Business Deal Question - Am I unreasonable?

[JamesMay82]

Myself and a friend are equally investing into and starting a ice cream/cafe parlour in the UK. We've both never done it before but its in a prime location and I will be working there and managing the day to while he is just a silent partner.

We are both putting in 50k each so a 100k in total and we will both split the profit 50/50. In addition to the profit share, I want to be paid a minimum wage per hour for the Hours I physically work there. I think this is fair because I'm going to be working there full time which could be 60-80 hour weeks and he isn't going to be hands on at all. But sadly he disagrees!

is it unreasonable to expect to be paid a minimum wage for my time? if I wasn't doing that we'd be having to pay a manager. He's suggesting I'm being greedy, while I think he is.

Whats the verdict? AITA? lol

 

[compwiz1202]

Myself and a friend are equally investing into and starting a ice cream/cafe parlour in the UK. We've both never done it before but its in a prime location and I will be working there and managing the day to while he is just a silent partner.

We are both putting in 50k each so a 100k in total and we will both split the profit 50/50. In addition to the profit share, I want to be paid a minimum wage per hour for the Hours I physically work there. I think this is fair because I'm going to be working there full time which could be 60-80 hour weeks and he isn't going to be hands on at all. But sadly he disagrees!

is it unreasonable to expect to be paid a minimum wage for my time? if I wasn't doing that we'd be having to pay a manager. He's suggesting I'm being greedy, while I think he is.

Whats the verdict? AITA? lol

You should definitely get something more if you are physically working.

 

[RokinAmerica]

If one is working and the other not then once the working one is paid, then you can split 50/50. However, If you want to work for free, come see me.

 

[Madhatter32]

I do not disagree with the OP's position but think the OP should have worked that out prior to entering into the partnership. If I were the OP, I would hire the manager and do something else if that keeps the partnership on good terms.

 

[JamesMay82]

Thanks for the feedback guys. We've not started yet and it doesn't look like we will if he doesn't back down, I just wanted to make sure I'm not being unreasonable. Mainly for the fact that I will need a job but also want a job and I can't be working for free!

I suppose his argument is that if the business doesn't make money in particular week or month for whatever reason i.e. current market conditions then I wouldn't be able to take a wage because the business couldn't afford it then I should forgo my wage. Which is what would happen if I didn't have him as a partner so that's a fair comment as well I suppose?

 

[Mousse]

If 50/50 is the cut of the net profit, that is fair. Worker's wages is a business expense and need to be paid to the worker, even if the worker is the co-owner.

Have everything clearly written out--the plan, the roles, the responsibilities, the cut of the profit. Make sure you're both on the same page as far as what you want to accomplish. Well, making money.🤑 Beyond just making money that is.🤔

If you're starting a business just because he's your best mate, the business is destined to fail and take your friendship along with it. Business is business, personal is personal. Do not mix.

 

[JamesMay82]

If 50/50 is the cut of the net profit, that is fair. Worker's wages is a business expense and need to be paid to the worker, even if the worker is the co-owner.

Have everything clearly written out--the plan, the roles, the responsibilities, the cut of the profit. Make sure you're both on the same page as far as what you want to accomplish. Well, making money.🤑 Beyond just making money that is.🤔

If you're starting a business just because he's your best mate, the business is destined to fail and take your friendship along with it. Business is business, personal is personal. Do not mix.

He's more of an acquaintance whose become a friend because of this business we are putting together. He's actually the landlord of the building as well so he will be getting paid fair market rent as well.

His words to me are that if I'm taking 50% and taking the wage then I'm having my cake and eating it as well. but with his company getting paid the rent you could argue that back to him as well.

I'll stick to my guns then and see how things go.

 

[Rafterman]

More work = more cash

 

[KaliYoni]

Whats the verdict?

