Iconic South Philadelphia Cheesesteak Eatery, 30-Year Operation with Real Estate

$2.8M

Revenue

$500K

SDE

6.4x

Multiple

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Full Editorial Writeup

This is a 30-plus year old cheesesteak restaurant in a high-traffic South Philadelphia corridor near Penn's Landing, Delaware Avenue, and the city's sports complex district. Founded in 1992, the business operates from a 2,500 square foot building with indoor seating for 30-plus patrons and a full-time team of 12. The listing quotes revenue variously at $2.5M and $2.8M, with $500K of owner cash flow, and it has built a loyal customer base over three decades in one of the most recognizable food categories in America.

The headline of this deal is the real estate, not the cheesesteak business. The $3.2M asking price includes owned property valued at $2M, spanning 39 E. Oregon Ave plus an adjacent vacant parcel at 29 E. Oregon Ave, with CMX-2 mixed-use zoning, over 100 feet of frontage, and 125 feet of depth. That means a buyer is effectively paying roughly $1.2M for the operating business (about 2.4x cash flow) and $2M for land and development optionality in a rapidly gentrifying neighborhood.

The seller is retiring after decades of operation and is offering $1.2M in seller financing over 10 to 15 years (the listing states both terms), which materially de-risks the entry for a qualified buyer. The pitch here is dual: run a proven, cash-flowing Philly institution while sitting on a mixed-use development site in a corridor absorbing new residential construction.

Why we like it

Earnings quality is anchored by a 30-year track record and $500K of cash flow on roughly $2.5M to $2.8M of revenue, a healthy 18 to 20 percent margin for a counter-service concept. The business is turnkey with a full staff staying in place, so the operating engine does not walk out the door with the retiring owner.
The moat is location and brand memory. Three decades near Penn's Landing and the sports complex district create durable foot traffic and an entrenched local reputation that is hard for a new entrant to replicate overnight.
The real estate transforms the risk profile. Owning the building plus an adjacent CMX-2 mixed-use lot with over 100 feet of frontage in a gentrifying corridor gives a buyer a hard-asset floor of $2M and genuine development optionality beyond the restaurant P&L.
Seller financing of $1.2M over 10 to 15 years lets a buyer control this asset with far less bank leverage, and a retiring seller with staff retention signals a motivated, clean handoff rather than a distressed exit.

How to improve it

Reconcile and verify the true revenue first. The listing cites $2.5M in one place and $2.8M in another, so pin down actual tax returns and POS data before anything else and re-underwrite the multiple on the confirmed number.
Separate the operating business from the real estate on the financials. Charge the business a market rent so you can see standalone restaurant economics, then decide whether to hold, lease, or develop the land as a distinct capital allocation question.
Attack the vacant lot at 29 E. Oregon within the first year. Commission a feasibility study on the CMX-2 mixed-use development potential, since upper-story residential over ground-floor retail in a gentrifying corridor may be worth far more than the $2M carrying value.
Extend revenue beyond walk-in traffic. Add third-party delivery, catering for the nearby sports complex and residential complexes, and packaged/branded product to smooth the demand curve and reduce reliance on game-day foot traffic.
Leverage the 30-year brand into a second location or ghost kitchen. An iconic Philly cheesesteak name is a licensable asset, and a modest expansion could multiply enterprise value without diluting the flagship.
Systematize labor and margins. With 12 full-time employees and the owner retiring, install clear management structure, food-cost controls, and scheduling discipline so the business runs profitably without a hands-on founder.
Renegotiate supplier and food costs. A three-decade operator often leaves easy margin on the table, so bid out beef, rolls, and dairy contracts to capture 100 to 300 basis points of margin quickly.

Diligence notes

Resolve the revenue discrepancy immediately. The listing states $2.5M and $2.8M in different sections, and the entire multiple rests on which is real, so demand three years of tax returns, POS reports, and bank statements before making an offer.
Get an independent appraisal of the real estate. The $2M value is seller-stated, so verify comparable sales, confirm CMX-2 zoning entitlements, check for any liens or tax arrears, and get a real development cost estimate before crediting the land with that value.
Scrutinize the labor situation. The pitch relies on full staff remaining, so confirm wage rates, employment agreements, key-person risk in the kitchen, and whether payroll is fully on the books, since undocumented labor is a common hidden liability in this category.
Stress-test demand concentration on the sports complex and foot traffic. Understand how revenue splits between game days, weekends, and normal weekdays, and whether any redevelopment or road changes could disrupt the corridor.
Confirm the seller financing terms precisely. The listing states both 10 years and 15 years for the $1.2M note, so nail down the actual amortization, interest rate, security, and personal guarantee requirements in writing.
Validate the 'home-based' flag and asset transfer. The listing oddly marks the business as home-based despite a 2,500 square foot restaurant, so confirm exactly which entity, licenses, health permits, trade fixtures, and goodwill convey in the sale.

Source

Originally listed on BizBuySell. View original listing →