Buying Guides

How to Buy Your First Restaurant

Buying a Business Guide Image

Many people looking at buying a business have considered purchasing their own restaurant at some point. The appeal of taking over a successful restaurant is seen as a solid investment by many. And of course if you are passionate about food and entertaining guests then this could be the ideal industry for you.

A restaurant will often be a significant financial and personal commitment, therefore it is important you fully the opportunity. In the following sections we will seek to help you answer the following questions:

  • Why is it for sale?
  • Is it in the right location?
  • What is its reputation?
  • Is the lease part of the deal?
  • What are your goals?

 

All these questions may seem daunting but with a little research they will soon answer themselves.

Why is the restaurant for sale?

You may have noticed that there are a lot of restaurants for sale, why? A successful well established restaurant will sell quickly and easily. Everyone has their reasons for wanting to sell, it may be due to retirement, relocation or downsizing. Not all sales are for negative reasons. This being said make sure you do your due diligence.

Creating a business plan

Whether you are requiring finance or not it is a good idea to put together a robust business plan. This should take into account how much you can actually afford to spend and the return you would expect to make. Pay attention to your fixed and variable outgoings (rent, cost of purchase, business rates, etc.), fixtures, stock & fittings and how you will maintain or acquire the appropriate licenses.

Pro tip: when buying a restaurant always request a full inventory before signing on the dotted line as this will directly affect your initial outgoings.  

Property considerations & costs

Your rent will be determined by location and potential footfall in an area. For example, a unit in the city centre with thousands of people passing by daily will cost more than one in the suburbs where people need to make the conscious decision to go out for a meal. This must also reflect in your menu and marketing. People in the city centre are more inclined for a quick meal reasonably priced whilst people in the suburbs are going to make a decision based on all of this as well as parking or return taxi fare cost.

When looking at the lease take into consideration what may happen if the premises are sold or if there are issues with the premises, who’s responsibility is it? Yours or the landlords.

Another building related cost that may creep up on you is services; you cannot survive without, rubbish removal, oil collection, and servicing of equipment.

Focus on profit

To sustain the business the profit margin is a key area which needs much thought and planning. Your prices need to be competitive for the quality of food and service you are providing. Depending on how much you spend on the décor and supplies, this will affect the prices you can charge. Trying to sell good food in bad surroundings is a hard (and unadvisable) task. Normally a margin of up to 10% is acceptable allowing for profit on the supplies to cover other costs associated with running the business.

Non compete

Lastly you may want to consider putting a non compete clause into the negotiation of the sale, requiring that the current owner doesn’t open a new establishment within 20 miles of the current location. However this isn’t usually an issue, restaurant folk are friendly people.  

If you would like to ask any questions on buying your first restaurant or you would like to arrange your first viewing of our restaurants for sale, feel free to call our team on 0800 987 0813.

Franco Pardini has worked in his family run restaurant for over a decade and has a wealth of practical experience in the restaurant trade.