Caveat Emptor or Buyer Beware. What Every Buyer Should Know About How to Buy a Bar in Atlanta, Georgia.

You get what you pay for when you buy a bar in Atlanta. Read this article to make sure you’re paying the right price.

There’s a method to value a pub or bar based on earnings called the Income Valuation Method. Expert Atlanta restaurant brokers use this method to set pricings on listings and give sellers an idea of where their bar or restaurant will sell. It’s based on earnings plus usual and customary additions called “add backs.” Books and records are used to validate both sales and the profits. Issues come into play however when an owner takes money “under the table” and wants to value their bar or pub on that basis.

When Atlanta buyers for sports bars see something online described or promoted with earnings “to be proven” by the seller, it often means the income can’t be substantiated. Sellers of Atlanta bars are saying they do not disclose their full earnings to the taxing authorities. Very different from add backs which are confirmed through due diligence, “under the table” earnings are taken on faith. An expert Atlanta restaurant broker will have a difficult time performing a valuation on this type listing and some won’t accept or sell this type listing for several reasons.

Pricing cannot be established on the listing since the seller is not basing it on confirmed sales and earnings. Based on the books, the price will always be too high since earnings are understated. Also, as a buyer, you would have to continue functioning the same way or you’re looking at a distorted view of any earnings. Lastly, the seller has already received a benefit in the operation and is now attempting to get it in the pricing. Because the books and records are showing reduced federal and state income tax, he’s easily reduced his tax liability per year by thirty-five percent or so. The seller of the Atlanta bar or club is now attempting to be paid on these same earnings though they can’t be established with certainty.

One solution if you choose to buy such a business is to change the operations so the money’s on the books. However that would require recasting the profit and loss statement to account for taxes. The impact of this may reduce the earnings into a loss at that point.

For most risk adverse buyers for Atlanta bars there’s another problem. You’re dealing with a seller for an Atlanta pub that’s already admitted he’s been less than honest with the IRS, the Georgia Department of Revenue, and his accountant. Miraculously, he would like you to believe him now that he’s selling you his Atlanta bar. Unless you take a job in the bar for a period of several months, there’s no way to establish the real sales and profit.

Those who want certainty in the numbers and do not want to questions their decisions should avoid “under the table” or “to be proven” opportunities. They may seem like a good value but in the end, buyers for Atlanta pubs, clubs or bars who think it sounds too good to be true may learn the hard way that’s the case. Confirm all their earnings and add backs with records and the help of an Atlanta broker specializing in clubs and bars. An accurate portrayal of earnings can be laid out in short order for verifiable listings.

Robin Gagnon is Vice President and Director of Marketing for We Sell Restaurants and wesellrestaurants.com. She holds an MBA in finance and frequently writes on the topics of restaurant sales, restaurant valuation, and financial topics surround the buying and selling or restaurants, clubs or bars.


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