Five Tips for Choosing and Buying an Existing Restaurant

For many, it's the true American dream - ditching the 9-to-5 cubicle life to run a popular restaurant. No more pushing paper and crunching numbers. It's much more fun to push the newest, hottest cheese burger creation in town, right?

Well, yes. Running a restaurant clearly offers room for the kind of fun, creativity and out-of-the-box thinking that most garden variety office jobs lack. But a restaurant is among the most competitive types of businesses out there, which means you'll still be pushing a few papers and crunching lots of numbers. That's why purchasing an existing successful restaurant often is a far safer proposition than starting from scratch and introducing a whole new restaurant. Jacksonville's Gateway Business Brokers offers a few tips to keep in mind when choosing to buy a restaurant:

1. Know what you're getting: Conduct a thorough study of the restaurant you're considering buying, including reviewing its financial records, marketing materials, inspection reports, licenses, contracts, lease agreements and even its menus. Also, be sure to order your own inspection of the business' physical assets as well, including equipment, utilities setup, square footage, parking availability and the potential for expansion. Equipment is a big one. It's expensive, and if it hasn't been well maintained, you could be stuck with high repair or replacement costs. 
2. Location, location, location: There's a reason this adage has been around for so long - It's absolutely accurate and critical to a restaurant's success. Something as simple as a median in front of a business that forces drivers to wait at an extra traffic light or make a U-turn can affect your business. Also, take note of the restaurant's customer base demographics, and the current and projected demographics of the local population. Changes in the neighborhood population could eat away at your potential clientele base, whether permanently or seasonally. For instance, restaurants in college towns often see their business fluctuate with the summer and school seasons. To keep up with changes, it may be necessary to seasonally tweak, or ultimately revamp your restaurant concept and menu. 
3. Lease up: The current owner of a restaurant business likely is not the owner of the space in which the restaurant operates. Before agreeing to purchase a restaurant, check with the actual owner of the space to make sure he or she is willing to lease it to you and that they'll honor the current lease rates. If the space owner jacks up the leasing rate, you may want to negotiate a lower sale price with the restaurant seller. 
4. Craft a contract with a non-compete clause: Make sure the sale/purchase contract includes a clearly worded non-compete clause that legally restricts the restaurant's current owner from opening a new, similar restaurant nearby and luring away your customers, at least for a given period of time. 
5. Determine your goals: This is where the real number crunching happens. Before making your decision, know exactly how much you're willing to spend up front for the restaurant's purchase and needed repairs, renovations, etc. More importantly, know how much cash flow you aim to generate, how much profit you want to earn, and the rate of ROI (return on investment) you expect over a given amount of time. An honest accounting of the current, projected and aimed-for financials will help you decide whether buying a particular restaurant is the right move.

If all this seems overwhelming, don't worry. Jacksonville's Gateway Business Brokers are seasoned experts in the purchase and sale of businesses, including many successful restaurant transactions and can walk you through every step of the process. Call 904-372-9157 to get your American dream started.