In the world of opportunity, few investments hold up to that of purchasing a restaurant business. The consistent cash flow can greatly outweigh the associated costs, and the variety of benefits (not just being a boss) can offer intrinsic value that can’t be found elsewhere. Like all investments though, there is a great deal of risk, as well as important points to consider, before diving headfirst into a deal. At BizPappa, our mission is to help hungry buyers (pun intended) get the best deals possible, and set themselves up for the most profitable of futures. Below, are 5 tips to consider before stepping into a restaurant business deal- these tips can set you up for success, while mitigating unnecessary risk.
I should note– these tips are very much overview, and the granular differences between restaurants for sale will greatly vary. If you have an idea of what you’re looking for, or perhaps even a specific property in mind, please contact us directly via our website, for a free consultation on how we can help you get the best deal possible.
1. Ask: why is the restaurant for sale?
Asking this question (both literally and figuratively) can bring to light a lot of importance variables that can’t be overlooked. Are the owners simply older and trying to cash out for retirement? Probably a safe investment. Are they moving due to issues with finances– maybe the tax code in your area is gradually working more and more against restaurant business owners? Knowing this can help you get a better sense of if this deal is right for you. There could also be leans or other financial obligations tied to the building- failure to identify this early on will result in massive financial pain down the road. Be smart and inquisitive.
2. How is the location?
The interior might be spick and span, but a dangerous neighborhood will very likely keep potential customers away. While some location variables can’t be expected (for example if your restaurant sits in an area heavily saturated with protests), others can be avoided, such as vicinity to less-than-desirable landmarks like busy streets, homeless populated parks, and more. While not always the most conclusive, a quick study of an areas crime rate can be a decent indicator of the quality of location. I also suggest doing a drive by of the property, both in the day and at night- to get a sense of how the location holds up in various hours and what the passing community is like. Be objective, but trust your gut.
3. Are you buying the entire brand?
A restaurant purchase can be complicated- while some people want just the brick and mortar for their own brand to fill, others might want to purchase the entire business model- color scheme and all! A mom and pop shop that has a solid reputation in a neighborhood might be a good opportunity to preserve the name- the customers will keep coming. However, switching out a beloved local eatery for your own vision, might adulterate the reputation of your establishment and people will always remember you as the place that “used to be so and so”. If you’re buying a franchise (for example, Chick-fil-A), then you won’t even have the option to nix the branding, so do your due diligence and make a conscious decision of what you want, and what you can actually get.
4. Consider the equipment
A restaurant requires a lot of equipment to be sustainable- dishwashers, ovens, fryers, not to mention a massive amount of utensils, menus, seating, etc. Is your purchase going to include these items, or are you coming in with your own items and have no need for theirs? Depending on the type of building you’re buying into, be mindful that your appliances may not immediately fit/adapt to the space, and you’ll need to spend large amounts of time and money to make it work. You might event just end up buying brand new gear entirely- which could have come included in the purchase. Do an evaluation of what your potential establishment needs, and what you are planning to bring to the table.
5. Consider staffing
This one is a bit subjective, but buying into a restaurant could very well mean buying into a new team of staff. Perhaps the existing staff are based locally and are highly dependable to arrive for shifts, due to years of consistency? If you’re not a people person, this direct person-to-person transfer could be a holy grail for you. If you already have a team in mind, maybe not so much. I’ll put it this way- interviews will be a lot easier if you already know that the staff at your desired location are experienced and live nearby. Of all the complications that come with restaurant ownership, it is said that manning people is among the most challenging. Set yourself up for success, in whatever way makes the most sense to you.
While these 5 tips for buying a restaurant business can certainly be helpful, nothing is as important as equipping yourself with a strong partner team of experts that know the restaurant industry in and out. At BizPappa, we pride ourselves in helping hungry buyers get the best deals possible, by working with their financial goals, interests, and dreams. Contact us today for more info!