Buying A Restaurant - Emerald Coast

Restaurant Broker: Why you need a broker to help you sell your restaurant

You have the idea, you have the drive, you’re ready to dive in on the journey to opening your own restaurant – but where to start? This is where finding a restaurant broker comes in. A restaurant broker is a specialist who knows all the ins and outs of the process to sell, purchase, and own a restaurant. If you are ready to make the investment in owning and operating a restaurant, working with a restaurant broker is an important step that you do not want to skip. According to the National Restaurant Association, one in three restaurants will fail in their first year. Starting strong with the support of a professional is vital to ensuring your restaurant has a successful base on which to grow.

Why work with a restaurant broker instead of a real estate agent?

Unlike other real estate agents or even more generic brokers, restaurant brokers focus exclusively on restaurants and are experienced with the many specific aspects involved in restaurant transactions. They have additional training and education, and have to earn a state-specific license with an exam to practice as a restaurant broker.

What does a restaurant broker do in the buying process?

Buying a restaurant is not a simple process and includes many more steps than other real estate purchases. A restaurant broker will have extensive understanding and experience with these types of transactions and can guide you through the process. There are a number of benefits that a restaurant broker brings to the table when you are trying to purchase a restaurant, including:

Knowledge of the local restaurant market: They will have an understanding of what types of restaurants exist, what the market for new openings is like, open or soon-to-be open locations, and how to make your idea fit into the demographic and market you are hoping to reach.
Connections with the people already in the business: A restaurant broker will know not only other local restaurant owners but also those related to the industry that you will want to connect with, like vendors, accountants, lawyers, and more.
Understanding of special approvals: Before opening your restaurant you will need to be approved by and for a number of different things, including permits, proper zoning, the health department, and a liquor license. Your broker should know which approvals you will need and how to get them in time for your opening.
Support during negotiations and with financials: There is a huge amount of paperwork and processes to follow during the purchase of a restaurant, and an experienced broker can help streamline a complicated process.

When you are ready to go all in on your own new restaurant, start with a restaurant broker who can be your partner and work with you to make your dream a reality.

How To Decide If You Should Purchase A Restaurant

Restaurant ownership is a dream for many people. Whether by starting your restaurant or purchasing an existing business, owning a restaurant is a significant investment. In many ways, buying a restaurant can be more complicated than opening a new one from the ground up.

New restaurants face different challenges and disadvantages than existing restaurants. However, established businesses can also come with a host of challenges and pitfalls. Before you purchase an existing restaurant business, consider these aspects to ensure your investment is well placed.

Past Success And Future Prosperity

The past success of a restaurant may indicate its future prosperity. This connection is a starting point for evaluating an established restaurant and should be explored before signing on the dotted line. One of the most vital questions to answer during your evaluation is why the owner is selling the restaurant. A business owner always sells for a reason, and you need to feel comfortable with what that reason is and why.

While the answer you receive from the seller may seem negative, it is up to you to look beyond stated reasons for putting the business on the market. Due diligence at this point will help you make the best decision for your investment. Consider circumstances of the seller’s reasoning, such as increased competition, neighborhood change, and restaurant reputation. Answers to these questions may not indicate that purchasing the business is a bad idea; they merely help you to understand the scope of your work ahead better.

Assets Of The Restaurant

Upon purchasing a restaurant, you will obtain any assets that it possesses. Knowing the condition of these assets is crucial in determining the worth of your possible investment. A restaurant’s most vital asset to assess is its cash flow. You can do this by reviewing the restaurant’s financial statements and calculating any property, depreciation, and amortization. Don’t forget to include contracts, insurance policies, and intellectual property owned by the restaurant in your assets calculations.

Liabilities

When you purchase a restaurant business, you also purchase its liabilities. Most common liabilities include any company debt like mortgages and loans that should be clear in the business’s financial records. Also, consider tax liabilities accrued by the restaurant. A full audit of the company’s tax records will tell you what you need to know about the business’s financial health before making your investment.

Don’t Go It Alone

Purchasing a restaurant is an investment that should not be entered into lightly. Restaurant brokers can help you throughout the process, understand your options, and feel confident with your decisions.

Why Buying an Existing Restaurant is a Smart Business Move

Finding a lucrative business venture is something many entrepreneurs work hard to achieve. Choosing a business venture that coincides with the passions and hobbies you have is beneficial. For instance, if you love to cook and interact with the general public, owning a restaurant is a great idea. There are over 660,000 restaurants currently in the United States.

Rather than trying to build a new restaurant brand, you need to consider buying an existing restaurant. Each year, many restaurant owners decide to get out of the business and pursue other passions. Getting a good deal on a restaurant for sale will be much easier with the help of a reputable broker. If you are trying to learn about the benefits of buying an existing restaurant, check out the information below.

Hit the Ground Running With Restaurant Equipment and Inventory

Starting a restaurant from scratch can be extremely expensive. If you are new to the game of running a restaurant, you may not have a large amount of capital needed to buy all of the equipment you need. Instead of going deep into debt, attempting to buy this equipment, you need to consider buying an existing restaurant. If a restaurant is already up and running, it will have all of the equipment and inventory you need.

Before deciding to buy a particular pre-existing restaurant, you need to get a breakdown of the equipment and inventory you will be receiving. With this list, you can make a decision about whether you are getting a good deal on the eatery in question. Your broker/consultant will be able to weigh-in and offer their opinion regarding whether the restaurant is worth the asking price.

