Anyone owned a Tattersalls/Lotto Agency?

[TMNT]

Me and the brother are looking at one in a shopping centre, its been established for years,

What we are looking for a business that is recession/slump proof, we are happy to work long hours,

on the assumption that the purchase price is a fair multiple of earnings, and we assume that its pretty hard to fudge a franchised systems turnover

This is what we have analysed so far

Pros
Established business
Very recession proof (people buy more lotto tickets in times of economic tough times)
Easy to run ie no need for qualifications other then a big smile
its a stable product market (ie doesnt really have massive ups and downs)

Cons:
Long hours
Boring as watching grass grow
Another tattersalls could open near by (however, we would think the head office would never allow it)
those huge $50m draws can skew/mask turnoever, especiall for the years with lots of these draws
People seem to buying more online these days

for example if we purchased something that has $250k profit before loan repayments for a purchase price of $750 (excluding interest)

Anyone with experience out there?

 

[jrc]

Lok at the conditions of the lease. Can the landlords rent to a similar business, can they force you to relocate within the centre - possibly to a place with less foot traffic. Can they disrupt the whole centre with a development project. Is another nearby centre likely to take or already starting to take business.

What are the terms of the franchise ie can the franchisor reduce your exclusive territory

To me if your figures are in the vicinity - $750 k purchase price. Interest/ opportunity cost say 7% $52,500.
Profit before owners wages and interest $250,000 less interest $197,500 less owners wages say $120,000, leaves $77,500 after. say 40% tax net roughly $45,000 say 17 years to get your money back.

I was told years ago a good rule if thumb is to get your money back in 5 years

 

[cimbom]

The commission from lottery tickets is quite low. Newsagencies rely on selling other products like snacks, stationery, etc to make up the margin. Also, I don't think Tattersalls cares about competition in an area. My local shopping centre has 4 lotto outlets I think. You'd probably do better buying Tattersalls shares

ETA: https://tatts.com/tattersalls/tatts-franchise/faqs

it seems I was correct - no geographic exclusivity

 

[sanj]

I would definitely include owner or managers wage in there if it hasn't been and then apply the industry standard multiplier assuming there is one. Some of the other advice is good too re leases etc.

Buying established businesses can certainly be a good proposition but make sure you your DD right because you can also get burnt

 

[Ed Barton]

I've noticed a few news agencies closing down lately.

 

[roe]

This model is under threat from
Online lottery, it certainly a business in decline in future years
It won't happen over night but it surely drain your sale a
Little at a time each year.

Jumbo interactive and Tatts online sale of lottery
Is growing at a Healthy pace, younger generation
Like me never bought a ticket from a brick and mortal store.

I don't do it often but when I do, only online
It is too easy and don't worry about losing the ticket.

 

[S.T]

This model is under threat from
Online lottery, it certainly a business in decline in future years
It won't happen over night but it surely drain your sale a
Little at a time each year.

Jumbo interactive and Tatts online sale of lottery
Is growing at a Healthy pace, younger generation
Like me never bought a ticket from a brick and mortal store.

I don't do it often but when I do, only online
It is too easy and don't worry about losing the ticket.

Yup, exactly. I cant remember the last time I bought a lotto ticket from an agency, too much hard work. Rather do it online, have an account setup, get emailed when I win etc.

 

[BayView]

Cons:
Long hours
Boring as watching grass grow
Another tattersalls could open near by (however, we would think the head office would never allow it)
those huge $50m draws can skew/mask turnoever, especiall for the years with lots of these draws
People seem to buying more online these days

You forgot to add the part where you have to be face to face with lots of old folks, lots of welfare types, etc - all wanting to talk to you at their level, and about their life issues and health woes etc...all day and every day.

AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAHHHHHHHHHHHH!!!

 

[willair]

Me and the brother are looking at one in a shopping centre, its been established for years,

What we are looking for a business that is recession/slump proof, we are happy to work long hours,

on the assumption that the purchase price is a fair multiple of earnings, and we assume that its pretty hard to fudge a franchised systems turnover

This is what we have analysed so far

Pros
Established business
Very recession proof (people buy more lotto tickets in times of economic tough times)
Easy to run ie no need for qualifications other then a big smile
its a stable product market (ie doesnt really have massive ups and downs)

Cons:
Long hours
Boring as watching grass grow
Another tattersalls could open near by (however, we would think the head office would never allow it)
those huge $50m draws can skew/mask turnoever, especiall for the years with lots of these draws
People seem to buying more online these days

for example if we purchased something that has $250k profit before loan repayments for a purchase price of $750 (excluding interest)

Anyone with experience out there?

Not hands on,but a few people I know did quite well out of buyning run down inner city outlets up too about five years ago,i think with the way
the items they sell can now all be watched on a watch-pcs, then the decline gets faster and faster,out of the 3 on of my mates bought 2 are now coffee shops- and the other is a upmarket pizza outlet,that may give you a idea,, the big ones on a very high rental lease depending on staff costs may be ok not something I would go into..imho..

