As already discussed, many first-time business owners dream of running a restaurant.
Owning a restaurant takes passion and grit, but in the end the also comes with spontaneity, excitement, fulfillment, and a chance to control hours while giving back to the community.
More than grit or passion, however, it’s the leg work that comes before an offer that will make owning a restaurant a success.
And there’s a lot to do.
For starters, getting advice from professionals such as attorneys and CPAs who can check figures and purchase contracts is advised.
These professionals should look into some basic facts, ask good questions, and get the economic information you need to make an offer.
Here we offer you some checklists of what to look for, what to collect, and questions that should be considered before signing up to run a restaurant.
Before Making an Offer: The Extended To-Do List
You have made many considerations, but there is much more to dive into.
From the seller, to the lawyer, to the accountant, here is what prospective restaurant owners can expect to get done before jumping in.
Recommended checklist of information to get from the seller:
- Ownership structure
- Lease arrangements and options (Get a copy of the lease.)
- Titles and warranties
- Insurance policies
- Vendor and employee information
- Contractor and zoning information
- Key competitors
- Tax returns and financial statements
- Names of any lawyers or accountants
- Health inspections
Restaurants are risky ventures, so you should have already asked:
- Why is the restaurant for sale? The current restaurant owners may simply want to retire or have other personal issues, but find out. If it’s not right for them, it may not be right for you.
- What is the financial picture? Put financials under a microscope and look for any issues that would spell trouble.
- Are there any tax problems or legal issues? Get help from a lawyer or review all public records to comb over the details
- Will the location work? Be familiar with the area and discover whether parking is an issue, if there’s foot traffic, what the nearby competition looks like, and any lease terms.
- What is the restaurant’s reputation? Find out how the broader community feels about the establishment resources like the Better Business Bureau, Yelp, Google, and social media.
Extend your knowledge and lower risk with these legal and contract questions:
- Are there any zoning changes or construction issues?
- Have there been local government issues or complaints?
- Have any tax audits been made in the last five years?
- Has there been a change in the customer base?
- If there is takeout offered, how is it handled?
- Has the business advertised?
- Are there pending or past offers?
- Are there established websites and emails?
- Are there any copyrights, trade names, logos, or signage costs?
- Some further questions should also be asked by you or a lawyer prior to making an offer, such as:
Before signing on the dotted line, you or a CPA also should collect all the vital financial reports, including:
- CPA sign-off
- Gross and net analysis
- Expense analysis
- Payroll analysis
- Three-five years of tax returns
- Sales tax and excise tax returns
- Trends of sales, net, and expenses
- Vendor history of payment
- Depreciation schedule and value of fixtures
- Proof of payment of taxes
- Liquor licenses
- Depreciation schedule
Get a Business Broker
Seem like a lot? It is. To help make restaurant ownership and all these steps attainable, a qualified business broker should be utilized for further information and advice.
A broker may ask you to qualify financially to be sure you will meet the seller or franchise requirements, and should assure you that your information and that of the business are confidential.
The broker should be able to provide a full listing package with a snapshot of the business and key operating elements, including:
- Gross sales
- Cost of goods sold
- Rent, labor costs, and other expenses
- Net income
- Number of employees
- Status of liquor license, hours of operation, and photos
Without the effort of a strong broker, a buyer could end up in a dreaded stalemate even after all the legwork they have done.
So, if you’re ready to own a restaurant and have passion and grit, do the leg work, get help from a lawyer, CPA, and broker, and get ready to take on your exciting new role.
Michigan Business Broker Nadir Jiddou is Here to Help
Having bought and sold businesses for more than 18 years in Michigan, Nadir Jiddou utilizes his contacts and experience to help his clients achieve their objectives quickly.
Call us at (248) 220-3274 or look at the business listings we currently have on hand to see what might be a fit for you.