I'm a former retailer. Here are some things to consider before agreeing to the partnership terms:

• When your store is closed, it is not making money. This means the person managing the store has to be at work for the store to make any sales.
• Retailing is a very labor intensive and people intensive business. It is easy to burn out, especially if you don't feel you are getting paid enough. Have you ever had a public-facing job before? Have you ever spent 12 hours in a row serving an unending (hopefully) flow of strangers who view you as a servant?
• Food service businesses require long hours, both for serving customers and for doing all the "backstage" stuff. An ice cream shop in particular needs to be open late at night.
• Do not underestimate both the time required and the emotional aspects of hiring, managing, and releasing staff. Further, there are a lot of federal, state, and local regulations that you will have to ensure are being followed when you have employees.
• In many locations, ice cream is a highly seasonal business. Anybody relying on income from selling ice cream might need a plan to survive the lean months of the year.
• If you are buying a franchised business, the active partner is going to spend a lot of time on dealing with the requirements of the franchiser.
• Total equity = Monetary equity + Sweat equity

I also used to be involved in a small, non-retail business partnership. As well, I've done a lot of due diligence on small companies in acquisitions by larger companies. In my opinion, if you and your potential partner already have a disagreement over a core issue and your potential partner is exhibiting an inflexible, heels-dug-in negotiating style, you should think very carefully about tying your future to this person. Once the excitement of launching something new wears off, you will have many, many, many high stakes decisions to agree on.

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ETA: After reading your most recent post (#7), if I was advising your partner I would tell them to approach the owner of an existing ice cream shop and work with the owner on opening a new branch, with contributions such as reduced rent or payment of build-out costs entitling them to a greater share of profits than landlords normally take.

 

[poorcody]

If you are both contributing equal capital and one is working in the business and one is not, clearly you are investing more. If he is reluctant about an open-ended salary, you should get a greater profit percentage (you could have different class shares if he is reluctant to relinquish 50/50 control), or contribute less capital.

He is only risking 50K; you are risking both 50K and whatever current salary/job you would otherwise have.

I would agree not a good sign to start a partnership. Definitely get everything is writing.

 

[JamesMay82]

I'm a former retailer. Here are some things to consider before agreeing to your the partnership terms:

• When your store is closed, it is not making money. This means the person managing the store has to be at work for the store to make any sales.
• Retailing is a very labor intensive and people intensive business. It is easy to burn out, especially if you don't feel you are getting paid enough. Have you ever had a public-facing job before? Have you ever spent 12 hours in a row serving an unending (hopefully) flow of strangers who view you as a servant?
• Food service businesses require long hours, both for serving customers and for doing all the "backstage" stuff. An ice cream shop in particular needs to be open late at night.
• Do not underestimate both the time required and the emotional aspects of hiring, managing, and releasing staff. Further, there are a lot of federal, state, and local regulations that you will have to ensure are being followed when you have employees.
• In many locations, ice cream is a highly seasonal business. Anybody relying on income from selling ice cream might need a plan to survive the lean months of the year.
• If you are buying a franchised business, the active partner is going to spend a lot of time on dealing with the requirements of the franchiser.
• Total equity = Monetary equity + Sweat equity

I also used to be involved in a small, non-retail business partnership. As well, I've done a lot of due diligence on small companies in acquisitions by larger companies. In my opinion, if you and your potential partner already have a disagreement over a core issue and your potential partner is exhibiting an inflexible, heels-dug-in negotiating style, you should think very carefully about tying your future to this person. Once the excitement of launching something new wears off, you will have many, many, many high stakes decisions to agree on.

----------
ETA: After reading your most recent post (#7), if I was advising your partner I would tell them to approach the owner of an existing ice cream shop and work with the owner on opening a new branch, with contributions such as reduced rent or payment of build-out costs entitling them to a greater share of profits than landlords normally take.

Thanks for taking the time to write all that out and I fully agree and its good to know the people on this post are having the same thought process as me.

My background has been sales and predominantly working from home for the last 15 years so moving into a hospitality business will be a shock to the system. However, the the location is next to a school and also a college so within a 100 yards we have 4000 students from the ages of 5-17. Plus we are on a busy road and we have loads of parking so on paper it all makes sense.

I'll keep you posted how the negotiations go. with the current climate he's not got lots of investors to partner up with plus he trusts me I'm hoping he will be fair with me.

 

[compwiz1202]

Thanks for the feedback guys. We've not started yet and it doesn't look like we will if he doesn't back down, I just wanted to make sure I'm not being unreasonable. Mainly for the fact that I will need a job but also want a job and I can't be working for free!

I suppose his argument is that if the business doesn't make money in particular week or month for whatever reason i.e. current market conditions then I wouldn't be able to take a wage because the business couldn't afford it then I should forgo my wage. Which is what would happen if I didn't have him as a partner so that's a fair comment as well I suppose?

