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8 Rules for Buying a Restaurant So you want to BUY a Restaurant? There are eight tasks or rules that need to be followed to successfully buy a Restaurant. 1) Determine what type of restaurant you want to own (independent or franchise; full service, fast food, etc) + what kind of Operation/Menu Structure are you comfortable with (i.e.24hr, Lunch & Dinner service; Italian, Mexican, etc.) 2) Decide where (city/metro area) and make sure the Market is viable (a Market Analysis Report may be appropriate) 3) Determine the dollar amount (liquid assets) you have to invest 4) Prepare a PROFILE (resume) on yourself. Include business/restaurant ownership and/or management experience, plus current financial status At this point, you have the basics for you (or a broker) to conduct a search. There are many search sources available. They vary from the local newspaper classifieds to restaurant specialty newspapers (i.e. Today's Restaurant News, Nation's Restaurant News, etc.), to on-line restaurants for sale web sites (see bottom of home page), OR if interested in a 2nd tier Franchise check out http://www.smallbusinessfranchise.com/sector/2554/food.php . Rule 5) Narrow your search down to one or two restaurants with at least 2 years business history and visit the neighborhood, then become a 'Mystery Shopper' to the restaurant(s) as a customer Rule 6) Request a Business Offering package that includes: information on the business history; lease/rental documentation; 2 years of Financial Statements (P&L); seating capacity (copy of Fire Code occupancy certificate); a listing of major equipment included in the sale, any Change of Ownership requirement (note: if franchise - franchise assumption governing factors); copy of a recent independent valuation report (NOTE: if an independent [non broker] valuation has not been done - then use the Business Offering package information to get an independent Restaurant Valuation Report !). When you request the Business Offering package - as a gesture of 'Goodwill', provide your PROFILE and sign a 'Confidential Agreement', if needed, to assure that all detailed information on the restaurant will be held as confidential Rule 7) Review the Business Offering package and Valuation Report to determine your offering/bid. Look at patterns (increasing or decreasing) for: Sales and Net Profits; % of Cost of Sales, Fixed Expenses, and Operating Expenses. In addition, determine if lease is assumable and what are the Change of Ownership requirements (i.e. liquor & health licenses, etc.). For the Valuation Report, review the Return on Investment and total business values and then determine an offering/bid range (note: if seller financing is being offered - use your higher price range) Rule 8) Request a minimum of 2 full weeks for DUE DILIGENCE. The Due Diligence period occurs after you have reached an agreement on the restaurant purchase and you will be inspecting all of the restaurant's FF&E, plus files and records click below for info on an independent, comprehensive
other Due Diligence info
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