Prime Koreatown Restaurant on 32nd St NYC
Full acquisition analysis: financials, market context, valuation, risk assessment, and 100-day integration plan.
View Original Listing ↗At a Glance
Award-winning Korean BBQ established 2018 in Manhattan Koreatown holds Michelin Bib Gourmand recognition. 7,000 sq ft location with $8.5M revenue down from $10M peak. Owner seeks operating partner with 12-month transition. $2.8M ask includes $5M FF&E and $100K inventory. Long-term lease through 2036 at $65K/month.
Key Strengths
- Michelin Bib Gourmand recognition provides brand differentiation
- Prime 32nd Street Koreatown location with exceptional foot traffic
- Long-term lease security through December 2036
- $5M FF&E value provides substantial asset backing
- 12-month owner transition reduces operational risk
Key Questions
- Verify actual P&L — reported $850K SDE implies 10% net margin vs. reconstructed $2.1M (25%)
- Obtain customer mix breakdown — revenue decline suggests concentration risk
- Detail competition analysis — which renovated competitors captured market share?
- Clarify staffing model — employee count not disclosed for $8.5M operation
- Review lease assignment terms — any personal guarantee or transfer restrictions?
- Analyze wine/liquor license transferability and costs
- Examine reservation data — what percentage comes from OpenTable/Resy platforms?
Reconstructed P&L
| Line Item | Amount | % Revenue | Benchmark |
|---|---|---|---|
| Revenue | $8,500,000 | 100.0% | Reported |
| COGS (Materials) | –$2,720,000 | 32.0% | Industry avg: 32.0% |
| Direct Labor | –$2,805,000 | 33.0% | Industry avg: 33.0% |
| Gross Profit | $2,975,000 | 35.0% | Calculated |
| Rent | –$780,000 | 9.2% | $65K/mo × 12 — HIGH vs. 2-4% norm |
| Vehicle / Fleet | –$255,000 | 3.0% | Industry range: 2-5% |
| Insurance (GL, WC, Auto) | –$212,500 | 2.5% | Industry range: 2-4% |
| Office / Admin / Software | –$170,000 | 2.0% | Industry range: 1-3% |
| Marketing | –$85,000 | 1.0% | Industry range: 0.5-3% |
| Other Overhead | –$127,500 | 1.5% | Industry range: 1-3% |
| Depreciation | –$34,000 | 0.4% | Industry range: 0.3-0.5% |
| Net Profit (Est.) | $1,311,000 | 15.4% | Before owner add-backs |
| Owner Salary Add-Back | $180,000 | 2.1% | $5M+ revenue benchmark |
| Owner Perks (Est.) | $50,000 | 0.6% | Travel, meals, auto |
| One-Time Expenses (Est.) | $560,000 | 6.6% | Renovations during revenue decline |
| Depreciation Add-Back | $34,000 | 0.4% | Non-cash expense |
| EBITDA (Est.) | $1,955,000 | 23.0% | Benchmark: 15–20% healthy |
| Estimated SDE | ~$2,135,000 | 25.1% |
SBA Financing Model
Estimated SDE of ~$2,135,000 can support SBA 7(a) debt service on a $2,800,000 acquisition. Assuming 10% down ($280,000) and a 10-year term at ~10.5% SBA rates, annual debt service is approximately $408,043. Estimated pre-tax income to owner: ~$1,726,957+ after debt service.
Cash Flow Reality Check
Cash Conversion Cycle
Working Capital Recommendations
- Establish $300K Credit Line: Secure revolving credit facility to cover 2-month winter trough (Jan-Feb 0.85x index) and unexpected equipment repairs given $5M FF&E value and age since 2018 opening.
- Accelerate Receivables Collection: Negotiate net-15 terms with corporate accounts and implement deposit requirements for private dining events to maintain -12 day cash conversion cycle advantage.
- Optimize Inventory Management: Reduce $100K inventory holding by implementing JIT ordering for produce and proteins. Target 5-7 day inventory turns to free up $40K-$60K working capital.
- Negotiate Extended Payables: Extend top 10 vendor payment terms from current net-15 to net-30 to capture additional 15 days float on $2.7M annual COGS ($112K monthly benefit).
How Sticky Is the Revenue?
Customer Concentration (Est.)