Let's go tell employees that they only get paid if the business makes a profit that day and see how that goes. Closest I ever had to that at a job was getting bonus 401k money if the company did well for the year. But they never took any.

 

[compwiz1202]

I wish I had the 50K. I would let you have a wage and I would do all the behind the scenes clerical stuff, and you can do the on site stuff. I always say my dream job would be exactly that where I wouldn't have to deal with people but do the technical stuff.

 

[JamesMay82]

Let's go tell employees that they only get paid if the business makes a profit that day and see how that goes. Closest I ever had to that at a job was getting bonus 401k money if the company did well for the year. But they never took any.

The employees would always be paid first and then me as a co owner I would receive my wage for the hours I've worked and then myself and my business partner could split the remaining net profit.

Obviously if the the business wasn't performing then we I might have to forgo my wage and profits to keep the business going if we hit a rough patch.

 

[KaliYoni]

My background has been sales and predominantly working from home for the last 15 years

Since we're on an Apple-focused website, here is One More Thing:

• Take some time to think about all of the infrastructure your current and former employers have provided that would become all your responsibility. Marketing, advertising, sales, public relations, human resources, accounting, banking, facility maintenance and upkeep, workplace safety, government permits, security...the list goes on and on. In my experience, one of the biggest shocks people who make the move from corporate environments to entrepreneurship feel is how much has to be done in addition to, say, scooping ice cream. As well, the kind of personal interactions you will have, especially with customers, is going to be very different from doing inside or outside sales for a large company.

 

[doobydoooby]

I totally agree with the OP that your effort should be compensated. However, I wanted to contribute one other thing that is utterly essential: don't allow the business to have 50/50 voting rights. It might sound fair and equitable, but it means you both run the risk of paralysing the business if you disagree in the future. It's absolutely essential that someone has the casting vote. I know of a couple of businesses where one of two partners fell off the rails personally, and it killed their business because one partner was incapable of taking decisions without the other's agreement.

 

[Apple fanboy]

The employees would always be paid first and then me as a co owner I would receive my wage for the hours I've worked and then myself and my business partner could split the remaining net profit.

Obviously if the the business wasn't performing then we I might have to forgo my wage and profits to keep the business going if we hit a rough patch.

I’m no expert but this does not sound like a good investment. Who is buying ice cream November to March in the UK? What is the business plan for those months? You’ve already stated

• Your business partner doesn’t think you should earn money for the hours you work.
• You think you’ll need to work 60 hours a week on minimum wage.
• When the profits dry up you won’t be paying yourself.

I’m sure you could find better investments or franchises out there. Especially as you don’t seem to be very experienced in the ice cream business.

 

[rafark]

Myself and a friend are equally investing into and starting a ice cream/cafe parlour in the UK. We've both never done it before but its in a prime location and I will be working there and managing the day to while he is just a silent partner.

We are both putting in 50k each so a 100k in total and we will both split the profit 50/50. In addition to the profit share, I want to be paid a minimum wage per hour for the Hours I physically work there. I think this is fair because I'm going to be working there full time which could be 60-80 hour weeks and he isn't going to be hands on at all. But sadly he disagrees!

is it unreasonable to expect to be paid a minimum wage for my time? if I wasn't doing that we'd be having to pay a manager. He's suggesting I'm being greedy, while I think he is.

Whats the verdict? AITA? lol

If you’re working and he isn’t, why does he get to have the same share as you? The investment is no longer equal.

 

[KaliYoni]

the location is next to a school and also a college so within a 100 yards we have 4000 students from the ages of 5-17

Devil's advocate question: doesn't this mean that the students won't be around during the best season for selling ice cream...summer?

 

[MacAndMic]

Make yourself equal and remove yourself from the employment portion. You both put in 50% and part of the day to day costs will be hiring someone to run the place.

 

[JamesMay82]

Devil's advocate question: doesn't this mean that the students won't be around during the best season for selling ice cream...summer?

Correct they won't but there is also a busy fitness centre which is kids only classes Dance, drama, karate etc that brings over 1,000 people a week that operates year round. Our biggest draw for the outside customers is the fact that we are the only ice cream parlour in our town with onsite parking and also with seating for 40 people indoors and 40 outside. Our nearest competitors have limited street parking on main roads which isn't ideal for walking young children across and they also don't have indoor seating.

