4 Considerations Before You Buy an Established Restaurant

If you dream of owning your own restaurant, you might believe it is a better idea to purchase a pre-existing restaurant over starting one from scratch.

While there are many benefits of purchasing an existing restaurant, such as an established customer base, popular menu and facilities, it is vital to weigh up the pros and cons so you can make an informed decision. Here are four considerations to make before you buy an established restaurant.

What are the Reasons Behind the Restaurant’s Sale?

There are often two reasons why the restaurant owner(s) has decided to sell up: they are looking for a change, or they are not making a big enough profit. If it is the latter, you must avoid the restaurant at all costs, because you could be closing your doors as quick as you have opened them. However, if an owner is selling up due to retirement, health issues or because they are tired of being a boss, you could be making a superb investment.

What Financial Obligations Will You Inherit?

It is important to identify any financial obligations you may inherit when buying a new restaurant, such as food costs, labour costs and the average food and beverage sales. You must also aim to identify the average utility costs, rental fees, taxes, insurance and license fees. All the information you attain will help you to develop a successful business plan.

If the current restaurant owner does not want to show you their books, you should take their reluctance as a warning sign and cut your losses while you still can. Any business owner that wants to sell their company should offer transparency so that a buyer can make an informed choice. Also, it is essential to identify how much the current restaurant owners owe on the mortgage, as you will also need to account for the fees in your business plan – which could stretch your investment even further.

Is the Restaurant in the Right Location?

A restaurant’s success is determined by its location, and if it isn’t in a good spot, you may struggle to drive customers into your restaurant – and that could be the real reason behind a business owner’s sale. It is, therefore, vital to learn more about the area, identify if it visible to foot traffic, and if there is enough car parking nearby.

Will You Also Purchase the Copyright?

You might be purchasing a restaurant, but will you also be purchasing its name, logo, menu and equipment? You must, therefore, review the copyright details to ensure you know what exactly you are purchasing before you buy the restaurant.

So, double check you purchase everything that makes the restaurant a success, such as its branding, furniture and professional kitchen equipment – or you may have to invest significantly more into the company, which could wreak havoc on your budget and business plans.

Investing in a restaurant is always a risk – whether it is a new or established business. However, if you do your research, create an effective business plan and are passionate about the new venture, you have every chance of becoming a successful restaurant owner.