasing the land title and the building. This is common in country towns, especially if buying an older pub, as they may need extensive work and it is easier for the current owner to sell the business and the building than trying to maintain its upkeep.
As with any real estate purchase, a business or pub for sale being sold as a freehold should include an element of inspections. It will need building and pest inspections as well as a solicitor to check on the land titles and assist with transfers.
All business sales should involve due diligence, a freehold sale requires that extra element to ensure you know what you are buying when you purchase the pub for sale.
Deciding if you should buy a pub for sale that is leasehold or freehold will depend on a number of factors. Firstly, the price, obviously a freehold business is a lot more expensive. But it does have the benefit of the asset, intime the price of the land could increase, you could also sell the business and maintain the property title and collect rent. So a freehold purchase of a pub for sale should be seen as acquiring additional assets. A leasehold purchase is obviously a bit cheaper (well depending on the revenue) but it does give you the ability to focus solely on the pub for sale and making it grow.
Look at the leasehold and freehold options when comparing pubs for sale.
4. Repairs and Maintenance of the Pub for Sale
As a lot of country pubs for sale have been established over 10 years they may be requiring repairs and maintenance. Especially those built-in 1900 to the 1980s. You need to have a solid understanding of the work involved, especially if expensive areas need fit-outs of repairs like bathrooms or kitchens.
If you are buying it leasehold, how much assistance is the landlord willing to give you, is there the possibility of a rent-free period so you can carry out much-needed repairs or renovations? Is the building even worth the investment? Unfortunately, alot of Australian country towns have run-down pubs and hotels that need alot of money invested for repairs.
When deciding which is the best pub for sale for you, you need to assess your ability to make repairs. Are you handy and can do renovations yourself or will you need to hire professionals? It can get quite expensive if you have to pay for every repair that is needed. So you will need to factor this into your budget and decide which pub for sale is best for you. The newer pub may be a better fit if you don't know the difference between a phillips head or a flathead screwdriver.
5. Check the Licenses
There is no point in buying a pub for sale if it doesn't have the correct license. If you can’t sell liquor inside the pub or in the attached liquor store, the business will fall apart quickly. If it doesn't sell liquor is it even a pub?
Ensuring the pub for sale has the correct license is important, and that the license can be transferred (or obtained) by you as the new owner.
“You can transfer a liquor licence when you buy or sell a business or when you want to change the licensee. Usually Liquor & Gaming NSW will give you provisional approval within 10 working days, so the business can continue operating. Confirmation of the transfer will take about 60 days if all relevant training has been completed.” Service NSW
6. Profitability of the Pub for Sale
Last, but definitely not least. When you buy a pub for sale, the valuation is usually based on the profitability of the business. How much money is the owner actually making? There's no point in having a $1,000,000 turnover if the owner is only taking home $60,000 a year. You need to understand where the money is coming in, and where it is going out. A solid financial understanding of the business is very important.
It is important to ensure you are paying a fair market value for the business and to also plan your future projections. You need to know how much net profit the business is actually making, and why.
Pubs for sale will have a long lease agreement, or the title if buying freehold. So you are committing to a long period of time (we're talking 5+ years) not just a 12-month stint to see what happens. It’s a commitment.
Money is everything in business. Understanding cash flow, knowing how to increase your bottom line, and where the expenses are going. So whilst you may have experience in hospitality, you need to have a good grasp of the financials when you buy a pub for sale. Always speak to an accountant or business broker.
If you're considering buying a pub for sale, Bsale can help. We showcase over 100 pubs for sale across Australia which have varied price points. Please reach out to our team if you need any assistance. Always consult a business broker, accountant and solicitor when buying a business.
About the author
CEO Bsale Australia
Vanessa is the current manager and CEO of Bsale Australia. Over the past 11 years as a business owner, she understands what it takes to grow a ...