We are predominantly ice cream but there will be coffee, cakes and sandwiches of course.

I’m no expert but this does not sound like a good investment. Who is buying ice cream November to March in the UK? What is the business plan for those months? You’ve already stated

• Your business partner doesn’t think you should earn money for the hours you work.
• You think you’ll need to work 60 hours a week on minimum wage.
• When the profits dry up you won’t be paying yourself.

I’m sure you could find better investments or franchises out there. Especially as you don’t seem to be very experienced in the ice cream business.

In addition to the other food options I mentioned above, we will also be having a very small arcade as well with 30 machines to attract people to the site as well. The winter months will be tough but with the parking the neighbouring schools and fitness centre we will have an advantage over our competition.

This is all in theory of course.

My biggest concern and I suppose the risk in any business is, what is the reward! what's the point in spending 50k on a business which could in theory only give me a salary of 20k! But I suppose that's another topic altogether. The business does have the potential to give us 75k salary each with the profit share and maybe even more if we are successful but that is the big question! He who dares wins as they say!

 

[Apple fanboy]

Correct they won't but there is also a busy fitness centre which is kids only classes Dance, drama, karate etc that brings over 1,000 people a week that operates year round. Our biggest draw for the outside customers is the fact that we are the only ice cream parlour in our town with onsite parking and also with seating for 40 people indoors and 40 outside. Our nearest competitors have limited street parking on main roads which isn't ideal for walking young children across and they also don't have indoor seating.

We are predominantly ice cream but there will be coffee, cakes and sandwiches of course.



In addition to the other food options I mentioned above, we will also be having a very small arcade as well with 30 machines to attract people to the site as well. The winter months will be tough but with the parking the neighbouring schools and fitness centre we will have an advantage over our competition.

This is all in theory of course.

My biggest concern and I suppose the risk in any business is, what is the reward! what's the point in spending 50k on a business which could in theory only give me a salary of 20k! But I suppose that's another topic altogether. The business does have the potential to give us 75k salary each with the profit share and maybe even more if we are successful but that is the big question! He who dares wins as they say!

I’ve always been pretty risk adverse tbh. But good luck to you if you decide to go for it. But as others have said make sure the contract is 100% clear. Like for example what happens if one partner decides to sell his share?

 

[JamesMay82]

I’ve always been pretty risk adverse tbh. But good luck to you if you decide to go for it. But as others have said make sure the contract is 100% clear. Like for example what happens if one partner decides to sell his share?

we need to have discussion on the sale of his share. I must admit I'm very risk adverse as well and so are most of my friends which is why I've posted on here to try and get a broader opinion.

I missed out on an opportunity years ago because I was too careful and the people who did go for it have done very well so I think that's driving me forward on this as well.

if it doesn't work out, at least I can say I've tried my best.. although I don't want any negative thinking! Believe and achieve as they say ha

 

[velocityg4]

Speaking of risk. You are risking a lot more than 50K. There’s also all the future income you will lose.

It’s highly unlikely you will turn a profit the first several months or even a year. It takes a while for people to get used to a business and word of mouth to spread. That means you are also losing all that income. You would’ve made in your 9-5.

If the partner expects you to not have a guaranteed payment from the partnership. Than they shouldn’t get rent. Ownership of the building should go to the partnership and increase their basis. Not voting power or draw. Just more basis for tax purposes. When it comes to distributing dividends.

As the general partner. You should have voting control 51/49, 80/20, don’t matter. You are the one working. You are the one who one at risk for partnership debts and liabilities. You need final say in management decisions.

If they want 50/50 voting, rent and no guaranteed payment for you. Then both of you should be general partners. You should hire a manager to run the place. Continue working your day job. Then only risk your 50k and some time doing paperwork, making business decisions and maybe helping out at crunch time.

As an aside. 100k doesn’t sound like nearly enough for a business of that nature. Especially with the arcade and everything described. One big killer of new businesses is insufficient starting capital.

 

[icanhazmac]

He's actually the landlord of the building as well so he will be getting paid fair market rent as well.

Wait, what?!?!

He is going to collect rent from your fledgling business but he doesn't want you to collect minimum wage for working/managing?

Get out of this while you can!