Please reference the following scenario:

It's 3 A.M., and Sally is Face-Timing you. Fortunately, you were up slugging away at your course work and tying up some loose ends for the project, so you didn't mind the break. She instantly jumps in, saying, "Look! I found a whole bunch of stuff that we need to review. After receiving theMarketing study for that property in Boca Raton (PDF),Sally asks if you could review the market study immediately because it looks like a hot property and will probably not be on the market for long.

Sally specifies that she has read the material and has a better idea of how to analyze our ROI. The luxury building is in a great location and seven years ago went through an extensive renovation. The current restaurant tenant operates 24 hours a day, seven days a week. Sally points out that it's a free-standing building with a total of 7615 square feet, with 6,000 square feet having air conditioning. Also, there is a 1,615 square foot outdoor covered patio and deck for outside dining. The property can seat 259 combined inside and outside, 93 parking spaces and covered patio seating with a full bar and wine case set up.

There is even a dining room kitchen with hood, separate chef's kitchen with hood, and Main Line kitchen with an on-demand hood. The hood is critical because it contains the fire suppressant equipment. Sally states that the three kitchen locations are an added benefit that will permit high-end customer special cratering for her inner circle dining parties on the dining room floor. Having the hoods already installed saves a lot of money and may avoid major inspections by the city. You inject that if the fire hoods are not functioning correctly, the startup costs could skyrocket and also delay our opening. We should add that issue to the list to discuss with the owner. Sally agrees and suggests we may want to determine the effect of the current tenant decides to holdover beyond the term. The broker was, after all, not too definite about the move out date. He only stated that the building was under lease by the restaurant tenant until July or August of this year.

She also points out that the market study specifies that the purchase price is $5,995, 000. Sally states that there is also an option to lease the building under a NNN lease arrangement at $35,000 monthly rent plus $4,200 in property taxes monthly. Sally, wonders out loud if there was a potential of incurring other charges.

Then later...

You inform Sally that you have read and drafted all of the documents related to either the purchase or lease of the property, you suggest that you have a discussion analyzing the available options and issues that might impede the operation or make the deal costs prohibitive. Sally agrees, "Hey, I am a bit perplexed. The purchase agreement appears to contain terms unfavorable to us. We should organize all of the issues we might dispute and develop a negotiation strategy to argue favorable conditions and options. These deals have a way of being great investments for the owners of the property. Often, leasing terms are designed to squeeze all of the profit out of the tenants' operations.

You tell Sally that you developed a pro and con sheet for each document that you will present and discuss in the discussion assignment. This way, we can develop aTerm Sheet (PDF) and negotiation strategy to deal with the broker. But first, we need to calculate our potential operating costs to determine our potential income

Figure out yearly income

1. Gross Revenue- ROI calculation determine:(2)Gross Revenue:(See ArticleBob Chinns-crab-House) (Number of seats259) * (average meal costs) = ($Y) * (365Days of operation) =Gross Revenue. Determine an Average Meal cost using the rate charged by a Three Star Michelin restaurant comparison (See "B" Article:"10 most expensive restaurants in the world."Fine dining at Michelin-starred restaurants around the world can come at a price.

Gross Revenue = 259 seats * Average meal costs is $385 * 365 days of operation = $36,395,975

***Now the question is: Would Sally and I be better off leasing of purchasing the establishment?