Advice for Buying a Restaurant and Selling a Restaurant

Restaurant buying 101. How to buy a restaurant

Posted by Eric Gagnon on Dec 27, 2011 1:00:00 PM

Buying a restaurant takes understanding of the industry and access to restaurants for sale.  Here’s how to get both.

Record numbers of Americans searching for a small business combined with a hunger for all things “foodie” are creating a perfect storm of demand for buying a restaurant.  It’s no wonder buyers are seeking out established restaurants for sale since building a restaurant from scratch is such an uncertain prospect.  Six out of ten startup restaurants are out of business by the end of year three, a grim reminder of shattered dreams. Countless restaurants don’t ever truly get off the ground since the owner’s capital is all depleted in the build out phase.    

There’s no such thing as instant success in the restaurant industry but buying an existing restaurant delivers significant advantages over starting from scratch.  Finding these existing restaurants for sale in Atlanta delivers a streamlined path to success for would-be restaurant owners. 

Buying a restaurant gives you control over restaurant start up costs. The single largest cause of failure for restaurants is lack of capital.  The capital burn rate increases exponentially when a skilled restaurant professional attempts to turn into a building contractor overnight simply because the project is an eatery.  Unless you’re a general contractor who happens to swing a hammer as successfully as you filet a swordfish, then your restaurant will take far longer to build and cost much more than you ever imagined. 

Buying a restaurant greatly reduces your time to market.  Your restaurant can be operating tomorrow with the purchase of an existing concept.  Compare that to six to nine months to permit, build and then open a restaurant from scratch.  You can be serving your first sandwich tomorrow to existing customers instead of waiting an average of seven months to open the door.

You get existing sales with a restaurant purchase.  An existing restaurant, even a struggling one, has a base of business.  Any brand new restaurant has to build the initial dollar of sales volume and every dollar thereafter incrementally.  The first $100,000 of sales volume is the toughest to achieve.  Without the expense and time spent building from scratch, you can implement marketing plans and operational changes to drive the existing sales line higher.  Starting from zero sales is a daunting task no matter how well known you are as a chef or how many customers you believe will visit your store.  

The final and most important reason to buy a restaurant is the purchase of existing cash flow.  On a comparative basis, purchasing the cash flow of an operating restaurant with good books and records is less expensive than many other business types.  The inventory is negligible and cash flow is often purchased for 2.5 times earnings or less. That means someone looking for $100,000 in cash flow can acquire an operating business churning out six figure earnings for less than $250,000.  There are few other investments where placing $250,000 on the line nets you a 40% return in the first year and pays off in two and a half years. 

You can find restaurants for sale listed with expert restaurant brokers who specialize in buying and selling restaurants.  The cost is certain, the sales line already exists and the cash flow is provable.  Most importantly, you can own a restaurant tomorrow. 

Topics: restaurant broker, buy a restaurant, how to buy a restaurant