Buying an existing restaurant is a good way to break into the business and save you from a lot of effort in outfitting the kitchen and hiring employees. However, you want to study the restaurant closely to make sure you buy one that's thriving and not one that's in decline or that has a bad reputation. Here are some suggested steps to take before you buy a restaurant you find in the restaurant listings.
Learn What Transfers With The Sale
Don't assume you'll walk away from the sale with everything as it is currently. If the land or building is leased, make sure the lease transfers or that you'll be able to obtain a new lease in your name. Also, think about the name of the restaurant and its recipes. Do you want them to be the same, or do you want to start over with a new name and your own recipes? If you want them to stay the same, be sure the name, recipes, logos, and menu copyrights are included in the sale.
Look At The Financial Data
The current owner of the restaurant may place too much value on it based on the years of hard work he or she has put into the business. The right way to determine a fair selling price is to dig into the financials to determine if there is a positive cash flow and that the restaurant is a good investment. You'll also want to find out about financial liabilities that you'll be responsible for, such as catching up on staff wages, paying fines, or other fees. The seller should be willing to let you study the financial records of the restaurant so you can make an informed decision about buying.
Examine The Equipment
Restaurant equipment lasts a long time, but it eventually needs to be replaced. Find out the ages of the ovens, stoves, freezers, coolers, and small appliances. These items can be expensive to replace, and it's best if you can avoid doing so for a few years unless you've factored their cost into your buying budget. In addition to the equipment, you'll also want to inspect things like drains, the grease trap, public restrooms, and other functional parts of the building to make sure all the systems operate as they should.
Consider Location And Reputation
Location and reputation are two of the most important things to consider when you buy an existing restaurant. If a restaurant has a bad reputation in the community, your new restaurant may not be successful because it will be linked to the old owner and old problems. Location is important too since it can determine how much traffic your restaurant gets. It's ideal if you are familiar with the restaurant and eat there occasionally so you're aware of its standing in the community and how busy it is. If you're buying a restaurant you know nothing about in a location you're not familiar with, then work with someone who can offer sound advice such as a commercial real estate agent. The agent should be familiar with properties they sell, or they can find the information you need to help you choose the best restaurant for your new venture.