Buying a Restaurant - Start With The Basics

Buying a restaurant can be an exciting prospect.  As a consumer, you probably have solid opinions about what you think makes or breaks an eating establishment.  If you’re thinking about taking the plunge, what are some of the things you need to know?  When buying a restaurant, start with the basics.  Here are a few elements to focus on in your search, and some questions that can provide information about the potential for growth.  By answering the questions, you can assess the growth of a restaurant business over time.

A good place to start is to find out how the restaurant is trending.  In other words, look at the sales and profit history.  Ask about the past three years, have sales revenues consistently increased?  Have the profits consistently increased?  Have costs and operating expenses increased only at a rate consistent with revenue increases? In today’s tough economic climate, any questions that produce an affirmative answer would be a strong indication that recent sales and profit history are exceeding the industry.

Location can play a huge role in a restaurant’s success.   A few key questions can assist in whether a location has the ability to succeed.  Is the restaurant located in a market area where the number of prospective customers is increasing?  Is the restaurant business in a region with a strong and growing employee population?    It is also important to find out if the restaurant is covered by a long-term and transferable lease.

Lastly, it’s important to factor in restaurant equipment.  Equipment can be a major expense.  Look to see whether the restaurant has modern facilities and equipment.  If the restaurant leases business equipment, are the leases long-term and transferable? 

Although a restaurant can be a risky venture, gathering information can greatly increase your chances of purchasing a restaurant with potential.  Starting with the basics can help you filter through the abundance of choices, and start you on your way to restaurant ownership.