If owning a restaurant has been a desire of yours, you may want to consider seeking out existing establishments to fulfil that dream.
There are a number of reasons why taking the reins of a previously existing restaurant may be the best option with an easier path to success, as well as branding and marketing standards that are already in place.
But simply following the path set before you may not be sufficient.
Owning a restaurant, even one that has been established, will take some leg work and careful consideration.
When perusing listings for existing restaurants for sale, take some time to consider any questions about the owner’s:
- Reasons for selling
- Financial picture
- Choice of location
- Reputation
A good broker will know why their clients are selling their businesses and be able to guide you on your mission.
Here a few questions to consider while on the search for the perfect established restaurant.
Why Sell a Successful Business?
It may just come down to knowing why previous owners want out. It’s important to know what you’re getting into.
The seller may be:
- Ready to retire
- Tired of long hours
- Not able to meet high demands
- Dealing with health or family issues
If owning a restaurant didn’t work for them, it may not work for you, so it’s better to ask why it didn’t up front.
What is the Full Financial Picture?
If you are planning to apply for a business loan, you will need to complete a detailed business plan anyway, so start digging now to find out the specifics.
You will need to sign a non-disclosure agreement to do so, but it’s important to get a look at the books and seek out:
- Profit and loss
- Cash flow statements
- Balance sheets
- Bank records
- Tax history
Restaurants have narrow financial margins, so asking up front about food and beverage sales (monthly and yearly), as well as labor and food costs will give you a clear picture of how narrow.
How is the Location Working for the Business?
Take some time to consider a few questions about location, such as:
- Is there foot traffic?
- Are competitors nearby?
- Is it in a busy area?
- How is parking and accessibility?
The kind of restaurant may determine how the location works for you. For example, a quiet dining experience may not be possible in a busy area, and a takeout business may be more profitable with foot traffic.
What do the Locals Think?
Restaurants can have a loyal following – or its reputation may keep those in the community away.
Some tips to determine whether locals (or visitors) are avoiding an establishment because of a bad reputation include checking out their insights at:
- The Better Business Bureau
- Yelp
- Social media
- Community forums
Although promotion opportunities exist when a restaurant is under new management, a bad reputation is hard to overcome, so it’s best to consider the experiences of a restaurants patrons first.
Knowing the Stakes
Using a broker can assure that foundational steps in the buying process are done correctly, but before that, make sure to be curious about how existing restaurants operate.
Asking why it is for sale, if the location serves the business, what locals think, and if the financial picture is clear are key questions to consider.
Once you know what you’re getting into, you’ll be able to take the next steps toward achieving the goal of owning a restaurant with clear eyes and the right footing.For the best business broker experience that can help navigate sales and provide vital services, call (248) 220-3274 or email nadir@mibizbroker.com.