Crucial Ideas For Buying A Truly Successful Restaurant

For the would-be entrepreneur, a food and beverage industry option can be very attractive. After all, each one of us must eat and drink to be able to survive and we have to pay much attention to the fundamentals! This may very well be true, but so many interrelated complex issues arise when you look to buy a business, that you should remember that only one in 10 companies such as this will actually survive. It is very important to value the business correctly upfront and if you go about your due diligence correctly you will have a good chance of surviving against these awful odds.

When you begin trying to buy restaurant business assets, you’ll quickly learn that one of the key skills you’ll require is the ability to decipher information and to communicate effectively. You will need numerous meetings with the seller and don’t be surprised if the early ones don’t reveal some fundamental facts and figures. It is natural for the seller to be a little protective and to want to gauge your enthusiasm and see whether you are really serious and qualified before divulging delicate data.

There are some basic facts and figures to absorb before you are able to project your own figures for the future. What style of food does the business favor and how many tables are there in the restaurant? How many covers, or meals are set per week and by day and if the menu is very specialized how strong are the supplier contracts and the subsequent supply chain?

In any business, labor costs are significant. Find out how the costs breakdown and whether the strength of the entire business is based on the skills and strong personalities of key figures, notably the master chef. You may not expect to get a lot of the finer details during the early process, as a seller often wants to keep any news of a potential sale away from the employees until the appropriate moment.

Write up a check-list of questions to ask the owner; you should have hundreds and not be afraid to be very specific, nor to insist on detailed answers. Before you even go there, however, understand that this kind of business involves very long hours and is typically a seven days per week concern. You will be required to deal with many “fires,” be great at managing people and your time and may not expect to see a specific net profit for quite a while.

Some of the challenges you may well face as a new owner include the ability to consummate new relationships with your suppliers. Sometimes certain suppliers may view a change of ownership as their chance to amend contracts to their benefit. You must be able to deal with distraught people, who may be upset because their table is not available, even though they booked it but arrived late. You must be able to motivate your employees and be able to handle all situations immediately, resulting in praise or termination accordingly.

If you are really sure that you want to get involved with the restaurant industry, have thought about the right questions and received full answers from the seller, have crunched the financials and studied the contracts, then you are now ready to look at the business value. Always work with knowledgeable experts in the field who have experience in the restaurant industry and use their findings to backup your own thoughts. Find out what the bottom line is, how much the owner makes in terms of salary, net profits and benefits and then adjust this figure downward based on any capital expenditure you feel you may have to make.

With any restaurant for sale, the three major costs involved – labor, rent and food, should be no more than two thirds of total expenditure and always remember that you will have to have a superb marketing plan so that you can tell everyone about your new creation.

Richard Parker is the author of the How to Buy a Good Business at a Great Price series. As President and founder of Diomo Corporation – The Business Buyer Resource Center, his materials, seminars and consulting have helped thousands of business buyers realize their dream to buy a business.