Revenue Retention Estimate: Est. 60-70% repeat customer rate based on Michelin recognition and OpenTable featured status, though 15% revenue decline suggests erosion in loyalty or visit frequency.
Estimated percentage of revenue retained after an ownership transition, based on industry benchmarks and business characteristics.
Churn Risk Factors
What's This Business Worth?
| Method | Low | Mid | High |
|---|---|---|---|
| SDE Multiple (Reconstructed) | $1,275,000 | $1,706,250 | $2,137,500 |
| SDE Multiple (Reported) | $1,275,000 | $1,487,500 | $1,700,000 |
| Asset-Based (FF&E) | $2,500,000 | $3,250,000 | $4,000,000 |
| Revenue Multiple | $2,125,000 | $2,550,000 | $2,975,000 |
Premium Factors
Discount Factors
Market & Comparable Transactions
NYC hosts 17,619-23,650 licensed restaurants with 72% reporting declining sales in summer 2024. Labor costs (53% of operators) and lack of customers (45%) are primary challenges. Manhattan commercial rent averages $120/sq ft with restaurants operating on 3-5% margins. Independent restaurants represent 67% of establishments. Korean food market shows 10% YoY growth nationally with 6,000+ Korean restaurants and 109% increase in franchise outlets since 2020. Single-unit restaurants trade at 1.85x-2.15x SDE nationally; multi-unit concepts command 4x-7x EBITDA.
| Comparable | Revenue | Multiple | Location |
|---|---|---|---|
| Single-location independent restaurants nationally | Varies | 1.85x-2.15x SDE median | National benchmark |
| Franchise restaurant units | Varies | 2.7x-3.5x SDE | National benchmark |
| Multi-unit restaurant groups | Varies | 4x-7x EBITDA | National benchmark |
| Metro Franchising (105 Dunkin' units) | Not disclosed | Strategic buyout | NYC metro |
Bull Case
Michelin recognition provides defensible brand moat in competitive market. Historical $10M revenue demonstrates upside potential with focused operator. $5M FF&E value significantly exceeds $2.8M ask, providing asset-backed downside protection. Korean cuisine category growing 10% annually nationally. Long-term lease eliminates relocation risk through 2036. Owner transition support reduces operational continuity risk. 7,000 sq ft space allows high-volume operation. Prime foot traffic location in established ethnic dining district.
Bear Case
15% revenue decline ($10M→$8.5M) signals competitive pressure and market share loss. $780K annual rent ($65K/month) represents 9.2% of revenue — 3-4x typical restaurant rent ratio of 2-4%. SBA debt service of $408K leaves only $1.7M cash flow assuming reconstructed $2.1M SDE — but seller reports $850K SDE, suggesting $442K post-debt cash flow on $2.8M investment (16% ROI before owner salary replacement). NYC's 3-5% margin environment and $17/hour minimum wage compress profitability. 75% annual staff turnover creates perpetual recruiting burden. Newly renovated competitors threaten continued share erosion. Discrepancy between reported $850K and reconstructed $2.1M SDE raises verification concerns.
Who You're Up Against
| Company | Type | Est. Revenue | Threat Level |
|---|---|---|---|
| Newly renovated Korean BBQ concepts (unnamed in listing) | Independent | $5M-$10M | Direct competitive displacement causing $10M→$8.5M revenue decline. Modern interiors and aggressive marketing capturing market share from established players. |
| Major Food Group | PE-Backed | $100M+ portfolio | PE-backed expansion into NYC dining scene with 40+ restaurants. Represents category consolidation risk if they enter Korean BBQ segment. |
| Union Square Hospitality Group | Independent | $200M+ portfolio | 28 James Beard Awards and multi-concept operator. Demonstrates sophistication of independent competition in NYC market. |
| Momofuku | Independent | $50M+ portfolio | David Chang's Asian American concept showcases brand-building potential. Competitive benchmark for premium Asian dining positioning. |
Competitive Advantages
Moat Assessment
Moderate moat based on Michelin recognition and location, but insufficient to prevent 15% revenue erosion. Brand equity provides customer acquisition advantage but requires ongoing investment to maintain. Location moat strong — 32nd Street is established Koreatown core with high foot traffic. However, newly renovated competitors demonstrate that physical plant updates can overcome incumbent advantage. No proprietary recipes, processes, or technology providing structural differentiation. Success depends on operational excellence and continuous reinvestment rather than sustainable competitive barriers.