 

[LoneWolf]

I know a few people who owns this type of retail.

What they generally do is, your daily income may not be much and they don't expect much from it. But they do bank on capital gains.
They will run the business for a few years and once the business picks up or improves, they will sell up and collect their returns.

Then recycle this process again.

 

[BayView]

Another shop-front retail business bites the dust.....

How's that list going?

 

[BayView]

I know a few people who owns this type of retail.

What they generally do is, your daily income may not be much and they don't expect much from it. But they do bank on capital gains.
They will run the business for a few years and once the business picks up or improves, they will sell up and collect their returns.

Then recycle this process again.

I'd wager this would not be a winning strategy; based on the previous posts on this thread - apparently several have closed up, many younger ones are going online, etc.

I reckon a drive-through coffee shop with a Tatts may stand a chance...double-shot latte and a quick-pick.

 

[TMNT]

thanks for the feedback everyone,

im quite aware of the pitfalls of a lot of shopping centre leases, eg renovations every few years, their ability to force you to move, and their tendancy to be a bunch of pricks

My feeling is, if the turnoever and profits are good, then the high rents arent a problem

as for people saying they buy online, yes thats a consideration too, that being said, I dont think buying lotto tickets online is a major obstacle, ive tried buying online and didnt like it and now buy inside the shop


I agree that the local small agencies on shop strips probabl dont have any decent profit due to low turnover

That being said, I dont think buying a rundown place and spurcing it up for CG is a remotely good strategy either, I mean, you cant force people to come to your shop, no matter how much of a smile you have or renovate the shop, as the product isnt unique

That being said again, lotto agenceis do seem to be for sale quite often

 

[Corey Batt]

The lack of exclusive rights to a territory is the main concern with lotto stands. Any other newsagency/gift store in the centre can start it up to and the pie gets smaller. Required franchise refurbs through their overpriced contractors can chew into the profits too.

These can work well if its in the *RIGHT* place to mitigate the downsides, there is one I know of in the CBD which will have a line of 50 people at any one time, as its at a main juncture of office towers, in a large food court in the middle of a centre. It recently sold for a premium, which off their quoted sales meant a very low ROI.

 

[jackbak]

Weren't you going to buy a Post Office?

My Dad used to own a Tattslotto business, from what I hear it was long hours 6 days a week for pretty average pay. He had enough after 5 years. As you point out the online purchasing will become an issue down the track.

 

[jackbak]

My feeling is, if the turnoever and profits are good, then the high rents arent a problem

Turnover might be good but profits will never be that great because the price of the business will be based on the profits. And as a business owner you cant do anything to improve your product which would be very frustrating.

as for people saying they buy online, yes thats a consideration too, that being said, I dont think buying lotto tickets online is a major obstacle, ive tried buying online and didnt like it and now buy inside the shop

But that is an area that is rapidly changing, people are becoming more comfortable with buying online and the website will become more user friendly. At work we buy a weekly Tatts ticket and we were just saying the other day that we should set it up online so it automatically comes out each week to save us going in into the shop.

That being said again, lotto agenceis do seem to be for sale quite often

That probably tells you a lot. Good businesses don't come on the market that often.

 

[mikezen]

A lot of magazines and papers are going online now as well

 

[TMNT]

well last night I had a chat with a tatts owner in my area that im quite chatty with. They have had theirs for at least 10 years.

Basically,

-its all about location location location,

-recommended against buying a run down, low turnoever or crappy one

- if you are buying an expesnive already established one, then its ok

- watch out for competitors or the shopping centre putting another one in close by

- Long hours

- its a cash business so you have to be careful, cant have too many casuals


that being said, I am not sure why its such a cash business, this one in question doesnt sell magazines, cigarettes or stationary, just chocolates so I would assume the POS system would keep track of all purchases, or maybe those scratchies are the ones that are cash only and cant be tracked.


for the record there is one in VIC that is asking $925k, for $450k in comissions, obviously this isnt profit and need to consider, rent, wages, repayments

Assume $75k rent, $50k owners wage, $25k insurance/electricity/misc, thats $300k profit, seems a decent return

(im just brainstorming)


edit: a quick look on gumtree has 13 agencies for sale in VIC, all priced between 150 and 350, except for a 1 or 2

 

[Eli1]

I never try to buy ticket in brick and mortar shop unless I want to flirt with some cute shop girl. Why I will go to shop if I can buy ticket online with a tap on my mobile ?????? I can buy ticket in less than 10 sec from my mobile on very last moment of draw.

I believe biggest threat to this business is online purchasing of tickets.

 

[TMNT]

well, I just heard wind that woolworths/coles (both?) are thinking about selling lotto tickets,

that would be a major nail in the coffin,

sure the people buying specifically tickets at agencies would probably still buy, but I can see those that are indifferent about them would start buying them when they pick up some milk (me included)

definitely off the books now