So a friend of mine was practically a franchisee of a kiosk at the Grand Prarie Premium Outlets. The actual franchisee is a moron and would rather pay people to work there than work it himself. The distributor of the product has told my friend he doesnt want moron coming back and suggested he take it over. The mall has approached my friend as well, stating that this kiosk is the best kiosk they have and they'd really prefer to keep it. My friend has come to me to invest. He doesnt want to use all his money on start up fees when he begins the lease under his name.

The lease is 1800 dollars per month (i hear thats a great price) because it was the first kiosk there.

It has great location. Its first in line and right next to a main entrance and the closest to the food court.

The startup would be a deposit of 1800 plus first months rent of 1800 plus the first week of product.

I looked at his books and in most months the kiosk makes 15,000 bucks. In bad months, like january, it makes 5,000. Id say it averages 12,000 or 13,000.

My friend said i could join to the lease or we could draft another legal agreement on the side if i just wanted to invest for startup.

Would i need an LLC? Im thinking yes. Should i invest 2,000 toward start up? My friend said we would split everything 50-50 until i made my investment back and then we would negotiate what percentage of the profit i would receive going forward. He threw around the phrase "60-40" which peaked my interest since i would not be working the stand and only making trips once a week to the distributor to pick up the product.

Please help! TIA

[This message has been edited by nwe (edited 5/24/2013 11:36a).]

You need everything negotiated and on paper before any funds change hands.

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You need everything negotiated and on paper before any funds change hands.

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Right. My friend said he wants all of it on paper so i dont get screwed like he did when moron made promises to him. My friend really wants to make these kiosks his career.

The percentage of profit would be negotiated before i invested anything. But what is a fair perfentage to ask for? He will be working the kiosk much more than i will, as i have a primary job.

[This message has been edited by nwe (edited 5/24/2013 11:53a).]

In my industry, you would receive 90-95% of your pro rata share of net cash until paid back + some preferred return. After payout, your friend would receive a 10-25% bump in his share of profit at your expense.

Say you put up $2,500 of $5,000, and average monthly net cash was $1,000. You would receive $450/mo, until paid out + 15% IRR or something similar. Once you reached that point, you would receive $375/mo.

If he goes with 60/40 then stick with that

What is sold in the kiosk?

Popcorn. And it's one of two food kiosks along with Dippin' Dots.

$13k/mo in popcorn.... That's a lot of popcorn

Yeah the location is terrific. And the popcorn is very tasty.

Also, is there a template online for situations like this I can have my friend sign? I want to be covered.

$15K/month in popcorn sales? Damn. What's the profit margin?

Also, you can probably get a lawyer to draft a profit sharing agreement for you, for maybe $500.00. Probably a wise investment and better than something you find on the internet.

[This message has been edited by Sir Psycho (edited 5/24/2013 2:31p).]

I have never been there but I'm thinking it's crazy stuff like butter and caramel popcorn.

Sorry couldn't resist.

But seriously, is it crack popcorn? Or gold covered popcorn. geesh.

Please just don't keep your savings in the popcorn stand.

There's always money in the popcorn stand

We buy it for around 2 dollars and sell it for 8 or 9.

Buffalo wing, cornfetti, white cheddar, carmel pecan, and list goes on and on. It's great stuff!

I say you should call a lawyer tomorrow or give me the name of your friend and I will offer him 70/30

If I'm in the middle of underwriting for my home loan, would this flag me in a negative way?

If you guys are netting 10k in popcorn each month, I'll buy it from you. Make some immediate cash for doing absolutely nothing . . .

This really does sound too good to be true. I'm gonna stand next to this kiosk and hold a sign that says "This popcorn contains AIDS."

If the numbers are correct don't miss the opportunity. Make sure that you get everything in writing. If you don't want it let me know.

For a measly 2k, he's willing to give up 40 percent of profits going forward, that supposedly run up to 15k a month?

If a deal sounds to good to be true.... It's probably not. Or you'd friend is an idiot and he'll mess this up anyway. I would literally sit outside the stand one day and tally sales. Books sound cooked.

[This message has been edited by aston04 (edited 5/25/2013 8:02p).]

dp

[This message has been edited by Aston04 (edited 5/26/2013 11:03a).]

$12k monthly revenue yields roughly $9.5k gross profit. Less rent you're clearing $7.8k. Your take for helping offset $4-5k in startup is 40%, or roughly $3k per month. Is this correct? If so, wtf is wrong with your friend? I wouldn't trust him to operate the popper by himself.

one of your negotiation points needs to be staffing philosophy. hire only average to good looking young ladies, people buy much more from them and complain way less. I've learned this many times over.

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For a measly 2k, he's willing to give up 40 percent of profits going forward, that supposedly run up to 15k a month?

If a deal sounds to good to be true.... It's probably not. Or you'd friend is an idiot and he'll mess this up anyway. I would literally sit outside the stand one day and tally sales. Books sound cooked.

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Ding, ding!

Warning bells in my head also.

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Ding, ding!

Warning bells in my head also.

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I don't think it's a stretch to sell 43 or so bags of popcorn a day. Actually, I think that sounds a little low for a prime mall location.

How much do you trust your friend?

"don't think it's a stretch to sell 43 or so bags of popcorn a day. Actually, I think that sounds a little low for a prime mall location."

Agree. We question why his friend would sell him a share for such a small amount of money. OP would recoup his investment in the first month.

yeah, that deal makes zero sense for the operator.

There are times when friends go too far to help out other friends. I branched off of my main business to start another side venture -- put up 100% of the capital, the majority of the sweat equity, and I ended up giving my friend 50% of the profits in exchange for his help.

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I don't think it's a stretch to sell 43 or so bags of popcorn a day. Actually, I think that sounds a little low for a prime mall location.

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I just find it odd that the buddy can not get together enough money/where withal to cover the entire investment, if it is that lucrative.

I'm going to put up $2500 toward the $4000-$5000 start up and get 50% until my $2500 is made back.

Then I will make 20% of the profits going forward. I'll probably make a weekly trip to grapevine to pick up product and stage it at the shops. Other than that, my friend will be operating the kiosk.

[This message has been edited by NWE (edited 5/28/2013 6:16p).]

20% sounds much more reasonable considering you will be doing something once a week and put cash up front.

Best of luck.

How did this turn out?