Delta Diner Harvest Strategy
March 1, 2022
This brief synopsis expands on our earlier email. We feel timing is especially important to our goals and is therefore a driver in our decision. While the next two years may put us in a better position relative to price, we feel the current climate of economic uncertainty could result in a difficult acquisition market down the road. We feel that it is important not to miss this window. The process could take time or happen quickly. We do not know.
We feel our best targets for an acquisition fall into three categories:
- An individual or group that would scale our model in other markets (licensing) and operate the Delta Diner as site #1, and for branding, training, and product development.
- An individual or group that wants to own a business in this market area with the opportunity to expand it on a regional basis (licensing).
- An individual or group simply wanting to own a good business opportunity in this market area with no intention of scaling.
We will be approaching group 1 by narrowing down a list of 40-50 compatible high growth companies operating in hospitality and related fields that would value the uniqueness of Delta Diner’s model, its scalability, and its potential for sustainable profits in appropriate annualized markets. To the right company, the Delta Diner would provide an exciting alpha site upon which to base a multi-unit approach.
If the new owner of the Diner comes from group 2 or 3, it will result from a more traditional approach. In this scenario we will collaborate with a broker to secure qualified prospects. The first number of months would be on a “quiet basis” with the broker emphasizing the iconic nature of the available business and limiting mention of the name “Delta Diner” to only prospects that have been prequalified and have signed a non-disclosure. We have researched brokers and feel confident we have identified a company with a history of marketing individual properties successfully. After this quiet period, we would get more aggressive with marketing efforts and create a narrative that is positive to both the current operation of the Diner and our efforts to secure a harvest of the business.
To best position ourselves for success, as Managing Members of the LLC, we need to be able to work within established parameters, with autonomy, to structure a potential deal to present for vote by the membership.
Target Price: 1.5 million
This price is based on 2019 independent valuation and other factors. Since 2019 we have made significant investments in the Diner, added exciting new revenue streams with attractive upside potential, and have been the beneficiary of appreciating values in the market.
What are we selling:
- All the physical property located at 14385 County Highway H in Delta Wisconsin. This includes land, buildings, and equipment (including equipment stored off-site).
- The Licensing Rights for use of all intellectual property in a four-county market area including Bayfield, Ashland, Sawyer, and Douglas Counties. This includes name, brand, processes, recipes, training materials, website, social media platforms.
- A prospect can acquire the above listed assets of Delta Diner, LLC or they can acquire the LLC.
- If it is an LLC acquisition, the potential 5% of net flow-back from licensing outside the market area as agreed to by contract with Traction Works, LLC (formerly Idea Works, LLC) could impact target price upward.
- If a prospect intends to scale the Diner concept into other market areas, it will involve a separate, but parallel negotiation with The Traction Works, LLC for additional Licensed Markets.
The Managing Members of Delta Diner, LLC will work to secure an offer, or offers, based on the information provided above, and present it to the membership for discussion and vote. In the meantime, Delta Diner, LLC will operate the Delta Diner as if we were not seeking harvest. We plan to aggressively expand our revenue base with the TapShack, Taste Budz, and associated omni-retail products including pickled garlic, hot sauces, frozen meals, ice cream and roasted coffee. These are all important to maximize the financial benefit to our LLC either through continued operation or harvest.
Please feel free to email us any questions you may have. Please indicate your position on the execution of our harvest strategy below.
Todd and Nina Bucher