If you are like many people, you may think you can purchase a restaurant and be guaranteed success – after all, you are catering to a basic human need. There are some success stories that reinforce this idea; however, for the most part, a restaurant takes hard work, time, money and effort. Even with all that, there is no guarantee of success.
As a result, if you are ready to buy a restaurant, you need to know what to look for and what to do. More importantly, you need to know what mistakes to avoid. Keep reading to know what some of the biggest mistakes people make when ready to buy a restaurant here.
Not Knowing the Difference in a Dining Establishment and Fast Food Service
Both restaurants sell prepared food; however, they are essentially two different types of businesses. There are many business opportunities professionals who complain about “buyers” who can’t distinguish between these two. This inability to distinguish between fast food services and dining establishments makes it challenging for restaurant brokers and others to help the buyer find the business that is best for their needs.
If you don’t have a clear idea of what you are looking for, you may find yourself spending a lot of your time examining businesses that are completely unsuitable for you. Take some time to learn the difference in these restaurant businesses before moving forward with the buying process.
Not Understanding or Preparing for Food Service Industry Demands
No matter what a seller may say about it, a restaurant isn’t easy to operate and for buyers who have no prior experience in this field, it may be impossible to run. If you want to purchase a business in this industry, but if you don’t have prior experience, consider buying from a franchisor. Most of the successful dining establishment owners are also chefs who spend part of their time making the food that is served.
Not Being Willing to Pay a Premium for a Quality Restaurant
Believe it or not, it’s actually smart to pay two times or more the cost of a seller’s annual adjusted earnings. However, it is not a good idea to insist that you pay a price that’s determined by using the standard industry multiple if the business is in a growing area or has an under-market lease that’s locked in for several years. This also isn’t a good idea if the seller is agreeing to stay on and train your new cook for up to six months at minimal cost to you. As you can see, there are more than a few factors to consider when buying a restaurant. Each of these factors will help you make the best deal possible for yourself and your future restaurant. It’s also smart to work with a professional restaurant broker who has had experience buying and selling restaurants and who can provide you with advice and guidance through the process.