Advice for Buying a Restaurant and Selling a Restaurant

Tips on Buying a Restaurant: Making the Dream a Reality

Posted by Robin Gagnon on May 25, 2011 2:18:00 PM

If you are a first time restaurant buyer you may be searching online for the latest restaurant listings. Seasoned professionals will tell you that this process is referred to as the Restaurant Buyer Internet Dating Approach. As a new restaurant buyer you are most likely confused after searching dozens of sites and expressing interest in restaurants for sale. Before you realize it you are connected with 7 different brokers on different websites with different listings. Although it may appear that you are doing research on restaurants anonymously the chances are you will be hindering your chances of getting the best listings by searching endlessly for everything from Irish pubs to fine dining Italian restaurants. When you search online for restaurant listings you may not realize it but the same broker or firm may represent multiple restaurant listings. In most cases, when you make an inquiry it is getting sent to one source who will immediately recognize that you do not know what you are looking for and you have not pre-qualified your interests.

To the broker the Restaurant Internet Dating Approach will look something like this:

Joe the Buyer Inquiry 1: I am interested in this nightclub which is generating an income of $300,000. .

Joe the Buyer Inquiry 2: Please forward information on this sandwich shop which is on the market for $30,000.

Joe the Buyer Inquiry 3: Please send me information on this $1.6 million fine dining French restaurant.

When you look at this scenario do you see what the broker sees? The inquiries are so broad in price point and the operations are so varied, it clearly indicates that the buyer does not know what they want and the broker will not take you seriously. Instead, you should be asking yourself exactly what kind of restaurant you are looking for, what kind of restaurant will take care of your family, and what you are willing to sacrifice in terms of money, time, and lifestyle, to buy the restaurant. You must have these questions answered and then use your defined lifestyle, financial, and business requirements to focus on restaurant listings that meet your criteria. A lot of restaurant buyers think they are starting out looking for restaurants that meet their personal requirements and then they fall in love with a restaurant that is exquisite looking but not earning any income.

As a general rule, the fancier restaurants that are shiny and new are usually restaurants that exceeded the budget capital during construction and are not delivering a return on investment. What’s more is that there is zero capital left to cover the marketing and make the business grow. You can usually sniff out these restaurants by the wording in their listings such as “Stunning construction. Owner spent more than $600,000 to build. Seller will sacrifice for $300,000.” Basically this is a sure sign that the restaurant is not making any money. Instead you should look for a business that looks a little worn in appearance but may be generating a whopping 2 million dollars in sales. The equipment will look worn from continued use and the bar may smell of alcohol, cigars, and cigarettes however, the books will be showing a gross profit margin that exceeds 60 percent. The owner will be pulling in net earnings that exceed one quarter of a million dollars and everything will be clearly defined without any comments like “It may have a future.” The moral to the story is that you must define your requirements so you can search for the restaurant that meets your criteria.

Topics: buying a restaurant, restaurant buyers, restaurant buyer

Assessing the needs of the Restaurant Buyer - Buying a Restaurant

Posted by Eric Gagnon on Nov 26, 2010 4:47:00 PM

Buying a restaurant means lifestyle choices for yourself and your family.Expert brokers at We Sell Restaurants explain how to identify your needs up front.

The subject of this week's radio show was the We Sell Restaurants Restaurant Assessment Tool. Designed to take you through a series of questions to help you understand what you want and which type of business fits your personal lifestyle.  This is vital to the restaurant buying process and a step that many buyers overlook. If you are honest in your answers,  you will be prepared to begin your search.  If you skip this step, you may become an "Internet dater" clicking here and there on everything that piques your interest.  The problem with this approach?  No broker will take you seriously.


This survey helps you rule out the wrong restaurants and zero in on the right ones. Take this short ten question test to understand the type of business that is perfect for you.

1)  What does my earnings requirement force me to focus on?

2) What type of lease or purchase situation do I want?

3) What kind of restaurant do I want?

4) How much money do I need to make to support my family?

5)  How much experience do I have?

6)  If I’m in charge of my own destiny by owning a business, what days and hours do I want to operate?

7)  What is the alcohol level I’m comfortable serving?

8) What’s my relationship status?

9)  How far am I willing to travel from my home to my business to work each day?

10) Where am I going to get the capital for my purchase?

Once you've completed this short survey, contact us to discuss your needs.  We'll be able to tell you which restaurants in our inventory are perfect for you.  If we don't have the perfect restaurant, we can represent you as a buyer with other broker's listings and find the right restaurant as well.

