Are you thinking of buying a restaurant in what you view as a tough economy?  As you consider the implications of buying now, here are a few thoughts from the restaurant brokers.

George Santayana wrote, "Those who cannot remember the past are condemned to repeat it.”  No matter what your political persuasion may be, we can all agree that at some point, economic growth will return to the nation.  If you're on the sidelines about buying a restaurant, you may be too late when the rebound occurs.  Why is now a good time for buying a restaurant?  Consider the lessons learned in the last few years and it becomes pretty clear that restaurants are poised for growth as never before because of their experiences while times were tough. 

Lesson One:  Lean and mean can be a good thing. The tightening of the overall economic belt led restaurants to innovate on every expense front.  Some operators went from bloated multi-page menus down to streamlined, more manageable versions.  Other restaurants experimented with operating hours, learning that small plates in the evening drove guests to dine and drink or found lunch could be more profitable than they ever imagined with carefully priced specials.  Still others tested their staffing strategy and rearranged shifts or duties.  These innovations led to survival during the tough times but can deliver real profit dollars to the bottom line when sales increase.  The lesson learned was to innovate, stay lean and let the dollars flow through as profit, not return to the largesse of the past.

Lesson Two:  Booming top line sales can mask a multitude of sins but when times are tough, every number in your profit and loss statement is scrutinized.  Some of the best operators in the industry honed their negotiating skills and found cost savings from virtually every vendor.  It was not unusual to get 5%, 10% or 15% savings on separate line items by asking for and getting better pricing.  Buying at this pricing and keeping your negotiating skills sharp during the return to better times will mean longterm profits.

Lesson Three:  Many restaurants found that the space they “had to have” when times were good put them in a no win situation when occupancy costs as a percent to sales spiraled out of control on lower volume.  A few operators were able to successfully renegotiate leases or accepted short term savings for adding increases to the end of their lease term.  The important lesson to remember is to control the urge for that “must have” location if the rent at the lowest end of your sales spectrum puts too much pressure on the business.  Rent is the largest single fixed expense on the profit and loss statement of any restaurant. It is likely to go up and almost never reduces over the life of the lease.  As you take over existing leases and negotiate new ones on restaurant for sale, this fixed expense is still negotiable during our fragile recovery.     

Lesson Four:  Marketing dollars are critical to the lifeblood of your business.  When times are good, every program seems like a good idea.  When tough times surface, some restaurants target this area first since they aren’t sure what’s working.  Smart operators measured every response over the past two years and reallocated critical marketing funds to the ones paying off.  Every marketing dollar invested should be directed toward winning programs and measuring return on investment is a key strategy to continue when the economy recovers.  Experiment with new methods but measure the results.  This keeps your marketing from becoming stale and insures you’re getting the most for your money.   

Lesson Five:  You can’t always anticipate when you may need to sell and for some, it was during the economic downturn.  Pricing dropped or owner financing was needed with the collapse of the lending market.  Owners forced to price during this less opportune time creates opportunity if you're buying a restaurant.  Pricing will go only one way as further gains occur in the marketplace. 

If you remain on the fence about buying a restaurant, time is running out for the best deals.  Consider these lessons and invest today.  As the recession becomes a distant memory, these lessons will linger.

Like this article?  Please SHARE on Facebook, Linked In or Twitter.