Volcano Union Pub and Inn - PDF document

1 Volcano Union Pub and Inn Sales Prospe
Volcano Union Pub and Inn Sales Prospectus Prepared May 10, 2018 Asking Price: $1,000,000 ( Please contact Gr eg Koert , Broker for more informatio n or to arrange a showing of this property : 5 30 - 615 - 4453, office, 530 - 798 - 3460 cell, greg_koert@yahoo.com ) Property and Sellers Ownership History The historic Volcano Union Pub & Inn located in the unincorporated historic gold mining village of Volcano was built in 1880. In 2000 it was converted to its current use as a restaurant, wine and beer bar, and four guest - room bed and breakfast style inn. However, the second - floor area where the guest rooms are located has been used in the past as an owner’s residence. The seller’s , Mark and Tracey Berkner , purchased the property in 2009 . They had previously owned another property in the village, the St. George Hotel from 1997 to October 2003. The St George hotel has 22 guest rooms, a dinner house restaurant, bar, and several other auxiliary buildings on a one - acre parcel. They developed a very profitable business at the St George, which had a strong event catering component, primarily weddings, which averaged about 20 per year. After selling the St George ho tel, the sellers took some time off . I n 2006, they established Taste Restaurant and Wine Bar in Plymouth, CA, another larger gold rush town about 18 miles from Volcano. In 2015 the sellers began to renovate some apartment buildings they owned in Plymouth, to create the 16 - guest room Rest, a boutique hotel . It began lodging operations

2 in February of 201 6 . During tha
in February of 201 6 . During that period from 2015 through 2017, Tracey Berkner was com pletely involved on a day to day basis with managing the new boutique inn, and management of the Volcano Union Pub & Inn (VUPI) , was left to on - site employee managers; restaurant manager and kitchen manager (also the chef) almost entirely. There is also an employee Inn Keeper, who basically operate s the four - guest room inn business. In addition to their businesses, t he sellers both also work as faculty for San Joaquin Delta College . They have decided to put the very successful VUPI up for sale due to the n ow extremely hectic schedules that they have created. As the prospectus will point out, there are several ways that the VUPI can expand and grow. But full time on - site owner operators would be the best fit to make this happen. Propert y Location and Attr actions Volcano is in the central Sierra foothill region, and as mentioned was developed during the gold rush period in California. At one time, it was estimated almost 10,000 miners lived there. Now hidden away 3 miles off Highway 88 accessed via forested rural roads, the village of just over 100 residents presents a bucolic, pastoral feeling, which is almost unique in the heavy populated state of California in current time. The village however is highly accessible to major populatio n centers of Sacramento and Stockton metropolitan areas; with estimated populations of 2,242,500 (2016) and 733,700 (2016). The map below shows the general central sierra foothill area and ma

3 jor road from the two metropolitan area
jor road from the two metropolitan areas that access it: The cities of Plymouth ( 17 miles away), Sutter Creek (12.4 miles away), and Jackson (12.9 miles away) have historically preserved downtown area that have been tourist attractions for over 50 years. Mid - March to Mid - April Daffodil Hill, 3 miles from Volcan o, draws 1000’s of visitors to the town . The Kirkwood ski area 45 miles east of Volcano is a major winter recreation area. For those who might like to do some gambling the Jackson Rancheria Casino is only 8.9 miles away. And finally, the explosively growi ng major new wine area in California, the Shenandoah Valley region with 28 wineries, is about 1 8 miles away. These major attractions bring thousands of tourists into the area every year and present a year around opportunity for the businesses restaurant and lodging operations. See https://amadorwine.com/vines - wines/history for more info on the wineries near Volcano. Volcano also has several events that are attractions; including the Crab feed in March, Cannonball car run and parade on or near July 4 th , Chowder Chomp on Veteran’s Day weekend, Scots Walk c andlelight parade, on the first Saturday of December, and others. Volcano is also home to one of the first theater groups in California and has five productions annually. Three in the fifty - seat theater, where there is not a bad seat in the house. The other two productions are in the amphitheater which seats over two hundred and fift y Physical Property Data Restaurant . When entering

