Entrepreneurial Finance 5 E © 2008 Philip J. Adelman and Alan M. Marks Phil and Arlene Mobel were both born and raised in Denver, Colorado. Phil interrupted his high school education after Pearl Harbor and joined the United States Navy when he was 17 years old. He was at sea on a destroyer that was sunk, and he was stranded in the water for more than 4 hours before being picked up. He received survivor's leave and was then reassigned to Annapolis to take midshipmen out to sea. In 1945, after leaving the Navy, Phil moved back to Denver and married Arlene in 1947. Phil had many jobs after leaving the navy, including working in his father-in-law's liquor store.

Phil and Arlene wanted to own their own business. They saved their money and invested in a used furniture and piano store in 1962. In the early 1960s, students in the Denver public school system received free music lessons, and piano teachers would refer student families to the Mobel's piano store. However, by 1967, budget cutbacks in the schools resulted in the elimination of free music lessons, which resulted in fewer referrals for the piano store; this lack of referrals, coupled with a recession, led the Mobels to close the store. However, they still dreamed of owning their own business.

Arlene's father's accountant found a neighborhood bar for sale on Broadway in Denver, and they purchased the bar with financing from Arlene's father, who gave the owner a $10,000 down payment on a $37,000 total price. The Mobels leased the property from the building owner for $350 a month and agreed to pay the remaining $27,000 sales price within 5 years. By this time, Phil and Arlene had three children and had to make arrangements for either Phil or Arlene to be home when the children were there. In order to generate enough cash to pay the business off in 5 years, they worked the following schedule: Phil opened the bar at 6 A.M. and the clean up man came in shortly afterward and cleaned up from the previous evening. The bar

opened for business at 8 A.M. At 9, one additional employee came to work. Arlene came in at 10 after getting the three kids off to school or placed with the sitter. Phil left at 11 to purchase food for the kitchen and make a bank deposit, then went home and got some rest to come back to

work at 5 P.M. where he stayed until the bar closed at 2 A.M. Arlene worked until 5 P.M., returned home, fixed supper, and took care of the kids. Phil got home at about 2:30 A.M. and went back to work at 6 A.M. The Mobels worked this schedule 7 days a week for 5 years, until

they finished paying off the bar on May 1, 1972. One evening, not long after Phil and Arlene bought the bar, several customers came in at about 11 A.M. and asked Phil if they could get some food, like green chili, because they had just gotten

off work and were hungry. Phil knew nothing about Mexican food, but was receptive to the idea. He got a recipe for green chili from a Mexican woman who was a customer and was known in the neighborhood as a wonderful cook. He offered to give her a free pitcher of beer in exchange

for the recipe. Phil had never eaten or made green chili, but figured that if he followed the recipe, he could cook an excellent pot of green chili. He went to Safeway, bought the ingredients, and

cooked up a pot of green chili for the late crowd. The chili was a hit, and more customers ordered it when word got out. The restaurant continued to sell green chili and a variety of sandwiches, including a special menu for the late crowd. The Mobels really believed in customer service, and the green chili customers frequented the restaurant for more than 40 years. On May 25, 1972, just 3 weeks after they paid off the restaurant, Phil's car was hit by a drunk driver and he was in intensive care for over a week and in a cast for several months. He was unable to work for more than 4 years. Arlene tried to run the bar by herself, but found that the employees had allegiance to Phil. The liquor and food salesmen knew that she had no experience with ordering and didn't know how to get specials and quantity discounts. Women really had a

difficult time being in the bar business at that time. During the late 1960s,Arlene found that the employees, customers, and distributors did not respect women and tried to take advantage of them at every opportunity. Arlene and Phil discussed the business every day, and she was an

excellent student who really learned how to run a bar and restaurant. After 6 months Arlene fired all of the employees and contacted the liquor distributors and

demanded new salesmen who would be honest with her or she would take her business elsewhere. She hired a new crew and explained that she was the boss and that they worked for her. She always believed in paying a fair wage and being honest with her employees. She also determined that there would be more profit in the business if they served a full menu rather than just a limited menu of green chili, pizza, and sandwiches. After doing considerable research, she determined that Mexican food coupled with the bar business would be the best combination. She

found an excellent chef and offered him a good salary and benefits. Alex, the chef, determined the menu, worked with Arlene to establish prices, and developed recipes that could be cooked by other chefs. Arlene had hit on the perfect combination of food and drinks, and by 1973, the Blue

Bonnet Café became a full-service Mexican restaurant and bar serving lunch and dinner. Their liquor specialty is margaritas, and they developed a recipe that could be made in 60-gallon tanks, and the restaurant goes through three tanks of margaritas on a busy weekend. The restaurant is so successful that they receive three semi-truckloads of food each week. The restaurant uses more than 50,000 tortillas each week and more than 2 tons of cheese a month. On

a slow day, they serve 300 meals; on their best day, they serve 2,000 meals. The woman who owned the property liked the Mobels and never raised their rent above $350 a month from 1973 to 1990, when she gave the Mobels a 20-year non-escalating lease, charging $1,500 per month.

In the early 1990s, Denver was installing light rail and declared the area around the restaurant an Urban Renewal zone, which was then purchased by a developer who also wanted to purchase the land at the restaurant. However, because of how successful the restaurant was, the developer wanted the Blue Bonnet Café to expand and stay where it was. The Mobels countered and stated that they would only stay if they could purchase the land where the restaurant was located. The

building owner had promised Arlene that if she ever sold the land and the building, she would sell it to the Mobels. In 1992, they bought the building and the land and began to expand the

restaurant. Their son Gary went to work in the restaurant full time as soon as he was 21. He graduated college with a degree in accounting and a master's degree in tax accounting. Their daughter

Marci graduated college and also began working in the restaurant. The area around the restaurant was expanding and a shopping center was being developed, which resulted in increased foot traffic and sales. In 2004, Phil and Arlene were approaching their 80s and decided to sell the

restaurant to their children and retire. As of 2008, the Blue Bonnet Mexican Restaurant employed more than 90 people and is very successful. Many of the employees have been with the restaurant for more than 15 years. The liquor distributor recently told the Mobels that the

Blue Bonnet is the single largest seller of tequila in the state of Colorado. It is now being run by

the second generation of this amazing family. Write a 5 page paper (1500 or more words) in APA format in response to questions below.

A .The family paid the land owners $350/month for rent. How much money could the land owner have made if they took the $350 rent payment and placed it into an annuity paying 2% over the entire lifetime of the rental? Do you think it would have been worthwhile? Why or why not? Also, be sure to explain which kind of annuity you chose and why.

b. Would you consider building a portfolio of restaurants and then dedicating a portion of the overall rent to an annuity? What would you do with the profits upon retiring? Do you think you would have a decent retirement account? Why or why not