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China Garden Hotel & Restaurant for Rent or Sale


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China Garden – Available for Rent or Sale

I have decided to offer the China Garden restaurant & guesthouse for rent, it is a profitable and well run business based in Soi Lengkee close to the thriving LK Metro area.  

 

Reason for sub-leasing

My wife’s brother has run the business for the past 2 years whilst completing his PhD, however he graduates in April and is seeking a more academic vocation. I had planned to return to Pattaya in 2014 to operate the business personally but I am still unable to leave my main business in China which continues to grow rapidly.  

 

Lease Agreement

We opened the China Garden in 2011 after investing 8 million Baht in a complete refurbishment, we signed a 3+3 years lease which was renewed on 1st January 2014 with a new 3+3 year lease (6 years). The building is owned by my close friend from the UK and held by a Thai company, I have fully discussed sub-leasing the building with the owner of the building and gained his consent, there no prohibition of sub-leasing in my original master lease.  The rent is 70,000 Baht per month for the next 3 years, rising to 90,000 Baht per month in additional 3 years, no key money.

 

Option 1

Renting the entire building for 200,000 Baht per month, split 70,000 Baht to rent the restaurant and 130,000 Baht for the guesthouse. The guest-house makes 2,400,000 Baht per year net profit. There is potential to increase low season rates to further increase profits given the standards of the rooms. If you rent the building for 6 years all kitchen equipment @ dining room fixtures becomes yours at the end of the term.

 

·        9 x Boutique Rooms

·        3 Jacuzzi Rooms

·        Fully furnished restaurant & kitchen

·        Owners 1 bedroom apartment

·        1 Staff room

·        1.5 million Baht of equipment gratis

 

Option 2

Renting the ground floor restaurant only for 70,000 Baht, essentially the full rent for the building is paid to the landlord and I retain the income from the guest-house.

·        Fully furnished restaurant & kitchen

 

Option 3

I would consider selling the business for 6 million baht to the right person, I am personal friends with the building’s owner and want to agree a suitable tenant.

 

Work Permit

China Garden’s lease is held by a 2 million baht company, if you require a work permit this can be easily arranged.

 

 

Guest-House Financials

The hotel generated 2,400,000 Baht net profit we have 90% occupancy rate all year and a superb reputation both on Pattaya forums and Trip Advisor. Gross Income from the hotel exceeded 3,400,000 Baht 2012 / 2013. The monthly building rent is calculated out of the restaurant expenses.

 

·        Rooms Low Season

o   Boutique Rooms 700 Baht per night x 9 = 6,300 x 30 days = 189,000 Baht per month

o   Jacuzzi Rooms 1200 Baht per night x 3 = 3,600 x 30 days = 108,000 Baht per month

Total 297,000 per month

·        Rooms High Season

o   Boutique Rooms 900 Baht per night 9 = 8,100 x 30 days = 243,000 Baht per month

o   Jacuzzi Rooms 1200 Baht per night x 3 = 4,500 x 30 days = 135,000 Baht per month

Total 378,000 per month

 

·        Low Season 6 months @ 297,000 Baht = 1,782,000 Baht

·        High Season 6 months @ 378,000 Baht = 2,268,000 Baht

 

Total 4,050,000 per year @ full occupancy

 

As we range from 90-100% occupancy and have long list of loyal returning customers, thus we do offer monthly rates. We are already 60% booked for 2014 with bookings made for 2015.

 

·        Guest house Expenses Monthly

o   Electricity Supply 50,000 Baht (Including air-conditioned restaurant)

o   Water Supply        5,000 Baht

o   2 Maids                 15,000 Baht

o   Room Supplies     15,000 Baht    (cleaning materials / laundry)

Total 85,000 per month (1,020,000 Baht per year)

 

Restaurant Financials

 

The restaurant is “under-performing” and is my main reason for sub-leasing. I lost my western chef shortly after opening and the restaurant has struggled ever since. After opening our sales were averaging 40,000 Baht per day but have declined to around 15,000 – 20,000 Baht per day including Waiters on Wheels deliveries.

