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.

Negotiating Flexibility

It is not hard to understand why buying a new restaurant will give you a greater margin to negotiate. Owners are usually selling for a specific reason, and if the price is right, chances are you will have few obstacles standing in your way. Remember, everything from the purchase price to the financing package can be negotiable when buying a restaurant.

Seek the Help Professionals

Regardless of the size of the restaurant business, you should consider using the services of both an accountant and lawyer. The first mistake is to think that with a small restaurant business, you can forego the support of professionals. Accountants and lawyers can be a great defense mechanism in ensuring that you are well aware of any risks involved. Remember though, that the role of the lawyer in purchasing a new restaurant is simply to write the legal terms of what you and the seller agreed upon. Ask the right questions if you plan to buy a restaurant that is for resale. Your goal is to find professionals that will assist-and not simply take your money for drawing up the contracts.

Bill Henthorn formerly was principal broker and owner of a resort / commercial real estate brokerage in Honolulu which specialized in representing sellers in transactions up to $50MM. He currently serves as the marketing directory for Acquireo.com(An online marketplace for buying and selling businesses of any size,type,price or location).

If interested in buying a restaurant businesses, check out the latest businesses for sale at http://www.acquireo.com/business-category/businesses-for-sale-restaurants-food-services.aspx

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.

The electrical equipment and wiring system required in most restaurants needs to be up to a certain code. When you buy a restaurant the kitchen will also need to be a reasonable size to handle the business volume of the restaurant.

If you are planning to buy an existing building and turn it into a restaurant, you will need to apply for permits and should consult your county clerk to see what permits you will need and how much they will cost. You will need to make changes to bring everything up to par according to the rules of your city, county, and state. You will also need to provide access for the disabled.

Not only will there be initial health inspections on your dining establishment, you will also have periodic inspections on your premises. My experience with this sort of thing is that the inspectors will usually give warning before a visit.

Patricia Farnham is passionate about the topic of starting your own restaurant She has written many articles over the years on her experiences ranging from running other peoples restaurants to creating her own. She is a restaurant industry veteran, owner/operator, author and enthusiast. For more information on why most restaurants fail and other topics, visit her website.

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.

7.Find out how seasonal the business is going to be. It may look great during the summer tourist season, but turn out to be a money loser the other nine months of the year. Talk with other owners in the area, and try to get at least bank statements showing deposits going back a few years so you can see what the sales trends are going to look like for you.

8.Figure out ahead of time what kinds of terms you can get from the vendors who supply the food. This is going to make a difference in your cash flow situation, and you want to know ahead of time that you will be able to set up accounts to supply you with the materials you will need to make the business run.

9.Check the equipment for anything that will need to be refurbished or replaced in the next twelve months. You don’t want to walk into a situation where you will need to outlay a lot of cash upfront to get the place in shape. If you do find problems, use them to negotiate a better price.

10.Get everything in writing, and use an escrow service or a lawyer, or both, to review and complete the deal. You are making a big investment, and you don’t want to get taken advantage of or find out too late you bought something other than what you were expecting. The small cost of these service providers is nothing compared with the cost of a bad purchase.

Use these basic tips to make sure you aren’t getting yourself in trouble and are buying a profitable and long term cash cow with your hard earned investment.

The ultimate guide to creating a “guaranteed to get funded” restaurant business plan quickly and easily was created by the author, former restaurant owner and full time startup business consultant Matt Remuzzi, owner of the website CapForge.com, one of the top web hubs for information on starting a business.