Buying a beer bar

[johnnyk]

Hugh, I think your points are well taken but on an everyday level and in a biz as loose as beer bars I don't think a non-compete is realistic and beer bars are not really niche businesses, there are 1000+ in Pty.

You might well be very smart to walk away but Navvy George from Brum may not have as many clues.

[khwaimaisabai]

Hi hh,

Torrenova is right. It just does not work the way you think. When you invest in a bar you are looking at the profits you can make, not inherit from the previous owner. You get the fixture and fitting and the location to build your own business. Nothing more.

It has happened more than once that people have paid over the odds thinking they are buying an existing business, with the former owner laughing all the way to the bank - and his new business with former customers and staff.

Khwai

[Hugh_Hoy]

khwaimaisabai said:

Hi hh,

It just does not work the way you think.

 

Thanks guys for the replies. Actually, it doesn't "work the way I think" cuz I don't have a clue how it works. I only asked about whether or not a non-compete agreement was made as part of the "deal". As for it not working that way, it hasn't been said that it can't be worked that way. The only part of the bar biz I know is the check bin. I kind of like it that way. I only have to worry about one check bin...not all the others

 

(I was a little taken back by the "silly" remark by Torrenova and the suggestion that I'd never been to the LOS/Pattaya. However, no harm.)

 

Hugh (mak)

[Guest]

Hi Hugh,

 

Nothing wrong with your question, at all. It's just that you have something like 1,200 bars in Pattaya all packed into a very small area. Getting, or expecting exclusive rights to *anything* is not reasonable. It's because of the density situation there, and in BKK also, where farang bars are also packed together very closely.

 

Take BKK, for instance. 3 main entertainment districts, all comprised of 30 bars each. That's 90 bars, all competing for the same tourist dollar, not even considering places like Morning/night, Nana disco, Hard rock, CM2, Bed, Q-bar, etc.

 

It's just not reasonable to have exclusivity agreements there. To even bargain for, would be an exorcise in futility. It's just the way it is there. ::

 

HT

[torrenova]

I'll throw another stick on the fire.

 

I've got a guy who I believe is eager to buy one of my bars. He hasn't come to making an offer yet but if / when he does and if the offer after negotiations is high enough, then I'll sell.

 

All my girls will go into my other bar and all my customers will migrate as well. I may buy another bar and rename it the same as the one which I sold (the new owner cannot keep the same name).

 

So the owner has bought the bar and paid for goodwill, which I have taken with me ! Tough shit. I'd sign most anything and then use it to wipe my arse. Worthless in this business.

 

I do know that any contractual terms can be incorporated in any sized deal in the first world but in Thailand it means jack shit. Realising that and what you can and cannot do here is 90% of running a business here. Normal business rules do not apply in general.

[Guest]

>>>>>>>So the owner has bought the bar and paid for goodwill, which I have taken with me ! Tough shit. I'd sign most anything and then use it to wipe my arse. Worthless in this business.

 

I do know that any contractual terms can be incorporated in any sized deal in the first world but in Thailand it means jack shit. Realising that and what you can and cannot do here is 90% of running a business here. Normal business rules do not apply in general.<<<<<<<<

 

Are you getting any of this, Hugh? Are you sorry you asked?

 

HT

[kwai_hai]

torrenova said:

 

So the owner has bought the bar and paid for goodwill, which I have taken with me ! Tough shit. I'd sign most anything and then use it to wipe my arse. Worthless in this business.

 

Spoken like a true investment banker.

[Guest]

A couple responses.

 

As to a non-compete (CNC) agreement. I've just not been in a transaction, buyer or seller, where it was relevant. Most promotion concepts can be copied, there generally isn't a bar right down the street that to old owner can move to (And if he were going to do that why did her sell in the first place?) I guess if the customer base was just there because of the owner (Bob at Hogsbreath might be an example of this) I might ask for a CNC.

 

As to enforcibility. Absolutely enforcable. There is a legal system here. You can sue people to enforce a contract and while it is a little fuzzy, I wouldn't call it any more difficult than suing somebody in the US. Just different problems. However, unlike the US it is difficult to get a temporary restraining order, which takes a lot of the teeth out of things.

 

The other option, of course, would be to complain to the police, if you have been careful in maintaining your police relationships. The police do a lot more to enforce contracts here than in the US, although that can also be a double edged sword.

