Buying a restaurant versus leasing and building from scratch cuts down your time to launch by a factor of many months. In the restaurant industry, where time is a critical factor that can make or break a business, it’s essential to consider this option.
While leasing a brand-new restaurant space that has never been occupied may seem appealing, the reality of hiring a contractor, getting plan approvals, waiting for permitting and more will often involve both lengthy delays and unexpected costs.
Estimates vary but a most often cited statistic shows it can take from 9 to 2 months from concept to launch day. This article explores the advantages of buying existing or second-generation restaurant spaces over leasing and constructing new ones. The benefits of buying an existing restaurant include immediate availability, cost efficiency, available permitting and established infrastructure, we'll demonstrate why purchasing an existing space can be a smarter choice for restaurant owners looking to save time and resources while setting themselves up for success.
The Drawbacks of Leasing Restaurant Space
Leasing restaurant space often comes with hidden challenges that can extend beyond the initial lease signing. One of the most significant drawbacks is the extended timeline required to prepare a new location for operation. This process can involve waiting for developers to complete the construction of raw spaces and for construction teams to finish the necessary buildouts. These phases can be delayed due to a range of factors, including zoning issues, supply chain delays, and unforeseen construction challenges. These delays not only push back the restaurant's opening date but also incur ongoing costs without generating any revenue, creating a financial burden.
Additionally, the uncertainty and unpredictability of construction timelines can disrupt business plans, complicating staffing, marketing, and other preparatory activities. These operational challenges make leasing new restaurant space a potentially risky and costly endeavor. If you are more interested in operating a restaurant than managing a project timeline, then leasing a restaurant is probably not the best choice.
Advantages of Buying Existing Restaurant Space
Buying existing restaurant space offers several advantages over leasing new locations. One of the most significant benefits is immediate availability. Unlike new spaces that require extensive construction and permitting, existing restaurants for sale are ready for operation with minimal modifications. You can update the décor, change out the menu board and sign, and you’re essentially ready to go. The underlying equipment and infrastructure, like the hood, and essential cooking appliances are the same in most cases.
This quick turnaround allows restaurant owners to open their doors and start generating revenue much sooner, reducing the financial strain associated with prolonged pre-opening periods. Additionally, purchasing an existing space can be more cost-efficient. It often includes valuable infrastructure, such as kitchen equipment, plumbing, hoods, electrical systems, expanded HVAC needs, grease traps and more that are already in place. This saves substantial upfront costs compared to building from scratch, where unanticipated can quickly spiral out of control. Existing restaurants for sale also have an established customer base and proven traffic to the location. That provides a stable foundation for the new restaurant to thrive even with a change of concept. Overall, buying existing restaurants is a strategic move that saves time, money, and effort, helping you to hit the ground running.
Example:
Second-generation restaurant is a term applied to businesses that have been open and operating but have a concept or operation that doesn’t work or loses money. They have unique benefits that make them an attractive option for those opening a restaurant. We Sell Restaurants worked with the sellers and buyers of
At We Sell Restaurants, we pride ourselves on our ability to facilitate smooth and efficient transactions, tailored to meet the specific needs of each unique client. A shining example of our commitment to excellence is reflected in the successful sale of Figo36 Modern Italian + Wine Bar, a fine dining establishment located in Charlotte, NC.
Dan Weiss, the previous owner, shared his positive experience working with Justin and our team, which was instrumental in navigating the complexities of selling his restaurant. He stated, "From inspection to close, Justin and his team at We Sell Restaurants were at every turn to guide me through this process. It is clear that Justin's experience was the difference-maker in the value that I received for my business and for making the closing process a success. Would absolutely work with Justin again on future transactions."
This testimonial highlights the critical role that expert guidance plays in the restaurant brokerage industry, especially in cases involving fine dining establishments like Figo36 Modern Italian + Wine Bar, where both the stakes and the standards are high. Justin's deep understanding of the fine dining sector and his meticulous attention to detail ensured that every aspect of the sale was managed with the utmost professionalism and care.
Key Considerations When Buying Existing Restaurant Space
When buying existing restaurant space, conducting due diligence is typically around the property itself. Buyers should consider the lease term, escalations in pricing, and conditions. There should be a focus on the condition of the building, infrastructure, and equipment inspection. Identifying any necessary repairs or upgrades beforehand helps prevent unexpected costs after the purchase.
From a financial review, it’s most important to understand the past performance to predict a better outcome if you are changing the concept. If the shopping center has two other restaurants vying for the breakfast customer and the concept you are taking over focuses on this daypart, you may want to be sure your focus is on dinner and drinks, while they are closed. This offers up better parking, less competition, and higher average tickets.
Legal considerations include a review of the restaurant’s permits. You will need to verify whether a liquor license can be obtained for the location if your concept includes alcohol. Verify that the lease is assumable at terms you are comfortable with and confirm that any existing contracts will not carry over to your entity.
By addressing these key considerations, restaurant owners can make informed decisions that align with their business goals and ensure a successful launch in their new space.
Expert Tips for a Smooth Transition
Navigating the process of buying and transitioning into an existing restaurant can be complex, but expert guidance from a Certified Restaurant Broker can make it much smoother. They can provide access to other professionals, such as legal advisors, equipment inspectors, or commercial contractors if you are making alterations to the building. They are also well versed in the work with landlord and will handle all negotiations to transfer the lease. Overall, these experts can help with negotiations, inspections, and legal due diligence, providing valuable insights and preventing costly mistakes.
Planning and preparation are also key; creating a detailed plan for the transition can help minimize downtime and ensure a quick start. This includes scheduling necessary renovations or upgrades, coordinating with suppliers, and planning marketing campaigns to announce the new ownership. It's also essential to maximize the existing features of the space, such as utilizing existing kitchen equipment or leveraging the location's previous customer base for a strong reopening. Finally, a well-executed marketing and launch strategy can attract customers and build excitement for the new venture. By following these expert tips, restaurant owners can ensure a successful and efficient transition into their new space, setting the stage for a prosperous business.
Conclusion:
In conclusion, buying existing restaurants can offer multiple advantages over leasing and building out new locations. The immediate availability and cost savings, coupled with established infrastructure and proven customer bases, make this option a strategic choice for restaurant owners looking to minimize risks and accelerate their path to profitability.
The practical benefits of second-generation spaces, such as existing permits and equipment, further enhance the appeal of this approach. By carefully considering key factors such as due diligence, financial planning, and legal aspects, restaurant owners can make informed decisions that align with their business objectives.
For those ready to explore this path, consulting with a Certified Restaurant Broker is the first step for valuable guidance to ensure a smooth transition. Ultimately, purchasing an existing restaurant space can be a smart, efficient, and effective way to enter or expand in the competitive restaurant market, offering a solid foundation for long-term success. For those interested in learning more or seeking assistance with their restaurant acquisition, contact We Sell Restaurants for more information, tips, and services to help navigate the process and maximize the potential of second-generation restaurant space.