Essentials Before Buying a Restaurant

For would be restaurateurs, the prospect of buying an eatery often begins with idealism. For an eatery to work on a business level, certain conditions must be met. If you hope to own a restaurant, but you do not know the specifics of buying and operating restaurants, following the eight steps below will help you decide whether buying a restaurant is right for you.

Decide if you have time for a restaurant

Running an independent restaurant can be a full time job, to say the least. If you do not mind spending up to 100 hours a week managing your establishment’s needs in exchange for controlling its direction, then an independent restaurant might be for you. Conversely, if you wish to spend little time running a location, and would rather not bother with culinary issues, then owning a franchise location could be the best option.

Decide what type of establishment you want

The types of restaurants you could own are endless, and the type you decide to own will determine how much time, money, and creativity are required to make it a success. For example, there’s a big difference between running a storefront eatery that does most of its business from takeaway orders and running a full service establishment that caters to customers’ every need.

Decide between buying a location and renting one

First-time restaurateurs often have the instinct to buy instead of rent, which is not bad. If you plan owning an eatery long-term, buying a location instead of renting one means that more of your business’ revenue will be profit in the long-term. However, if you aspire to own an establishment in a metropolitan market whose real estate prices and property taxes would make it difficult to earn a profit, renting could be the best choice.

Have your financial statements ready for sellers

Most sellers want to make sure that inquirers are able to make the purchase before they engage them. Having your statements ready lets you present them to a seller as soon as you receive a financial disclosure statement, speeding up the sales process.

Calculate the cost of owning and operating a particular establishment

It is difficult to calculate the cost of opening and operating an establishment until you know which establishment you will own. You can perform a hypothetical expense analysis based on the type of establishment you wish to own. When conducting the analysis, consider the following expenses where applicable: location purchase or rent, construction, food and liquor purchase, service equipment lease or purchase, payroll, property taxes, building insurance, workers comp insurance, merchant service fees, waste management payments, and monthly utilities.

Make sure an establishment has been valuated

Make sure an establishment has been valuated before you buy it. A business valuation determines a restaurant’s fair market value (FMV) based on several considerations, including its present revenue, its projected revenue, its building and property value, and its customer base.

Seek a fairness opinion if an establishment’s price seems too high

If you are set on owning an establishment and you feel that the price is too high, seeking a fairness opinion from a business valuator could make it easier to negotiate with the seller.

Consult an expert about how to buy restaurants

Buying or selling a restaurant can be a tedious process. If you have questions about how to buy restaurants, do not resort to guesswork. Consult an attorney who specializes in restaurant sales, or a consultant that helps its clients buy and sell restaurants.