How to Buy a Very Successful Restaurant

The food and beverage industry has always been one of the most attractive for the would-be entrepreneur. When we consider fundamentals, something that each one of us must purchase to survive, food and drink of course comes at the top of the list. While this may be the case, there are many complex and interrelated issues to consider before you buy a business involving an existing restaurant and it's important to bear in mind that less than one in 10 purchases will actually succeed. Correct valuation upfront and an adequate process of due diligence will help you to survive against these odds and prosper.

One of the key skills that you can possess when you get ready to buy restaurant business is the ability to communicate and to decipher information. You will need numerous meetings with the seller and don't be surprised if the early ones don't reveal some fundamental facts and figures. It is natural for the seller to be a little protective and to want to gauge your enthusiasm and see whether you are really serious and qualified before divulging delicate data.

There are some basic facts and figures to absorb before you are able to project your own figures for the future. What style of food does the business favor and how many tables are there in the restaurant? How many meals, or covers are sold per week or by day and if you have a specialized menu, how strong is the supply chain and the supplier contracts?

Labor is a major cost in any business and particularly here. Find out how the costs breakdown and whether the strength of the entire business is based on the skills and strong personalities of key figures, notably the master chef. You may not expect to get a lot of the finer detail during the early process, as a seller often wants to keep any news of a potential sale away from the employees until the appropriate moment.

Write up a checklist of questions to ask the owner, you should have hundreds and not be afraid to be very specific, nor to insist on detailed answers. Before you do this, though, remember that this type of business involves working long hours and can be a seven days per week activity. You will be required to deal with many "fires," be great at managing people and your time and may not expect to see a specific net profit for quite a while.

Some of the challenges you may well face as a new owner include the ability to consummate new relationships with your suppliers. Some suppliers may look at the change of ownership as their chance to significantly alter their contracts or prices. You have to be able to deal with upset people, who may be concerned as their table is not ready, even though they booked in advance but got there late. You have to be able to stimulate your employees to work well, to handle all situations promptly, resulting in termination or praise according to the circumstances.

Once you are sure that you are ready to consider buying a business in the restaurant industry, have asked the right questions and received full and fair answers, have interpreted contracts and financials correctly, then you may be ready to discuss value. Always consult with established experts in their fields, who have restaurant industry experience and can use what they know to back up your own feelings. Find out what the bottom line is, how much the owner makes in terms of salary, net profits and benefits and then adjust this figure downward based on any capital expenditure you feel you may have to make.

With a restaurant for sale, expect your three major costs - food, labor and rent to be no more than two thirds of your total expenses and make sure that you have a first-class marketing plan so that you can tell the world about your new baby.


------

Richard Parker is the author of the How to Buy a Good Business at a Great Price series. As President and founder of Diomo Corporation - The Business Buyer Resource Center, his materials, seminars and consulting have helped thousands of business buyers realize their dream to buy a business. Want to find out more about business buying strategies that really work, then look no further than=> http://www.diomorestaurant.com