This represents the biggest opportunity, personally I would close the Chinese restaurant and re-invent the restaurant with a “Thai / Seafood” theme or Western cuisine. I would remove the front windows and make an open plan dining room. There are lots of possibilities given the space and location of the restaurant, it has a professional fully equipped kitchen.

 

We calculate prices on 1/3 basis

·        1/3 food costs   (raw costs 50 Baht, sell for 150 Baht)

·        1/3 Over heads such as rent

·        1/3 Profit

 

Staffing

·        4 x Chefs @ 10,000 Baht = 40,000 Baht

·        1x Kitchen Porter @ 7,000 = 7,000 Baht

·        6 Waitresses @ 7,000 + Tips = 42,000 Baht

                                                 Total 89,000 per month

Fixed Costs

·        Building Rent @ 70,000 

Staffing costs + Rent = 159,000 Baht

 

So you out goings are 159,000 Baht x 3 = Sales need to be 477,000 Baht   (16,000 a day)

 

Net Profits on 477,000 Baht would be 1/3 or 159,000 Baht x 12 months = 1,908,000 Baht

 

** Note ** Drinks are much higher margin and the restaurant should be doing 30,000 Baht plus per day given its location and size.

 

Bottom Line

 

Buying @ 6 million Baht the guest house alone will return your investment in under 3 years, the biggest opportunity is the restaurant, you have a rock solid 6 year lease with a clause stating the lessee has the right to extend the lease agreement. You will double your investment, have an apartment to live & the opportunity to work legally.

 

Renting the building or just the restaurant is a fantastic opportunity for someone looking to operate a business & live in Thailand who may not have large amounts of capital to invest. Deposits & contracts are negotiable.

 

 

If you have any questions please feel free to email me at:   [email protected]

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I have responded to a couple of email and want to add these details.

 

  • We do not pay the police any money - our business is fully licensed as a guest-house & restaurant. Only illegal businesses pay "tea money"
  • Our company has up to date tax returns for the past 8 years. 
  • I opened & owned Le Katai restaurant, Jolly Friar & Lone Star (all Soi Lengkee) - all were sold as going concerns and are still profitable businesses 2 years later
  • We pay our staff's national insurance contributions and keep everything above board.
  • My investment of 8 million baht was repaid in the first 2 years of opening, however the restaurant was performing better at that time.

 

If you are interested in renting the ground floor restaurant business you must have catering / appropriate experience, its in "both" of our long term interests to ensure you are successful. 

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How much to buy the building?

I really dont think my friend is interested in selling, he bought it around 4 years ago for 15 million Baht as a long term investment. He's a European Director for a major Japanese electronics company, but has a Thai wife & son. The rate Pattaya is expanding I can imagine in 10 years or so it will be worth a pretty penny, there is much more room is these shop houses then the new ones going up. 

 

Think how much LK Metro has expanded in the past 2 or 3 years ? When I opened there was only Champagne A Go Go..... now 20 + venues ? Its become the epicentre for many in Pattaya, forget Walking Street.  

 

Location, Location, Location! People need to eat & sleep but want to be close to the action without the noise when you sleep or harassed whilst you eat.

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THAT IS HOW TO ADVERTISE A BUSINESS FOR SALE !

Excellent description with options. In my opinion soi lengkee will generate a lot more footfall over the coming years It has a good road with quality guesthouses/hotels and eateries. The new CCR development on 3rd road will increase trade coming down, and we all see that trade is already moving up from beach road to soi Buckhow.

If I hadn't just bought 2 condos I would seriously look at this opportunity.

Good luck !!!

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I really dont think my friend is interested in selling, he bought it around 4 years ago for 15 million Baht as a long term investment. He's a European Director for a major Japanese electronics company, but has a Thai wife & son. The rate Pattaya is expanding I can imagine in 10 years or so it will be worth a pretty penny, there is much more room is these shop houses then the new ones going up.

 

Think how much LK Metro has expanded in the past 2 or 3 years ? When I opened there was only Champagne A Go Go..... now 20 + venues ? Its become the epicentre for many in Pattaya, forget Walking Street.

 

Location, Location, Location! People need to eat & sleep but want to be close to the action without the noise when you sleep or harassed whilst you eat.

