10 Tips To Buying a Restaurant At A Great Price
There are many considerations prior to your purchase of a restaurant. The majority of businesses fail within the first two years. It is important to look at different aspects when you see a restaurant for sale. Here are ten tips for buying a restaurant at a great price.
Tip #1: Profit and Loss Reports
It is important to view the profit and loss reports before you purchase a restaurant. The profit and loss reports should be for the previous three years. This will help you to determine if you are buying a profitable restaurant or if you need to make changes to the business to realize a profit.
Tip #2: Available Equipment
Many new people in the business world assume that buying a restaurant automatically means that you receive everything that is in the building. To get the best price for your investment, be certain that the restaurant equipment is working and comes with the purchase price. You don’t want to end up buying faulty equipment or buying a restaurant that doesn’t include all the necessary equipment.
Tip #3: Back Taxes
What are the property tax amounts on the restaurant? Are the taxes up to date and current? Many times restaurants for sale owe back taxes for property, sales taxes and even times employment taxes. If there are taxes owed on the facility, it may be time to look some place else.
Tip #4: Menu Items
A profitable dining establishment will have an excellent menu that people are used to viewing and ordering from. Just because you purchase a restaurant does not mean that the menu is included in the sale. Ask the owner if they are going to include the menu, product items and the recipes prior to buying the restaurant.
Tip #5: Staffing
Will the current staff stay after you purchase the restaurant? You can truly get a great price if the staff remains because you do not have the expense of hiring and training new people to run the facility.
Tip #6: Established Advertising
Another important question to ask is the placement of established advertising for the restaurant. Are there fixed ads in place that have already been paid for by the current owner? You can save a fortune in picking up the subscriptions and having advertisement that is already running for the facility.
Tip #7: Location
Location of the restaurant is extremely important. It will be extremely expensive to re-locate the facility. Has the neighborhood deteriorated? Are there businesses and attractions in the areas to draw in clientele? Are there competitors in the neighborhood with a similar menu or similar dining features? Location can make or break a restaurant and this may be the primary reason the restaurant is for sale.
Tip #8: Parking
Is there ample parking for your dining guests? Is the signage clear from the road? Is there easy access to the facility? All of these issues will affect the amount of foot traffic that you pick up for your restaurant.
Tip #9: Health Code Standards
Has the owner met the current health code standards? Some restaurants go up for sale because there is so much to do and a great deal of expense to meet current health code standards. You might buy a restaurant at a great price to later find out you have to sink a fortune into the facility to meet the health code standards.
Tip #10: Interest Rates
What are the interest rates to assume the loan on the facility? You are not getting a great price if the interest is high. Additionally, there should be zero points on the loan.