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Crucial Tips For Buying A Truly Successful Restaurant
For the would-be entrepreneur, a food and beverage industry option can be very attractive. When we consider fundamentals, something that each one of us must purchase to survive, food and drink of course comes in at the top of the list. 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. Correct valuation upfront and an adequate process of due diligence will help you to survive against these odds and prosper.
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.
Before you can start projecting a position in the future, you need to know some basic facts and figures. What style of food does the business favor and how many tables are there in the restaurant? You need to know how many meals are served per day, per week and by month and if the menu is somewhat specialized, are the supplier contracts strong enough and is the supply chain sufficient?
Labor is a major cost in any business and particularly here. 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. Tread carefully here as the seller may well want to keep news of the potential sale away from his employees, so you might not get some of the finer details right away.
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. As you are preparing your position, though, remember that this type of business will call on very long hours and is typically a seven days per week activity. 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. Employee motivation is very important and you should be ready to deal with every situation as it arises, whether that means praise or even termination!
When you’re sure that you are cut out to buy business interests in the restaurant industry, have tabled the right questions and received the comprehensive answers, are happy with your interpretation of the financials and contracts, then you are ready to discuss the 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 a restaurant for sale, expect your three major costs – food, labor and rent to be no more than two thirds of your total expenses and make sure that you have a first-class marketing plan so that you can tell the world about your new baby.
Richard Parker is the President and founder of the Diomo Corporation – The Business Buyer Resource Center. His inspiring materials, seminars and consulting have assisted thousands of business buyers with achieving their life long dream to buy a business.
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