4 the VUPI you walk down a corridor to ent
the VUPI you walk down a corridor to entrances on the right to the ‘game room’ which houses seating for 4 0 and is used primarily for events; parties, wedding, meetings, etc. To the left is the entranc e to the main restaurant and bar areas, and through the restaurant is the out - door patio seating area, enclosed with wood fencing and beautifully landscaped. The seat totals are: Restaurant - 6 0 seats Restaurant patio - 45 seats Game room (events) - 4 0 seats The restaurant is being sold with labor force in place , as an asset. Currently the employees operate the business, with oversight by the owners / sellers, but not day to day on - site participation of the sellers. Lodging . Up the stairs of the main corridor , are the four guest rooms. Two with queen sized beds and two with k ing sized beds. All have their own bathrooms; Qu een rooms have showers, and King room s have soaking tubs and showers . There is a n enchanting balcony on the second floor acce ssible to the lodging guests, equipped with comfortable chairs, which provides views of the village. Annual occupancies and ADR for the lodging rooms are: 2014 48.32% $111.15 2015 56.22% $102.77 2016 52.43% $108.41 2017 54.81% $112.55 2018 55.43%* $106.15 * Through May The gross building area is 4,080 square feet and the lot is 9,028 square feet. The sellers also own a parcel immediately adjacent to the VUPI, in the back which has a small flat area

5 and then g oes up a steep hill. The fl
and then g oes up a steep hill. The flat portion is used for pa r king. The property also has a detached 312 square foot metal building used fo r storage. Renovations: The sellers completely rebuilt the kitchen including appliances in 2009 as well as building two modern bathrooms for the restaurant , in place of a port - a - potty and rustic bathroom they inherited. They also replaced the restaurant furniture, fixtures, and equipment and renovated most of the doors to the building. Total cost of renovation s was approximately $ 125,00 . 00 Opportunities for Growth The current average net income (NOI) for the past two years was $125,000, as will be shown in the financial data section following this section. There are several ways new owners can grow both the net income and the gross revenue of this business. First, the restaurant manager earns a salary of $40,000 a year. With payroll taxes and workers comp benefits, the total cost is approximately $48,000 p er year. Should the owners have a Culinary background there would be the opportunity to add additional cost savings to the bottom line by replacing the Chef who currently has a salary of $36,000 a year + off site housing. Management. New on - site owner ( s )/ operators could act as the restaurant manager. This would immediately add $48,000 to the NOI ($173,000 using the two - year average). If they were to fill both management functions it could be a total of $90,000 to the NOI resulting in $215,000 with th e two - year average. Catering . VUPI has held small weddi

6 ngs , many rehearsal dinners and various
ngs , many rehearsal dinners and various community events. However, the current owners ha ve not developed a full - blown catering operation, as the sellers had when they owned the St. George Hotel. The St. George, also under its current ownership does not do much catering, if any. This is a huge gap in potential food and beverage revenue that can be exploited. The c urrent owners simply have not had the time to do that (see first section) with their other commitments. Right next door to VUPI, is the community center which seats 200 people, and can be rented by Volcano Association members ($30 year) for $100 a day and is not used regularly . This presents a terrific opportunity to cater weddings, birthdays, reunions, etc. that the new owners could and should develop and result in several hundred thousand dollars in additional gross revenue, which would also boost NOI . Lodging . The current lodging gross revenue of $86,000 in 2017 could be increased substantially, if ownership emphasized this department. As noted earlier the sellers have developed a 16 - guest room inn in Plymouth and the four guest rooms in Volcano are n ot a priority . One suggestion would be to completely renovate the décor and furnishing of these rooms emphasizing a clean, contemporary look. These rooms were last refreshed in 2009, when the sellers bought the property and new beds and linen were added i n 2017 . While the occupancy in 2017 of 55% is good compared to the surrounding area, it could be increased with a marketing campaign targeted toward the