 

Frankly, I think it would be just as difficult to enforce a CNC in the US as it would be here if the money involved was small, although we do have small claims court in the US but no such thing here.

 

But, if the circumstances warranted it, I would ask for a CNC. I do disagree with torronova on this. If you are going to do an agreement, and we all do even if it is a simple lease, then you might as well do it correctly. All agreements are a bitch to enforce if the other side doesn't comply, but at least with an agreement everybodies responsibilities are clear. And the police do get involved in unraveling a lot of things like lease deposits and such. In a surprising equitable fashion has been my experience. Unless the other guy is really important....But, then I wouldn't have much luck in the US fighting with Ted Turner or Marvin Davis, even if I was right.

 

As to ownership. A couple clarifications. In a condo you don't own the land, even if you are on the ground floor. The land and structure are owned by the Condo Association and you own part of the Association. This is a lot different from owning land.

 

It is difficult for a foreigner to own land in Thailand although there are some legal loopholes. However, you can lease land for 30 years with at least one 30 year renewal. This gets a little vague if you are farming. There are some fairly safe ways to own land through company ownership also , but you must be really careful doing this if there is a lot of money involved.

 

Now as to business ownership. There seems to be a lot of confusion here. There are three ways to own a business in Thailand. Individual, Partnership and Corporation (Registered Company). with the exception of Anericans (The US has a special treaty with Thailand that grants Americans special privileges in business). Thai companies must have 7 shareholders and a majority of the stock must be owned by Thai citizens. There are myriad ways of getting around this (designees from your lawyer, presigned share sales agreements, etc.) Depends on how much money you have involved on how serious you want to be about protecting your interests. Small bars seldom go to the trouble of doing this for a small bar.

 

Just a comment. I keep hearing about why would you want Thai partners, etc? Wherever you are you have to be careful who you do business with. Frankly, I have found Thais equally good as Americans when it comes to partners or employees. Some are good and some are terrible.

 

Most bars are not owned by companies. They are leased premises and anybody can lease a premisis, thai or Farang. As to bars, however, only a Thai can apply for the liquor license. This is no big deal as they are easy to get and you can have the license in an employees name and get a new license if the employee leaves ( or not even bother until somebody says something). The Farang technically can't work in the bar without a work permit but this is circumvented by having a manager, in small bar this could be the cashier or bartender. The Farang just oversees everything. However, most everybody just looks the other way on all of this, although there have been cases of Farangs being busted for no work permits. Although this is usually related to some other ongoing dispute.

 

GoGo bars are another story as it is not so easy to get the necessary licenses and this is also one of the reasons for so many sub-leases. If you are going to own GoGo bars then you really should think about being more sophisiticated in your ownership.

 

Of course, nobody ever pays taxes on any of this, Thai or Farang except the larger outfits with multiple bars. All of this is likely to change however if, as is rumored, some day in the future it will be necessary to show VAT payment receipts to renew the liquor license, not just pay the fee. Then the whole complexion of the bar business in Thailand will go through a dramatic facelift. Then I'll be glad I have a company and pay all my taxes.

[Hugh_Hoy]

kwai_hai said:

torrenova said:

 

So the owner has bought the bar and paid for goodwill, which I have taken with me ! Tough shit. I'd sign most anything and then use it to wipe my arse. Worthless in this business.

 

Spoken like a true investment banker.

 

Or a bar owner who gets fed up with it all, puts a plastic bag over his head, ties his hands behind himself, and jumps from the 8th floor.

 

Hugh (mak)

[Hugh_Hoy]

TC...thanks for taking the time to detail your "take" on the issue. All agreements are usually only as good as the people who are making them. And, like u said, enforcing them can be a bitch any place. I was merely curious.

 

HT...With 3 major "playgrounds" in BKK, such an agreement could stipulate that the old owner could open at one of the other two locations. Or would have to wait x number of years in the same venue. In Pattaya, not so clear-cut, but probably a definable area or time period could be agreed upon if both parties were ameniable.

 

Torrenova...yeah, you could wipe your ass with the paper. But, as you know, especially in the LOS (and even here in the U.S.) it's always a good idea to know who you are dealing with when u do something like that. In the U.S., "labor problems", fires, cars being blown up, DO happen when people are crossed. Probably not a good idea anywhere...especially if a sizeable amount of money is involved. I don't know jack shit about running a bar, but I have some associates who have a very thorough knowledge about the latter. My knowledge is only "peripheral"

 

Hugh