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Discrepancies with Business Cost

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jakeweil1

Junior Member
What is the name of your state? Texas
I am under contract for a pre existing franchise business. I have already invested a considerable amount of time, effort, and money into this endeavor. The current business owners have been really honest up to this point. However, today a HUGE issue came up. The franchise requires a remodel to be done and this was calculated into the business start up costs. I contacted the only franchise approved contractor in the area and he provided me with a quote that is 10k higher than the amount that the sellers represented was quoted to them by the same contractor. The sellers have represented in several documents the lower price quote, which I relied on during my negotiations for the total business price. I have asked the sellers for a copy of the original price quote from the contractor and they have been unable to produce the quote. If the original price quote was indeed 10k over the estimate that the sellers gave to me what type of recourse do I have? The sellers have not yet been paid. The money is still in escrow. I feel that if the sellers were off on the price quote by 10k for the construction then I should pay 10k less to the sellers for the business. Is this a fair/legally enforcable approach. What are my options?
 


justalayman

Senior Member
jakeweil1 said:
What is the name of your state? Texas
I am under contract for a pre existing franchise business. I have already invested a considerable amount of time, effort, and money into this endeavor. The current business owners have been really honest up to this point. However, today a HUGE issue came up. The franchise requires a remodel to be done and this was calculated into the business start up costs. I contacted the only franchise approved contractor in the area and he provided me with a quote that is 10k higher than the amount that the sellers represented was quoted to them by the same contractor. The sellers have represented in several documents the lower price quote, which I relied on during my negotiations for the total business price. I have asked the sellers for a copy of the original price quote from the contractor and they have been unable to produce the quote. If the original price quote was indeed 10k over the estimate that the sellers gave to me what type of recourse do I have? The sellers have not yet been paid. The money is still in escrow. I feel that if the sellers were off on the price quote by 10k for the construction then I should pay 10k less to the sellers for the business. Is this a fair/legally enforcable approach. What are my options?

Not an answer to the legalities but 10k represents what, a 1% increase, a 100% increase?

and over what time period was the info given by the sellers until the quote by the contractor?
 

jakeweil1

Junior Member
10k would be roughly an 8% increase in the total start up cost of buying the business, so this is a pretty significant amount of extra $. The initial construction quote that the seller gave me was for 14k and the one from the contractor was almost 24k. The sellers provided the quote in the beginning February and again in mid March, so the last time that the cost was presented to me by the sellers was only a month and a half ago.
 

justalayman

Senior Member
jakeweil1 said:
10k would be roughly an 8% increase in the total start up cost of buying the business, so this is a pretty significant amount of extra $. The initial construction quote that the seller gave me was for 14k and the one from the contractor was almost 24k. The sellers provided the quote in the beginning February and again in mid March, so the last time that the cost was presented to me by the sellers was only a month and a half ago.
Unless the sellers got a new quote (why would they) the quote would be 3 months old now. Even though construction costs have been going up ridiculously fast, even that is a bit much.

What have the Sellers said about the difference?
Is there any documentation to support the original quote?

I realize you stated you contacted the only authorized GC but are there any available at a greater, yet close enough to be willing to do the work somewhere?
 

jakeweil1

Junior Member
Thanks for your input. As far as the original quote it was actually given in august 05, but this isn't the issue anyway because the contractor is willing to honor any quote that he has given. Where the problem lies is that the contractor says that the only quote he has a record of giving is for 24k and the sellers cant produce the quote from the contractor for 14k. So there are only 2 possibilities 1. The sellers are lying and can't produce the quote because it never existed. 2. The sellers have lost the original quote. In my opinion if the sellers are lying the extra construction costs should reduce the sale price. If they are telling the truth and can't find the original quote the extra costs should be on them too since the original quote is turning into a $10,000 piece of paper.
 

HomeGuru

Senior Member
jakeweil1 said:
Thanks for your input. As far as the original quote it was actually given in august 05, but this isn't the issue anyway because the contractor is willing to honor any quote that he has given. Where the problem lies is that the contractor says that the only quote he has a record of giving is for 24k and the sellers cant produce the quote from the contractor for 14k. So there are only 2 possibilities 1. The sellers are lying and can't produce the quote because it never existed. 2. The sellers have lost the original quote. In my opinion if the sellers are lying the extra construction costs should reduce the sale price. If they are telling the truth and can't find the original quote the extra costs should be on them too since the original quote is turning into a $10,000 piece of paper.

**A: at this point you should negotiate the franchise biz purchase price.
 

jakeweil1

Junior Member
A New Development

Hello everyone, thanks for your help. This situation has actually just changed. The sellers have been able to produce a copy of the original quote and now the contractor is stating that the rules with the franchise have changed and that the construction period would be longer now and this is why he has to charge more. It is clear that the contractor is full of BS. He has lied to me about the franchise's rules changing (I checked with the franchise and this is not the case) and somehow misplaced the original quote which is also suspect. The franchise has said that they are going to put some pressure on the contractor to honor his original quote but I am doubtful that they will do enough. What can I do? The franchise has told me that I should back off the contractor while they proceed but I feel like I should be kept fully in the loop because this decision effects me more than anyone else.
 

jakeweil1

Junior Member
This situation is still pending although the franchise has assured me that they are doing all they can to resolve this issue.
 

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