He has already got back nearly 10 million baht in rent already in 4 years

The property will be payed for in another 2 years

Good going

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Quality restaurant I thought and big portions too!

My Pattaya budget is perfectly adequate as long as I don't spend any of it

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He has already got back nearly 10 million baht in rent already in 4 years

The property will be payed for in another 2 years

Good going

The rent "was" 60,000 Baht for the first 3 years = 720,000 Baht x 3 years = 2,160,000 Baht

 

My current rent is 70,000 Baht for the "next 3 years" = 840,000 Baht x 3 years  = 2,520,000 Baht

 

The additional 3 years  (in 3 years time) has been set at 90,000 Baht = 1,080,000 x 3 years = 3,240,000 Baht

 

So he will have received 7,920,000 Baht in total rent for a period of 9 years. 

 

I think its pretty standard to get your property investment back of approx 15 years which is his out-look plus the building will appreciate in value over the 15 years. 

 

 

Do remember the 200,000 Baht rent is 130,000 for me and 70,000 for the landlord, I'm offering a business costing 8 million Baht for "no investment" or simply buy me out for 6 million Baht. 

 

Cheers,

 

Ian

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Quality restaurant I thought and big portions too!

I am glad you liked the food, dont get me wrong the restaurant chugs along but without me being there full time its will never "sing". 2 million profit from the restaurant isnt small change but it could do way better, I sold Le Katai (now the Devonshire) to a friend, a double unit restaurant in Soi Lengee and it made 4 million a year nett profit from the restaurant alone, I was there full time and built it up from scratch. Two years later the same area is "more popular" but I making less simply because I am not there.  I control the room bookings and correspondence via forums etc  and the hotel part "sings".... I cant stress the importance of good management.    

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I am glad you liked the food, dont get me wrong the restaurant chugs along but without me being there full time its will never "sing". 2 million profit from the restaurant isnt small change but it could do way better, I sold Le Katai (now the Devonshire) to a friend, a double unit restaurant in Soi Lengee and it made 4 million a year nett profit from the restaurant alone, I was there full time and built it up from scratch. Two years later the same area is "more popular" but I making less simply because I am not there.  I control the room bookings and correspondence via forums etc  and the hotel part "sings".... I cant stress the importance of good management.    

 

The food was comparable to Chinese places I use in the UK, but the prices aren't!  I'm not sure what my girl made of the chicken and sweetcorn soup though, she's more Tom Yam.  I ate in Le Katai everyday when I stayed at Opey.  Never had a bad meal and the specials were great value.  Anyhow, all the best.

My Pattaya budget is perfectly adequate as long as I don't spend any of it

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You do run a good business.  Although i don't know you personally, I have eaten in Le Katai many times on my trips over the past decade and in China Garden the last few years.  Your selling and not being active in running at least one establishment in the area will be a loss of quality for Soi Lenkee and Pattaya.

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You do run a good business.  Although i don't know you personally, I have eaten in Le Katai many times on my trips over the past decade and in China Garden the last few years.  Your selling and not being active in running at least one establishment in the area will be a loss of quality for Soi Lenkee and Pattaya.

Thank you, my wife and I worked very hard to build up Le Katai, Jolly Friar, Lone Star & China Garden from scratch. I like to think all of my establishments had a good reputation and as important they were profitable which is the "holy grail" in Pattaya. I think potential buyers can see many threads in the hotels section of this forum to check how popular China Garden has and continues to be. I have been very open and honest about our business as I was 2 years ago when I sold the other 3 restaurants which all continue to thrive to this day under different ownership.

 

I had a great 8 years living & working in Pattaya but the work demands in China means I cant give my business in Pattaya the love it deserves so its time to cut my last tie to the city.

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Thank you, my wife and I worked very hard to build up Le Katai, Jolly Friar, Lone Star & China Garden from scratch. I like to think all of my establishments had a good reputation and as important they were profitable which is the "holy grail" in Pattaya. I think potential buyers can see many threads in the hotels section of this forum to check how popular China Garden has and continues to be. I have been very open and honest about our business as I was 2 years ago when I sold the other 3 restaurants which all continue to thrive to this day under different ownership.