7 Sacramento / Stockton area emphasizing
Sacramento / Stockton area emphasizing a retreat theme, i.e., retreat to Volcano for wine tasting, exp loring the many shops and boutiques in the historic down towns or Jackson, Sutter Creek, and Plymouth, for skiing at Kirkwood in the winter, or just a retreat (the sellers have said some guests just hang out in Volcano). The area is rife with mountain bike rs, motorcycle enthusiasts, and classical car owners. Utilization of social media advertising will be especially significant with millennials, and pricing even with some rate increases, is much less than Napa, Sonoma, of coastal north coast and central coa st destinations. The current ADR five - year average of $108 should be increased by at least $50 to be more in line with the current market. Increasing occupancy will support a higher ADR of $ 158 and quickly increas e profit. Since there already is a full - time inn keeper employee. Any additional revenue will be profit, less utilities and breakfast food costs. A reasonable goal for lodging would be $30,000 gross revenue per room achieved within two years of new ownership . The owners have special low rates in January and February to drive occupancy. Supper Under the Stars – dinner in the street every August for 250 people Financial Data and Valuation Financial Statement. The table below shows the revenue, expense, and net income achieved by VUPI for 2016 and 2018. Volcano Union Pub & Inn Expense and Revenue Statement 2016 & 2017 Gross Revenue Sales Beverage $185,004 $193,161 Food $618

8 ,219 $617,476 Events $3,357 $4
,219 $617,476 Events $3,357 $4,891 Corkage $7,870 $7,750 Rooms $86,455 $79,810 Retail $5,714 $4,016 Discounts - $11,852 - $10,612 Total Sales $894,767 $896,492 Cost of Goods Sold Artwork $1,101 $339 Beverage $73,782 $74,578 Food $162,755 $188,644 Retail $7,130 $1,538 Supplies $19,171 $25,334 Total COGS $263,939 $290,433 Gross Profits $630,828 $606,059 Expense Advertising $8,824 $8,544 Auto $1,201 $1,157 Credit Card Fees $22,519 $20,312 Décor $1,867 $1,121 Donations $548 $800 Dues/Subscriptions $1,868 $2,102 Education $0 $414 Employee relations $1,684 $1,582 Event Expense $8,344 $10,238 Garbage $5,368 $3,782 Insurance $26,621 $31,861 Internet $629 $499 Landscaping $5,745 $7,224 Laundry $28,425 $28,747 License Permits $619 $652 Linens $371 $0 Misc . - $21 $393 Meals $294 $597 Music Entertainment $338 $492 Office supplies $2,088 $3,070 Outside Services $410 $275 Payroll $302,336 $240,088 Payroll taxes $41,560 $44,665 Professional fees $600 $1,192 Repairs $17,119 $20,948 Software / Har d ware $696 $320 Tax Property $3,788 $4,829 Tax Local $384 $2,017 Tax Sales $0 $2,480 Uniforms $0 $254 Utilities $31,907 $28,235 Total Expense $516,132 $468,890 NOI $114,696 $137,169 Notes: 1. The major fluctua

9 tion between 2016 and 2017 that effects
tion between 2016 and 2017 that effects NOI is labor expense. Sellers will provide an explanation of this fluctuation, but basically believe it is due to lack of every day on site participation by owners. 2. Insurance can be further divided by sub - categories not shown above, but are; liability $7,458; Employee health, $6,053; and W orkers C omp , $13,109, all for 2017. 3. An expense of $18,000 for both years, which is rent to the sellers, has been brought down to the net operating income line. V aluation. The valuation of the property related to the list price is based on the average NOI of the two years; $125,000 and using a 12% cap rate to value of the business as a going concern including ; real estate, FFE, labor force in place, goodwill and ot her intangibles . The resulting valuation would be $1,000,000. Financing Financing via SBA guaranteed loan program is available for this purchase for qualified buyers with restaurant experience. The lenders using this SBA program require a minimum of 20% down payment of the appraised value of the business ‘as a going concern’. The Seller’s agent is a specialist in assisting small business buyers of boutique properties obtain financing. Please contact him with questions or assistance about financing this purchase. Current SBA loan interest rates would range between 6.25% - 6.7 5%, as of the date of this prospectus, and as determined by the lender’s underwriter based on their risk assessment and other factors. Other terms are generally a 25 - year amortization and loan t