Start a Restaurant

If you decide to buy an existing restaurant business, one of the benefits you will immediately realize is the privilege of examining its historical performance. This will allow you to make some very important business decisions. Your strengths can be of great use even if the restaurant was not profitable in the past, and your greatest hope can be to evolve a winning operation.

Existing Restaurants Are Easier to Investigate

You should always do a thorough investigation of any piece of real estate-and especially if you plan to buy a restaurant. This will require taking an up close and personal look at its past activities, current operations, nearby competition, and its future business potential. Restaurant traffic speaks volumes about what you can expect in the future. It is also important to monitor health trends and how they fit into the current status of the restaurant as well as your ownership goals.

An Infrastructure Already In Place

An infrastructure can best be described as the location, equipment, employees, operating systems, and existing supplies. This removes the challenges of starting out at ground zero when buying a restaurant, and will allow you to focus on building the business-which is where your attention should be. A solid infrastructure already in place also allows you to implement new changes more rapidly. With an existing restaurant, there is quicker opening time versus the time needed if it were a new development. The existing customer base of an existing restaurant can carry the business until you are firmly established, and once firmly established, you can then work on bringing in new customers.

The Benefit of Pricing Differences

There may be the perception that to buy an existing restaurant business, it will cost more. This is not usually the case. The odds are actually in your favor of saving money in the long run when buying a restaurant where all the amenities are firmly in place. Even if purchasing the restaurant requires a premium down payment-you at least know up front what you are getting. Usually with a new franchise, there are demographic studies done on drive by traffic, demographics, and potential customer bases. These are all studies that try to determine the restaurant’s potential for success. In reality, this is a near impossible task. It is also good to note that a new location can take up to a year or more to build. All of these challenges are avoided for the most part when buying a resale location. (more…)

Before you buy a restaurant you may want to see if you are suited to be a restaurant owner. If you are willing to do what it takes to run a business, and not just indulge a hobby, you may want to buy a restaurant. You will need to have experience in the restaurant business before you can successfully buy a restaurant and run it on your own.

That is not to say that you can’t hire employees who know a great deal about the business before you buy a restaurant. Of course you will want to learn as much as you can about the restaurant business so that you have more than a little knowledge of how your restaurant operates.

You will need to consider the competition in the trade. If you have several Italian restaurants in the area where you want to buy a restaurant, you may want to think about another type of restaurant to open. Obtain a demographic survey to see what type of people live in and around the area, their income and ethnic backgrounds, etc.. To help determine what type of restaurant you should open.

Not only do you need to check out the location and the competition, but you will need to possess good marketing skills . While research will teach you what type of restaurant to buy and open, you will need to advertise to let people know you are there and what you offer. You also need a great location for your restaurant, you need to be in the thick of things, have ample parking, and be convenient to visit.

When you decide to buy a restaurant, you will be facing a mountain of regulations you will need to abide by. Your kitchen must be kept up to State hygiene standards. The FDA sets these standards and all establishments preparing and selling food need to adhere to them.

Mechanical and electrical ventilation systems are mandatory, and you will need licenses for food handling and liquor licenses before you open. All refrigeration systems need to be digitally controlled. (more…)

Buying an existing restaurant business can be a great way to get into a successful and profitable business with low risk and high rewards. But there are definitely things to watch out for when you are looking at a potential purchase, and you want to go into the process with your eyes open.

Here are ten things to take into account when buying an existing restaurant business:

1.Be sure you find out everything you can about the location. Has it been a restaurant for a long time? Does it have enough parking? Can you get a good lease (the lease shouldn’t be more than 10%, and preferably 5% or less, of the gross sales)? Is it secure? Does it meet permit requirements? One of the biggest problems new restaurant owners face are undisclosed issues with the building or landlord, or a lease that is impossibly high.

2.Verify the current business is doing the sales the owner claims. Most independent restaurants have terrible books, and often the owner won’t disclose their tax returns, because they are underreporting their income. It is very difficult, therefore, to know exactly how much business they are doing. If you never see anyone in the place, however, and they are claiming great sales, you should be very suspicious. You should be using a restaurant specific financial projections tool to help you estimate all your startup and operations costs, such as the one available from www.restaurantfunds.com.

3.Make sure you understand what your actual payroll costs will be. The current operation may be profitable because the owner has his family working for free, and the employees are paid under the table. Don’t base your figures on what the current owner is doing, base it on what it is actually going to cost you to run, then see if it still makes sense.

4. Figure out where the customers are coming from, and make sure you will continue to get them and can grow the business. If the location is maxed out, or if the customer base is likely to go with the current owner because they are mostly friends of his, find that out ahead of time.

5.Be wary of owners that require all cash buyouts. If they aren’t willing to take at least a reasonable portion of the price of their business over time, it may be because they know something you don’t about your chances of success once the deal closes.

6.Get the owner to sign a fair non compete agreement. You don’t want them to open a new place right down the street from the place you just bought using the money you paid them, and then have them take all the business you thought you would be getting. (more…)