 

I had a great 8 years living & working in Pattaya but the work demands in China means I cant give my business in Pattaya the love it deserves so its time to cut my last tie to the city.

Ok to clarify if the buyer gave you 6 million baht for the guest house/ restaurant business

Then Would just have to give the landlord 70,000 baht a month raising to 90,000 baht

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Ok to clarify if the buyer gave you 6 million baht for the guest house/ restaurant business

Then Would just have to give the landlord 70,000 baht a month raising to 90,000 baht

 

Yes that is correct, the buyer gives me 6 million baht and takes over the lease which commenced 1st January 2014, the rent is 70,000 Baht per month for the duration of the coming 3 years. After 3 years the lease stipulates the "lessee has the right to extend the lease for an additional 3 years at the rental fee of 90,000 Baht for the duration of an additional 3 years". There is no key-money or hidden charges for transferring the lease. 

 

 

 

Thank you

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What happens in 6 years if the landlord decides to raise rent through the roof or sell the building or decides to give it to another brother or cousin? 6 million baht and 6 yrs of rent down the toilet ?

 

 

Sent from my iPhone using Tapatalk

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What happens in 6 years if the landlord decides to raise rent through the roof or sell the building or decides to give it to another brother or cousin? 6 million baht and 6 yrs of rent down the toilet ?

 

 

Sent from my iPhone using Tapatalk

 

You can apply that kind flawed logic to any business in the world, 99.9% of all businesses in Pattaya are based in "rented space".  

 

Does for example Mc Donalds buy every property it opens one of it restaurants in? The answer is no, buying the building make no economic sense to Mc Donalds as it gets a faster return on their money opening a second or third restaurant rather then ploughing 1$ million dollars in to owning the building. What happens if Mc Donalds landlord kicks them out in 6 years ? They move their business across the street and know they made their profits in the original lease term. 

 

I cannot guarantee you anything beyond the 6 years lease, but I do know you will "double or triple your investment" and if I was kicked out after 6 years I would take my 12-18 million profits and open a new business locally. Landlords want "good tenants", people who pay their rent on time and maintain the building, I think most serious businesses operators understand this.

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This is the best 'for sale' ad I've seen for a business. Nice!

+1

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Restaurant owners need to be in the restaurant unless they have a manager with impeccable standards.  Basic things like portion control, staff supervision, hygiene standards and owner/manager/staff interaction with customers is of the highest priority.

 

Will the new owner have the right stuff to build on what's there???       

"If it feels good, just keep doing it!"

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Restaurant owners need to be in the restaurant unless they have a manager with impeccable standards.  Basic things like portion control, staff supervision, hygiene standards and owner/manager/staff interaction with customers is of the highest priority.

 

Will the new owner have the right stuff to build on what's there???       

I whole-heartily agree, the main reason for renting / selling the business is due to my manager leaving at the end of April. I can run the hotel remotely as I have excellent staff and many loyal & regular guests.However I cannot operate a restaurant in that fashion for all the reasons you mentioned. Who ever takes over needs to have good understand of catering business or employ a Thai / Western manager with the requisite experience, we have trained chefs & waitresses but running a restaurant is not the same as operating a bar for example. Two of the four chefs have been with us for 3 years as have our maids and several other staff.

 

I have already received several emails enquiring about renting the restaurant, one idea was to transform the restaurant in to a Pizzeria which I strongly advised against as Pattaya has "countless pizza options", renting the restaurant as a stand-alone business is a great option but it needs be a viable business. Having lived in Pattaya for a long period and knowing the area these are the kind of restaurants I could see being successful. 

  1. Chinese, if you have personal experience in this cuisine (someone like Wok n Rok)
  2. Italian, but not just pizza's
  3. Steak-house, compete with the ever popular Beefeaters.
  4. Seafood, live tanks with fresh seafood which is scarcely available outside of Walking Street.
  5. Thai / Chinese fusion, similar to the very busy Leng-kee restaurant on Pattaya Klang
  6. A Bake n Brew / Loaf coffee shop / breakfast style for the day-time, transforming in the evening to more substantial dining experience (after 5pm).

I do have several friends who are professional chef's, should the new owner need help I am more then happy to facilitate staff training via these friends. 

