For many people, purchasing an eatery is a dream come true. But actually running it often isn’t, especially for those who haven’t managed a food service establishment. Owning a restaurant can be a rewarding experience, but it can also be daunting one, especially if you don’t ask the right questions before purchasing a restaurant.
Questions to ask before buying a restaurant
Some people buy restaurants based on the known benefits of restaurant ownership such as being one’s own boss, and the opportunity for high income. But before they buy, they should ask questions about their readiness to operate a restaurant, and whether a restaurant is profitable to operate.
How much time do I devote to an establishment?
If you plan on buying an independent restaurant, prepare to spend over 40 hours a week tending to its business (many independent food establishment owners spend about 100 hours a week doing this). If you want to spend minimal time running an eatery, operating a franchise restaurant that has a preset menu and an established customer base may be better.
Do I want independence, or the help of a corporation?
Some restaurant owners enjoy captaining their own ship. If this describes you, know that running an independent restaurant requires work that franchisees seldom experience, such as: deciding menu options, generating a customer base, developing marketing resources, and developing interior and exterior aesthetics. If your interest in making money exceeds your commitment to developing a restaurant, a franchise could offer you the most satisfaction.
How long do I plan to own a restaurant?
If you plan on owning an establishment long-term, your buying options are naturally expanded. For example, buying a floundering establishment with the thought of restoring it, or buying a location and starting from scratch, is sensible when you own long term. On the flip side, if you foresee selling within five years, buying an establishment with a good business history could be critical to selling when you expect to.
How much money to devote for repairs?
Whether a restaurant needs a new roof, new tuck pointing, or new bathrooms, plan on doing the work before you reopen it. You might see your building as it will eventually be, but your customers will see it as it is now.
How easy would it be to get a business loan?
Two things determine the ease of receiving a business loan: your financial state, and the type of eatery you plan to open. Because they have corporate backing, and their revenue can be estimated by the performance of identical restaurants, lenders view franchise restaurants more favorably than independent ones.
Has the establishment I want been valuated?
A business valuation assesses the fair market value (FMV) of a restaurant, helping the owner and potential buyers to arrive at a realistic sale price. Buying or selling an eatery that has not been valuated could result in a bad deal for either party.
Restaurants on the Market can help you with your purchase
Answering the questions above can help you decide what restaurants hold your interest, what it would take to open and run a restaurant, and whether certain opportunities should be pursued. For specific questions about purchasing a restaurant, consult with Restaurants on Market, where we equip our clients with the knowledge to make informed decisions.