Jarett Berke·May 16, 2024

When a Restaurant Is a Great Business to Buy | Jarett Berke Interview

Jarett Berke is a former Marine Corps aviator and Dartmouth Tuck MBA who bought Lou's Restaurant and Bakery in Hanover, NH in summer 2018 — a 73-year-old Main Street institution adjacent to Dartmouth College that he was initially dead-set against because it was a restaurant. An accountant intermediary convinced him to look at an anonymized P&L by leading with two key facts: no alcohol and closes at 3pm daily. The business turned out to be exceptional by restaurant standards, running mid-to-high-teen profit margins on a multi-revenue-stream model combining the restaurant (~60%), a scratch bakery (~30%), and catering (~10%), all sharing fixed costs and owned real estate. The deal was structured as a stock purchase financed roughly 80% SBA 7(a), a seller note used as an escrow/holdback, and ~$200k in personal and family equity; Jarett later purchased the real estate separately via SBA 504. COVID arrived 18 months after closing, and Jarett credits navigating that crisis — pivoting servers to delivery drivers overnight using Toast POS, launching family-style meal kits, retaining all full-time staff, securing an early PPP loan — as the moment he finally felt like the real owner. Six years in, revenue is up roughly 60%, the kitchen has been renovated, the bakery relocated to an adjacent basement, and outdoor seating added 11 tables; Jarett is focused on long-term hold, debt payoff, and incremental growth in catering and potentially retail product sales rather than multi-location expansion.

Deal facts

multiple: ~3.5x SDE (described as 'mid-threes,' range 3–3.7x using interest-rate build-up / Duff & Phelps method)
sde ebitda: mid-hundreds of thousands SDE (sellers' take-home)
revenue: single-digit millions (described as 'somewhere in the middle'); ~60% growth since 2018 acquisition
financing structure: SBA 7(a) ~80% of purchase price + seller note (couple hundred thousand, structured as escrow/working-capital holdback) + ~$200k+ buyer equity (personal savings and family loan); real estate purchased separately ~16-18 months later via SBA 504 + community development mezzanine debt at ~2% for 25 years
notes: Stock deal (not asset deal). Business founded 1947; Jarett was 4th owner. Sellers (Toby and Patty) owned for 27 years. Business includes restaurant (~60% revenue), bakery (~30%), and catering (~10%). Seller NDA prevents exact figures. Real estate on Main Street Hanover NH purchased separately post-close via option agreement. SBA lender was the bank next door (Ledger Bank), which was also founded by the original restaurant owner.

Why this business

Jarett had told brokers 'no restaurants,' but the accountant intermediary showed him a P&L without naming the business — just noting it served no alcohol and closed at 3pm every day. Those two features (no alcohol, daytime hours only) addressed his core objections. When he saw the profitability — mid-to-high-teens profit margins, consistent year-over-year revenue growth — and learned the sellers were largely hands-off with a GM and office manager running operations, he viewed it as a genuinely great business that happened to be a restaurant. The 73-year-old community institution on Main Street in Hanover NH, the real estate ownership, and the multi-revenue-stream model (restaurant, bakery, catering) all reinforced his conviction.

What's working

Multi-revenue-stream model: restaurant (~60%), bakery (~30%), and catering (~10%) share fixed costs, producing mid-to-high-teen profit margins — nearly double the restaurant industry average
Daytime-only hours (open through 3pm) attract more mature, stable employees who value the lifestyle, creating a competitive hiring advantage
No alcohol focus eliminates liability headaches, theft risk, and problem-patron issues common to bar-style restaurants
73-year community institution in a college town (Dartmouth) with strong brand loyalty and no reservations needed — consistent line out the door on weekends
Strong GM (Craig, former regional chain manager) was in place pre-acquisition and stayed on, enabling Jarett to work on the business rather than in it
Real estate ownership: bought the building ~16-18 months post-close via SBA 504 + cheap federal Home Loan Bank of Boston debt at ~2% for 25 years, locking in occupancy costs
Stock deal preserved vendor payment terms (30-day net), health permits, and all existing contracts — no cash-on-delivery restart
COVID pivot: switched servers to delivery drivers overnight using Toast POS online ordering; launched family-style meal kits; retained all full-time staff; obtained early PPP loan through the adjacent bank
Post-COVID outdoor seating added 11 tables to existing 16, boosting daily guest capacity from ~500 to 650-660
Kitchen renovation increased throughput capacity; bakery relocated to adjacent basement space at low cost

What's hard

Labor is chronically tight in the Upper Valley / Hanover NH area; staff callouts require Jarett to step in and do dishes, bust tables, etc.
Profitability slightly below sellers' levels due to intentional reinvestment in people (higher wages) and infrastructure (kitchen renovation, bakery expansion)
Seasonal revenue swings: Dartmouth students leave in December and January–March is slow; Jarett still wakes up in the middle of the night during slow season worrying about cash
Catering growth has been inconsistent — good employees grow it, then leave, and it deflates; difficult to build sustainably
New fast-casual competitor opened across the street, taking some quick-service customers; Jarett's response is to move upmarket on experience
Stock deal came with risk: health inspector initially tried to force a new inspection and threatened to shut the restaurant; Jarett had to stand firm on his legal research
Cash at close was extremely thin — essentially all personal savings plus a family loan, leaving little cushion; COVID hit just 18 months later

Notable quotes

I said no restaurants during my search. The accountant said, 'I'm not going to tell you the name, I'm not going to tell you what it is, but here's a P&L and they don't serve alcohol and they close at 3 PM every day.' And I'm like, H, okay.

The business never felt like it was mine until Covid. I kind of felt like an impostor the entire time — even though I'm looking at the books and I'm writing the checks and signing them and everything and people call me boss.

I showed up the next morning at 6am and bust tables. I spent the first month doing every job — dishes, prep, baking at night. I got to know all the people and just listened.

The thing that I have that I was afraid that I wouldn't have is that autonomy, that mastery, and that sense of purpose. And sure the money is good and I'm living a very comfortable life, certainly nowhere near what some of my classmates are making who went into private equity, but that's not the driver for me.