Having a Built-In Audience is an Advantage

Developing a great reputation in the community is something owners of new restaurants struggle with. It takes a lot of time to get your restaurant known. If you wanted to skip a few steps and unlock the benefits of having a built-in audience, investing in a pre-existing restaurant is a good idea.

An existing restaurant will already have loyal customers, which means you can start making money right away. However, you will need to invest in top-notch marketing campaigns to get new customers in the door. Marketing professionals who have experience in the restaurant industry can help you develop and manage both digital and print campaigns.

Keeping a Restaurant’s Existing Staff on the Payroll

Another challenge you will be faced with when starting a brand-new restaurant is finding and hiring the right employees. An existing restaurant will already have a team in place. If the existing staff a restaurant has is productive and trustworthy, keeping them on the payroll is a must. Having a team of hard-working employees who already know the ins and outs of the business will help you greatly in your pursuit of profit.

Trying to Buy a Restaurant?

As you can see, there are a number of benefits that come with buying a pre-existing restaurant. Contact Emerald Coast Restaurant Brokers & Consultants to find out how we can help you bring your dream of owning a restaurant to reality.

Mistakes to Avoid When Buying a Restaurant

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.

Due Diligence Mistakes When Purchasing a Restaurant

The most common mistakes seen when people get ready to purchase a restaurant is that they don’t fully understand the due diligence process. You may wonder what this is, and why it is important. If that’s the case, you are in the right place.

Due diligence is done to help confirm that the items learned during the discovery phase of the purchase are true. If you are buying a restaurant, there are three main things to keep in mind. Keep reading to learn more.

Too Soon

When buying a restaurant, some take the approach that they want to see everything before an offer is made. Unfortunately, with this approach, your ability to buy may be hindered.

By nature, sellers are curious. They want to avoid revealing too much about their business until they have a buyer who is more “certain” about the purchase. Even if there’s a confidentiality agreement is in place, they usually think about the people working in the store, the customers they have, and their current livelihood. All these things will be at risk if someone involved fails to honor the terms outlined in the agreed-on confidentiality agreement.

It is too soon if you begin to push for things like 941 filings and tax returns before the deal is made. To avoid this issue, go into an agreement to buy with the due diligence period and fully refundable escrow if you aren’t satisfied.

Too Much

There are checklists available online to use when buying any business that are over 10 pages with more than 100-line items. This list asks for many things that have nothing to do with actually purchasing a restaurant. It may ask for things about trademarks, patents, and intellectual property, which the franchise brand actually owns.

It’s important to look for the right things when buying a restaurant, rather than factors that make no difference. Working with a business broker is one way you can feel confident that you are looking at the right factors when buying a restaurant.

The Wrong Focus

Some of the things listed above aren’t relevant to the transaction (as mentioned above). Don’t try to spend too much time or money on things that you can’t change. An example of this is the franchise agreement review. In most cases, franchisors aren’t going to change the terms in the franchise agreement. Don’t waste time trying to make this happens – even if you get an attorney involved, the likelihood this will occur is virtually non-existent. When it comes to buying a restaurant, there are more than a few things to consider. One of the best things you can do as the buyer is to work with a restaurant broker who can help ensure you get a good deal and that you do the proper due diligence to ensure you make the right decision. This will ensure you are confident in the decision you make and that you make a smart deal for the restaurant that you are interested in buying.

Benefits Of Purchasing an Established Restaurant

If you’re interested in setting up a restaurant locally, but aren’t sure that you’re up to starting a business from scratch, you might be well served by purchasing an established restaurant from a broker. These companies buy and sell existing restaurants as full packages, instead of as real estate alone. This means that you’ll gain access to not only the restaurant but the building and a lot of the items and equipment that you’ll need to get it up and running quickly and easily.

There are numerous benefits to buying a restaurant this way, including:

Use Existing Equipment

When you opt to buy an already established restaurant, you can make one offer for the entire facility, including the building and restaurant equipment. While you may not need all of the equipment on-site, and any that you don’t need you may be able to sell for an overall profit. The equipment that you do need will provide you with a nice start towards a working facility, so you won’t need to purchase each item that you need individually at full price.

No Need to Start from Scratch

Purchasing a fully equipped restaurant means that there’s no need to design the entire facility from scratch. You may be able to use some of the tables, chairs, or other fixtures in the facility. This can help save you money as you launch your own business, allowing you to save money on basic items like tables, chairs, restaurant trays, basic plates and silverware, and more. You won’t have to begin with a blank slate, then try to determine everything that you need. Instead, you can evaluate what you already have and fill in the gaps.

Market is Established

Buying an established restaurant means that it also had an established market. There were customers in the area, the restaurant had vendors that they dealt with, and they had employees from the area. This gives you a basic list of individuals and businesses to start with. Instead of starting from scratch, you can reach out to previous vendors, employees that used to work for the restaurant and did well, and other contacts. This may allow you to start with a basic network as you begin to establish your own restaurant in the building.

When you’re interested in starting a restaurant but don’t want to buy each item that you need individually, it may make sense to purchase a restaurant from a broker. This allows you to get a jump start on the items that you’ll need, as you can buy the building as well as many of the fixtures and furniture. If this sounds like a process that you’re interested in, reach out to us today to learn more about how we can help you.

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