Just read through all the replies. Thank you for the great information.
I'll respond to some just to answer what was asked and cover things for if others look, but to cut to the chase, we have been waiting for the realtor to respond to the questions about the financial statement I had, as yes the profit dropped from $40K in 2021 to $10K. His starting response was "I run into this, where small business uses Quickbooks to help them keep organized for accountants, who then straighten out the mistakes for tax purposes, but no one ever changes the systems." So they reclassed things but the expenses were what I saw. They also added in the last month of 2021 so income went up to $146,221.37, and Net income is $10,017.22, so wife has decided deal is over.
So yes the purchase price is $350K and I thought I said that above somewhere but maybe not, but the owners were not able to say how much of that was for the house and how much they felt was the business, they were just selling the house which came with the business in their heads. They did not see the reason to break them out.
Yes, my wife is a customer there multiple times. She also has a goal/dream to own a tea room, so yes it was specific, though not with the property. This was where I had to tread lightly because I explained that just because her sisters and her felt this would be marvelous does not mean it is viable. She seemed willing to understand this might flop in the analysis and so I was willing to consider it. After all, there is no harm in looking and seeing if perhaps something worthwhile was there.
I certainly would have pursued the idea of the tax returns or something done by an accountant as all we had was this statement done by the owners who had no experience in the industry,
The spooky thing is with the fixed numbers, payroll against that $146K is $83K so well over 50%. Typical averages I could find from restaurant associations etc said 20-45% is standard so they are way off kilter here and this is where I feel their thinking of "we've made it work" falls on not knowing better. It appears this lays out as what I thought, basically a break even business that would live on the razor thin margin of staying in the black which could be tipped into a loss year by a single poor month. Those were the conversations I would eventually have with my wife if this went further to at least make sure this was all stated before anyone signed on any dotted lines. Thankfully it seems the opportunity is passed.
To those who said how much time the owners spent working, they did provide us with a list of everyone's typically hours for the week, including themselves, and they spent 24 hours and 30 hours for each sister. The other employees worked about 13 hours a week. They are open about until 3:30 every day, opening at 11:30 during the week and 8:30 on weekends and closed Monday and Tuesday, so just open 5 days a week. Tying up the payroll, the issue is they told us they paid everyone $15 per hour regardless of their job title because they all kind of did everything (the two sisters and 5 employees). They said the two sisters made $46,074 last year (together not each) gross and the others 5 made $30,111 between them. However the hours they provided added up to 156 per week so I had already determined that was about $138,528 annually so there would have been more questions to them on that anyway as clearly the info provided did not stand up to scrutiny.
Think I hit most of what was asked since I last replied.
Also I have no idea what "twee" means, so that went over my head.
