Are you dreaming of owning your own restaurant? You’re not alone. Many people dream of owning their own business, and with most adults having had their first working experiences in restaurants, it’s no surprise many people think the hustle and bustle of the restaurant industry is a great way to live the American dream.
Buying an existing restaurant has many benefits, and a few pitfalls as well. Check out these tips to make sure you are making a sound choice in your new business venture.
- Figure out why the restaurant is for sale. While the owner may have racked up some personal debt in spite of a profitable business, it’s important to check out other reasons that could make a business go under. Things to look out for include increased taxes, construction nearby, changes to the neighborhood, lawsuits against the restaurant, and so on. If it sounds fishy, look into it further, because it could very well be a poor investment.
- Know as much as you can about the business. This isn’t just limited to the financial records and licensing of the restaurant. It’s important to understand the marketing techniques the business uses and the demographic data of the customer base. Also, get to know the staff on hand, how they work, and how they have been managed in the past.
- If the property is leased, check with the property owner. Make sure to work with the property management company to ensure that the lease terms will be extended to you. Have the current business owner join you in negotiations. Pay special attention to the current state of the property. Make note of any roof leaks, air conditioners and heaters that need inspected, and the condition of the floors, walls, and lighting. These type of things are often not covered by a property management company.
- Get it inspected. Make sure to have the building and the equipment properly inspected. It’s imperative that you make sure that all the equipment is in working condition, but that it was also properly maintained. Repair costs should be negotiated into your purchase price.
- Pay attention to other assets. Not only is the equipment a valuable part of the business, but so is the inventory. Also pay attention to the registers used, computer equipment, booths, tables, chairs, anything that can incur additional costs to your running the business.
- Reputation is everything in the restaurant business. Check into local boards and Facebook groups to learn the reputation of the establishment you’re planning on purchasing. A bad reputation is hard to turn around, even if the business is under new ownership. Many restaurants will have good customer satisfaction, though, and are probably up for sale because the owner can no longer continue to run the business.
- Location, location, location. A restaurant with a good location is always helpful. Your chances of success are much more probable if you’re in a location that is easily accessible and noticeable. If, for some reason, the restaurant itself doesn’t succeed, the location may make for another great business as well.
- Learn the ins and outs of the previous owners financial choices. Examine and understand bank statements, financial statements, tax reports, bills, and register receipts. Understand the bookkeeping to develop a firm grasp on what kind of income and expenses to expect. Discuss the bookkeeping methods with current and past employees to determine how you can make the business more profitable.
- Get a non-compete clause. Not only should you negotiate non-compete clauses into your lease, but also with the current owner of the business to prohibit that person from opening a similar restaurant in the area for a determined amount of time.
Ready to take the plunge into owning your first restaurant? Brier Grieves has provided personal insurance and risk management solutions to Florida residents for over 25 years. Contact us to see how we can help you attain your business goals.