Topics: buying a rstaurant, restaurant buyer

Why the Restaurant Buyer Should Do Due Dilgence On Themselves

Posted by Robin Gagnon on Jan 31, 2009 12:44:00 PM

The first step in buying a restaurant is to conduct due diligence on yourself.  It's easy to fall in love with the idea of buying a restaurant based on a familiar memory of waiting tables in college.  The reality is much more difficult.

This ten step questionnaire will help you define what you want and more importantly, what fits your lifestyle before you go on the search for the perfect restaurant.  This is vital to the buying process and the step that most buyers overlook.  Prepare first, since once you being to make inquiries, multiple opportunities will surface.  It's also important to do your homework up front since you can't be taken seriously when you inquire about everything from $55,000 asset sales to $2.5 Million dollar waterfront properties with real estate. 

1)  The answer to this question lies with whether you need an immediate income (in which case only the first answer is an option for you) or whether you have the capital (and risk tolerance) to invest and building earnings over time.  Consider that it will take between 18-24 months for a GOOD operator to perform a turn around or begin seeing profit from a start up so plan accordingly.
I am interested in:
a)  An operating restaurant - profitable
b)  A turnaround situation
c)  A closed restaurant
d)  Franchise Restaurants
e)  New Space

2)  The answer to this question lies within your financial situation.  Landlords will require both good credit and a personal guarantee on the lease in most cases.  If you plan to lease and don't have both, you may want to consider something with real estate so you can leverage the purchase of the real property with a lender. If you're purchasing real estate to convert, it's going to take a lot of capital
I am interested in
a)  Restaurant and Real Estate
b)  Restaurant Only - with Lease
c)  Real Estate Only - I'll convert

3)  The answer to this question may lie with your background or experience.  You may also have personal values or other criteria which would stop you from looking at certain concepts. 
I am interested in
a)  Upscale/Fine Dining Restaurant
b) Bar-B-Que Restaurant
c)  Pizza Restaurant
d)  Italian Restaurant
e)  Sports Bar Restaurant
f)  Asian Restaurant
g)  Deli/Sandwich Restaurant
h)  Franchise Restaurant
I)  Take Out/Delivery Only Restaurant

4) The higher the net income of a restaurant (which typically sells for 2- 2.5 times earnings, the higher the purchase price.  What you can afford will drive the answer to the following question.
I am interested in
1)  Earnings of  under $50,000
2)  Earnings of between $50,000  and $100,000
3)  Earnings above $100,000

5)  The answer to the following question is straightforward.  It may be very relevant to an owner that may finance a portion of the purchase or landlords and lenders who may turn away candidates without background and experience.
I do have or I do not have Restaurant Experience

6)  This question affects your future lifestyle and time with your family.  It's a good one to discuss with other family members before you begin looking at sports bars open until 2am each night.
I prefer a restaurant that is
a)  Open any hours
b)  Open until early Evening (11pm)
c)  Open Late Night/Early morning hours (2am)
d)  Open for breakfast and lunch only

7)  The highest profit margin in a restaurant is made on alcohol sales so the alcohol ratio will drive the net profit on a business up or down depending on how much is served.  Local and state restrictions on the type of alcohol licenses generally dictate a ratio.  The answer to this question is NO alcohol if you have a felony conviction in your background as you will not qualify for a liquor license in most states.
The most desirable alcohol ratio for me is:
a) Low to No Alcohol/High Food
b) Mid Alcohol/Mid Food
c)  High Alcohol (bar levels)/Low Food
d)  No Alcohol

8)  This is a good place to try and take a break and articulate to yourself or another person why you are motivated to buy a restaurant.  The answer may determine whether you continue on this quest or decide on another type of business. 
My motivating factor to buy a restaurant is
a)  Investment/Money making potential
b)  Restaurant Experienced/now I want my own place
c)  Seems like a good idea
d)  I'm not sure

9)  This question is incredibly important in major metro areas.  Decide up front how far you will travel or if you will move to acquire the right restaurant.  Changing your children's school is a family decision.  The right business in the wrong location may not be an option for you.
When it comes to finding a restaurant, these are my criteria from my current home
a)  I am willing to travel _________ miles from my current home to my business
b)  I am willing to move _________ miles from my current home to my business

10)  The last question to ask yourself before you go shopping is what you can afford. You wouldn't shop for a house without a pre-approval or a budget and you shouldn't start shopping for a restaurant without the same.  Who's paying for the business? Will you need financing?  Are you looking for owner financing?
My financing plan is:
a)  I will not require financing or capital
b)  I have loans or investors secured up to __________
c)  I need the owner to finance ____% or $______ but I can find $__________ to put down

If you seriously consider all ten of these questions before you buy a restaurant, you will be equipped to meet sellers and brokers with a clear strategy for your own success.

Topics: due diligence, buying a restaurant, restaurant buyer