Buy a Restaurant, Buy Out Assets or Build from Scratch? We Explain.

Posted by Eric Gagnon on Oct 27, 2010 4:37:00 PM

I can lease a restaurant space and equip it for less than that!  That's the feeling of many buyers seeking a restaurant space but before you throw out the idea of buying someone else's operation, consider the costs.  Used equipment for a restaurant fully equipped at the least is $35,000 to $45,000.  That's before you locate every single piece of equipment you need (some from this supplier, some from that!).  It doesn't include trucking all that equipment to the restaurant and then getting a qualified electrician, plumber, gas technician, engineer and more to set it in place and make sure you don't blow up the shopping center.  How much is that?  Figure another $2500 - $5000 to be on the safe side. If something doesn't work, you have to get it repaired or pull it out and return it to the vendor.

 

You're now up to almost $50,000 and you don't have anything in the front of the house.  What about those chairs, tables, tablecloths, dishes, flatware, bowls, serving plates...the list goes on.  Figure another $3500 if you're buying used, carting it yourself and buying at a good rate.

Now you're up to $53,500 and you haven't opened the doors.  Now the fun begins.  You need to get inspected by the state, get a food service permit, get a liquor license and wait on the city and or county to react on each of these.   Are you having fun yet?  You'll have another $1500 to $5000 in licensing and you haven't poured your first drink yet.  You're up to $58,500.

Since you're waiting on the restaurant to open, you're paying rent or burning up free rent waiting out the 30 to 60 days it takes to get operational. That's another $5000 to $8000 in rent while you aren't doing any business.

Then you open the door and do your first dollar of business.

Compare that to buying a business that's fully equipped, operating with food service and alcohol permits in place and most importantly, generating sales.  You can inspect the equipment in working condition and negotiate to be sure everything's operational before you take over.  

We Sell Restaurants tells Dishing with Donna listeners why it's our position that if you can get an operating business generating a sales flow for under $99,000, it's not worth the headache, wait and costs to try and buy secondhand equipment and do it yourself.

Topics: Buying a Restaurant

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