When it comes to real estate, Paul Ficalora quickly becomes one of the most well-rounded people in the industry.
Paul Ficalora works in property & casualty insurance, commercial real estate, and restaurants. Paul provides his services all around the Metro NYC area and has made a name for himself as a guy who can handle it all with expertise.
Could you please share with our readers your history with real estate and the food service industry?
My first real estate transaction was in the late 80’s. I sold a building to the largest McDonalds restaurant in Chicago. Shortly after that I joined a start-up public company and sold marketing and financial services to restaurants. The refocus on real estate was when I became a restaurant broker in 2008. It is critical for a broker to have a real estate license in situations when the building, in addition to the business, is for sale. Particularly important is to be a commercial realtor rather than a residential agent. A commercial realtor knows the formulas on how to establish the market value of a building and has a working knowledge of commercial leases. This is critical to both buyers and sellers. I am licensed in NY and CT and affiliated with Coldwell Banker Commercial Scalzo Group.
How long have you been a business advisor for?
When I left the corporate world I wanted to take advantage of the 13 years of conducting business with restaurants. During that time I developed sills that I felt were valuable to restaurateurs. Becoming a restaurant Broker in 2008 was the best use of my knowledge and experience with restaurants. For the past 8 years, I have guided restaurateurs through the detailed process of Purchasing and selling restaurants.
How big is your team?
I have three teams plus relationships with some of the finest restaurant specialist in the industry. My first team is with Houlihan Business Brokers. Gerry Houlihan is the president and has owned and operated a restaurant for over 18 years and continues to manage a multiunit foodservice operation. He has a wealth of restaurant and commercial real estate experience and is a man of integrity whom I am proud to be associated with. My other team is with Coldwell Banker Commercial Scalzo Group, with offices in NY and CT. They are the largest CBC group in CT as well as #1 CBC office in the State. Being part of the Coldwell Banker Commercial umbrella, which nationally and internationally closed over 14,000 transactions last year, I have access to some of the brightest and most experienced commercial real estate experts. My third team is my insurance team with John M. Glover Agency. They are an independent insurance agency with 19 offices in the northeast. And they have relationships with over 60 insurance companies. JMG is celebrating their 100th year in business this year. This allows me access to an abundance of insurance knowledge and experience. In addition to these three great teams, I have a network of restaurant-focused specialist. They range from public relations, menu creation, food preparation, operations, finance, payroll and of course credit card processing specialists.
Basically, I have a selection of very talented experts in the restaurant business that I have access to.
Why is confidentially so important when dealing with restaurants?
For good reasons; any restaurateur does not want his or her staff and customers to be aware that the restaurant is for sale. Creating uncertainty in the staff compromises performance and opens the risk of some staff to prematurely leave for other opportunities. This is harmful to the operations and potentially bottom line of the restaurant. Also, a staff’s positive moral is vital to the overall feel of the restaurant. If the customers are aware that the restaurant is for sale, some will stop booking parties at the restaurant and others will be concerned that the food quality and service will decline. This will certainly have a negative impact on the bottom line.
Being well aware of these potential problems I never identify the name of a restaurant that is for sale or the town of the restaurant. My marketing will reveal specific details, like what general part of the County or part of NYC the restaurant is located, how large the restaurant is, how many seats there are and various attributes as well as the lease details. When an interested party contacts me I qualify them and ask them to sign a confidentiality agreement. Only after this is signed will I reveal the name and location of the restaurant, and set an appointment to show the restaurant myself.
I market the restaurant through my own database of restaurateurs, as well as public restaurant business sights. (Bizbuysell, Bizquest, and occasionally Craig’s list.)
How do you determine the worth of a restaurant?
There are three industry standard formulas to derive the value of a restaurant business. 1. The gross sales approach, which is derived by taking a percentage of gross sales 2. Cost to build approach, which is arrived at by analyzing the cost to build the restaurant business, less a deep discount and 3. The Sellers Discretionary Earnings approach which is a multiple of the net profit. If you go to my website you will see these three formals explained in more detail; PaulFicalora.com. Also, it is important to realize that if the restaurant owner also owns the real estate and want’s to sell the building as well, then there is a different formula to determine the value of the real estate.
Keep in mind that you have to be a licensed real estate agent to be able to sell the building. And, it is particularly important to be a commercial real estate agent rather than a residential agent. The formula for establishing the value of a house is very different from the formula for a commercial income producing the property. I am licensed in NY and CT and specialize in commercial properties and understand the income and expense approach to establishing the value of a restaurant building. When real estate is involved there are typically two transactions; one for the business and one for the building. Why? Because a bank will not finance a restaurant business but will finance the building. Also, keep in mind that there are many influencing factors that must be considered: location, rent, condition of the restaurant as well as local market conditions.
You seem to be a one-stop shop with your insurance brokerage capabilities, what type of insurance would you say is the most popular?
I am a restaurant broker because I have a strong admiration and great deal of respect for restaurateurs. Because of this natural inclination, protecting the ongoing business of my clients makes perfect sense. From kitchen fires to cyber attacks, my awareness of potential risks serves to protect restaurants with precise insurance policies. As I mentioned before my agency has access to over 60 insurance companies. Restaurants typically need coverages that range from utility outages, food spoilage, employee dishonesty and business income, to name a few. Cyber attacks are more prevalent and since restaurants collect credit cards for payments, they are at risk.
What insights can you give a new or existing restaurateur about liability insurance?
Most business owners’ policies, and commercial policies for larger restaurants include liability insurance. It is important to look at your limits. Car accidents from drivers who drink too much can result in extremely large claims. Also, if the credit card numbers are stolen for a few hundred of your customers your liability exposure is very high. By the way, many cyber attacks or stolen credit card information are inside jobs. My best advice is to ask restaurateurs to read their policies to see what they are covered for and more importantly what are the exclusions. There are always exclusion provisions in every policy. I offer a free policy review for all my present and future clients. I view insurance with this perspective: “My clients best interest is my sincere interest.”
What insights can you give our readers on how to handle real estate marketing?
Real Estate marketing is in conjunction with marketing the business; the same discretion is applied. Let me rephrase the question: What insights can I give readers on how to evaluate a lease when purchasing a restaurant business? At least four key elements to look at in a lease are:
1. You will own all the FF&E (LL or Tenant)
2. Rent (include RE taxes and CAM charges; rent per # of seats)
3. Assignment Clause (not to be unreasonably withheld)
4. Personal Guarantee or Good Guy Clause. (new restaurateur or established restaurateur)
To learn more about Paul Ficalora’s services, visit his website.