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good luck Ian you have a fine establishment if i had the catering knowledge i'd be knocking at your door now lol.i think your idea of converting the restaurant to a seafood + thai theme would be a winner,restaurants offering good quality seafood and excellent service are in short supply in that area.

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You can apply that kind flawed logic to any business in the world, 99.9% of all businesses in Pattaya are based in "rented space".  

 

Does for example Mc Donalds buy every property it opens one of it restaurants in? The answer is no, buying the building make no economic sense to Mc Donalds as it gets a faster return on their money opening a second or third restaurant rather then ploughing 1$ million dollars in to owning the building. What happens if Mc Donalds landlord kicks them out in 6 years ? They move their business across the street and know they made their profits in the original lease term. 

 

I cannot guarantee you anything beyond the 6 years lease, but I do know you will "double or triple your investment" and if I was kicked out after 6 years I would take my 12-18 million profits and open a new business locally. Landlords want "good tenants", people who pay their rent on time and maintain the building, I think most serious businesses operators understand this.

 

Yes, indeed, McDonald's policy is to internationally buy all the real estate they legally can, their "restaurant owners" own nothing, it is a franchise/lease scheme where everything belongs to McDonald's and which normally expires after 20 years. It is designed to squeeze people out.

I had considered doing business with them but backed out when I realized it's just the guarantee to get a half-decent salary over 20 years if performing well and end up with nothing after that.

There might be differences of how they handle this from one country to another though.

 

To come back to the China Garden:

 

One question I would like to ask is, beyond the profits, is a salary paid out to the owner/manager and how high is it?

 

You mention in option 1 renting the whole for 200k a month... is that on top of the 70k rent to the building owner?

You say that currently the restaurant makes zero and the guesthouse 2.4 m profit - you wrote net profit, so is that profit after taxes?

So deduct 200k rental and the result is nearly zero ?

Did I miss something?

 

Option 3, buying for 6 million:

There are no 12-18 million profits... firstly, the initial investment has to be substracted, so gross profits will range from 6 to 12 million, and also the profits have to be benchmarked against other investments, for example rental condos which easily yield 8%, and after 6 years, the 6 million condo investment would be worth around 9 to 10 million AND there is no danger of losing the condos...

 

If I suppose there is no significant salary (200k + per month) paid out to the manager/owner, buying the business for 6 million is a huge risk due to the lease, because the owner/manager will eat up his "profits" instead of accumulating them back into his account, and at the end of the lease.... well, it might just be THE END, being kicked out because the owner has other plans for the building (the owner might not be the same person as now at that moment - this has also to be taken into account).

 

You mention you are friends with the building's owner - do you think there is a chance to negociate more safety for example by including defined lease price evolution as well as a substantial penalty for the building owner if he decides to kick the tenant out without any wrongdoing on the tenant's part?

 

 

There's also a little inconsistency in the figures for the guesthouse:

2,400,000 Baht net profit

90% occupancy rate all year

Gross Income from the hotel exceeded 3,400,000 Baht 2012 / 2013.

Total 4,050,000 per year @ full occupancy

so... umm... 3.4 million current gross represents 90%, so at 100% occupancy: 3.4 / 0.9 = 3.77 million... but advertised at 4.05 million

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good luck Ian you have a fine establishment if i had the catering knowledge i'd be knocking at your door now lol.i think your idea of converting the restaurant to a seafood + thai theme would be a winner,restaurants offering good quality seafood and excellent service are in short supply in that area.

 

Personally its what I would do, live fish, prawns, crabs & shellfish are readily available at either the local fishing port or at Macro. The profit margin on seafood is very good and its in high demand with Europeans, Aussies, Russians, Asians... pretty much everyone! You would need to make a small investment in the tanks / filtration system but the kitchen is already equipped with a 500,000 Baht commercial steamer

 

The other aspect of a seafood place is you price "by weight" so if the prawn prices suddenly rocket you simply adjust your price per kilo etc. Its also much easier to recruit / replace chefs for cooking Thai food / seafood opposed to say Chinese or Indian food. There are so many plus sides to this type of restaurant.... 

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