Restaurants are a common first business for many business buyers.
From variety of service and pricing, opportunities for full family involvement, and the thrill of building something that you can pass on, restaurants are a desirable investment for many first-time business buyers.
But before doing so, it’s important to look at what kind of restaurant would be a good fit, to know what questions to ask, and what steps to take to assure that the venture is a successful one.
We outline here the considerations to make before buying a restaurant. Next, we will walk you through how to make it happen.
Restaurant ownership is not for the faint of heart, but with a little foresight and a lot of passion, you will be well on your way to establishing your dream.
Why Buy a Restaurant: The Pros and Cons
Becoming a restaurant owner takes a lot of heart, as it comes with complexities right from the beginning.
To make an informed career choice, consider first the pros and cons of becoming a restaurant owner.
Here is a short list of the most common benefits and drawbacks to owning a restaurant.
Pros:
- Excitement – Spontaneity, creating menus, and working with a diverse group of customers are among the exciting and creative benefits to owning a restaurant
- Community fulfillment – Restaurant owners get the privilege of not only serving patrons but being socially connected and serving a nurturing function in a community, whether by simply feeding them or getting involved in fundraisers and charities
- Cultural identity – A restaurant contributes to the cultural identity and economy of a community
- Full control – Restaurant owners choose the important elements of operation, work hours, and
- No maximum salary – There is no limit to the potential
Cons:
- It’s competitive – The work it takes to stand out from the competition is expensive and time-consuming
- Staffing is difficult – There is a high turnover in restaurant work, and a lot of time is donated to finding and keeping managers, chefs, servers, and other staff
- No minimum salary – If the restaurant is doing poorly, you will be directly affected
- Financial hits – Be prepared to lose money the first year
- Long and unpredictable hours
Which to Buy: Established or Franchise?
Buying an existing restaurant can be a great way to jump into a restaurant business. For starters, you skip the difficult task of getting a new restaurant off the ground.
Other benefits include an established customer base, name recognition, a tested market, and a built-in business plans.
Just like buying an established business, a franchise offers the benefit of jumping into a business model already in motion.
Buying into a franchise will have many of the same benefits as buying an established business, but with the bonus of training assistance, easier funding from investors, faster ROI, and bigger marketing perks.
Some drawbacks include franchise fees and contractional obligations not included with an established business purchase.
Some Questions to Ask Before Taking on a Restaurant
Before you make an offer on a restaurant or franchise, there is still a lot to consider.
To begin, ask yourself these five questions:
- 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.
Restaurants are risky ventures, so ask the questions and do your homework before purchasing.
Closing Checklist
Investigating whether a restaurant is worth buying is a pivotal part of making being a successful restaurant owner.
No matter how passionate you are, or how attractive a restaurant looks, there are some issues that need attention before jumping in.
We recommend making a checklist and consulting professionals before diving in.
Do not make an offer before carefully reviewing the history, financial records, and operations of a business.
To help you further, we have created some extended lists that can aid in the next step of making restaurant ownership a reality.
The considerations may be daunting, but well worth it in the end as you take ownership of a well-thought-out and fulfilling restaurant enterprise.
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.