Risk Scores & Due Diligence
Due Diligence Priorities
- 1. Reconcile SDE Discrepancy: Reported $850K SDE vs. reconstructed $2.1M suggests vastly different rent treatment or undisclosed expenses. Obtain 3 years audited financials, rent schedule, and owner compensation detail.
- 2. Revenue Decline Analysis: Obtain monthly revenue trend 2022-2024, customer count data, average ticket analysis, and competitive impact documentation to verify $10M→$8.5M decline attribution.
- 3. Customer Concentration Review: Analyze reservation system data, corporate account mix, tourism vs. local split, and repeat customer percentage to assess revenue stability and concentration risk.
- 4. Lease Assignment Process: Review lease terms for assignment clauses, landlord approval requirements, personal guarantee obligations, rent escalation schedule through 2036, and any co-tenancy protections.
- 5. Staffing Model Verification: Obtain current org chart, wage rates vs. $17/hour minimum, turnover data, workers comp claims history, and verify $2.8M labor assumption at 33% of revenue.
- 6. License Transfer Timeline: Map liquor license transfer process (4-6 month typical NYC timeline), health permit application, food handler certifications, and any personal license dependencies.
- 7. FF&E Valuation Audit: Verify $5M FF&E claim through equipment appraisal, review depreciation schedules, identify deferred maintenance items, and assess remaining useful life of major systems.
What Needs to Transfer
Potential Deal Breakers
- Liquor license denial — would eliminate alcohol revenue (est. 25-30% of total revenue)
- Lease assignment rejection by landlord — no alternate locations with comparable foot traffic
- Key chef or manager departure during transition — recipe and operational knowledge critical to Michelin standards
100-Day Integration Playbook
- Complete 12-week owner shadowing program covering FOH/BOH operations
- Transfer liquor license, health permits, and food handler certifications
- Audit supplier contracts and renegotiate pricing on top 10 vendors
- Implement daily revenue tracking vs. historical baselines
- Conduct staff retention meetings and identify flight risks
- Launch targeted marketing campaign highlighting Michelin recognition
- Implement dynamic pricing for peak vs. off-peak hours
- Refresh menu offerings based on customer feedback and margin analysis
- Enhance OpenTable/Resy presence and online reputation management
- Establish corporate dining program for local office accounts
- Negotiate rent reduction with landlord citing revenue decline and market conditions
- Implement labor scheduling optimization to reduce overtime costs
- Renegotiate credit card processing fees and third-party delivery commissions
- Evaluate kitchen efficiency improvements to reduce food waste
- Assess sublease potential for underutilized space within 7,000 sq ft
Value Creation Waterfall (3-Year Outlook)
Our Verdict
Verdict: Pass — Proceed to LOI
PASS. The $2.8M asking price assumes reconstructed $2.1M SDE at 1.3x multiple, but seller reports only $850K SDE (3.3x multiple). Even using optimistic $2.1M SDE, SBA financing leaves $1.7M pre-tax cash flow before replacing owner's $180K+ salary — creating negative leverage. The 9.2% rent-to-revenue ratio ($780K annually) is structurally unsustainable and represents 37% of reported $850K SDE. Revenue decline trend, increased competition, and NYC's compressed margin environment create unfavorable risk/return profile. Asset value ($5M FF&E) provides downside protection but requires liquidation discount. Fair value range: $1.3M-$1.7M based on 1.5x-2.0x reconstructed SDE or 1.5x-2.0x reported SDE.
Recommended Next Steps
- Request 3 years of audited financial statements with detailed rent reconciliation
- Obtain monthly revenue and customer count data 2022-2024
- Review current lease agreement and landlord relationship status
- Conduct site visit during peak dinner service to assess operational flow
- Interview key staff members to assess turnover risk and institutional knowledge
- If pursuing: Counter at $1.5M (1.76x reported SDE or 0.7x reconstructed SDE) with earnout to $2M based on achieving $9M+ revenue in Year 2
Suggested Offer Structure
$1,500,000 with performance earnout to $2,000,000 if Year 2 revenue exceeds $9,000,000 (10% growth from current $8.5M baseline)
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Related Resources
Sources
BizBuySell Listing #2528255 · NYC Restaurant Industry Reports 2024 · National Restaurant Valuation Benchmarks · NYC Minimum Wage and Labor Regulations · Korean Food Market Growth Statistics