Buying a restaurant

  • Buying a restaurant

There are three ways of getting into owning a restaurant as your business:

  • buying a restaurant;
  • taking over a lease for a restaurant; and
  • starting from scratch.

Here’s our guide on buying an existing restaurant, with some tips, tricks and things to think about.

Why buy a restaurant?

There’s a benefit in entering the hospitality game knowing (to some degree of certainty) that the restaurant already works. It won’t work for everyone.

Is buying a restaurant right for me?

We’re starting from the point of view that your’re committed to opening a restaurant, with all that entails.

If buying a restaurant isn’t for you, we’ll have Small Plates out later covering the other two options.

 

Tips and tricks when buying a restaurant

Goodwill

The purchase price of a restaurant will take into consideration the goodwill of the business. Some list it as a separate part of the purchase price.

Goodwill in a restaurant conceptually takes into account things like:

  • business name;
  • restaurant concept;
  • reputation of the business;
  • trading history;
  • accounts; and
  • systems and processes behind the restaurant.

Personalities

Ask yourself: how much of the goodwill, the reputation and each returning customer is attributable to the owner or some key staff member?

There are ways of preventing the seller from opening nearby and taking all of the old customers.

But if the owner or key person is the reason why the business is as good as it is, it follows that once he or she leaves, the business will decline.

Know what you’re getting into

You’re spending tens or hundreds of thousands of dollars on starting your restaurant business. Minimum.

Please don’t rely on the papers the business broker hands over and expect that they’ll be fine. They’re not lawyers and those documents will favour the seller.

Even if the seller’s lawyer drafted the papers, those documents will be weighted against you.

Due diligence and the sale process

Are you purchasing the restaurant as a going concern, by buying the assets of the restaurant or by purchasing the shares?

Here’s a list of a few of the things a buyer ought to check:

  • identities of the parties, looking out for trusts and corporate entities;
  • accounts (audited) and tax returns;
  • planning permission and zoning;
  • food safety registration and convictions;
  • liquor licence conditions and rating;
  • employees and employee contracts; and
  • lease.
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By | 2017-06-01T13:06:24+10:00 28 May 2014|Categories: Guides|Tags: , , , |

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