Features of a Restaurant Purchasing Process

Published:
November 8, 2021
restaurant 449952 340 1

The food industry, in particular restaurants and other similar establishments, is thriving and developing faster and faster every day. This is the reason why buying a restaurant will be a promising investment with unlimited growth opportunities. One of the ways to become part of this commercial network is to start your own restaurant business, especially if you already have experience in the catering industry. This article will be useful for those who want to learn about the basic steps of buying a restaurant and understand how much such a purchase can cost.

Cost of acquiring a restaurant business

Acquiring a Restaurant business can cost significantly less than buying a structure in any other industry. In addition, this business often has a faster payback period, which also makes a certain contribution to its prospects. On average, according to recent calculations and surveys, the average cost of a restaurant, excluding land, will be $ 275,000. The plot alone has a cost of approximately $ 95 per square foot. Thus, the average price together with the land will be about 425 thousand dollars.

It is worth noting that, of course, the above figures are given as averages – you can find cheaper offers. In addition, among other factors, think about where your establishment will be located: naturally, the restaurant business in the city will be much more expensive to buy than in the countryside or even in the suburbs.

The procedure for acquiring an already operating and in operation restaurant has a lot of nuances and can seem confusing and incomprehensible to you, especially if you have no idea about the restaurant industry in general. We’ve outlined a few simple steps below that you can follow to understand the process.

First step is finding a suitable restaurant for sale within the market of your interest

The first thing to do if you are thinking of buying a restaurant is to research the market you are interested in and see what offers are available in your area. In the list of restaurants, you will find a lot of useful information, in particular, regarding the cost of the transaction, the size of the restaurant itself, the zone, the reach of the clientele, the age of the building and other characteristics of the business.

However, there are a few things that you should pay special attention to when reviewing the offer lists. Below we highlight a few basic things.

  • Analysis of the competitive environment. When studying the offers, be sure to pay attention to how many and what kind of establishments operate in the area within which you want to do business. If the competition in the area is too high, then you risk making a failed investment.
  • Explore the location. In particular, here you should study whether the establishment will have good pedestrian traffic, whether it is close to leading highways and similar significant places, if there are parking spaces nearby, etc.
  • Analyze future business profitability and cash flows. When buying a ready restaurant business, find information regarding its profitability and income. In some cases, you will need to contact a realtor.
  • The reason for the sale of the business. Be sure to ask about the reason for the sale – this is one of the most important points. It is possible that the sale of the restaurant is connected with some kind of financial problems.

Checking general financial information: cash flows, costs and income flows

At the time of buying a business, you must have all the information regarding all financial information, in particular, directly the cost of selling a restaurant, and all its financial flows. Your task is to get and calculate all the numbers related to your future establishment. This way, you will be able to determine the profitability and financial viability of a given business, which is, whether the cost of a restaurant is worth investing in and whether it will pay off. However, do not forget that when you become the head of a business, a lot can change depending on your plans.

Knowing your credit score and getting financial support

Next, you need to find out your credit rating, which is assessed on a separate scale – 300 (worst) – 800 (best). It is determined by several basic factors: the general state of your credit history, the money in circulation, how long your credit history is, the type of loan and its size.

Your credit score will play a major role in obtaining start-up capital for your business and any loans. If you have a high rating, banking institutions will be happy to finance you and cooperate with you. With a poor credit rating, you can also get a loan, however, at a higher interest rate.

Preparing a contract with a lawyer

Once you have received funding, you can enter into negotiations with the restaurant owner regarding the purchase. This step assumes that you become familiar with all the liabilities and assets of the restaurant, in particular, what exactly is included in the sale. You should ask the current owner for answers to the following questions.

  • What assets does the restaurant have (staff, equipment, furnishings, etc.)?
  • Does the establishment have a license to sell alcoholic beverages? And is such a license included in the price?
  • What is the equipment, in particular, its age and quality, compliance with safety standards?
  • Are there pest problems?
  • Will you be able to use the previous menu or will you need to develop your own recipes?
  • What is the reputation of the institution?
  • Will the lease be handed over to you?

The answers received will help you get a deeper understanding of the profitability of the proposal and the benefits of investing in this business.

Perform a due diligence check

This event is a final audit covering all parties – operational, legal, financial and structural. To carry out such a check, you will need all the information that can be requested from the owner, in particular, the following:

  • financial data: reports, balance sheets, tax return;
  • records regarding the legal status of the establishment, including insurance policies, licenses, trademarks, and more;
  • data on employees;
  • information about the inventory available in circulation.

The importance of conducting a final audit is to have a general and as clear understanding of the business and its profitability. This step must be done prior to completing the sale.

You can see more interesting offers in the category “Restaurants”.

Recent offers:

Bar and Restaurant in Edinburgh for sale

Pizza Restaurant In Los Angeles for sale

 

Related insights

Offshore bank license in Cayman islands

Commonly-chosen space for banking, largely dominating the rest due to high-quality private-banking. Offshore bank license in Cayman Islands gives entrepreneurs possibilities to provide banking-services legally, thereby strengthening assurance of partners and capital-holders. Offshore banking licenses Cayman Islands Presently, Caymans are a promising and desirable hub for Chinese establishments. Several new banks already applied for permits…

Read more 21.03.2023

Offshore bank license in Bahamas

Bahamas banking-niche possesses a status of a rapidly growing segment of economy. Banking facilities offering commercials only for people and structures without residence are considered non-residential companies for foreign exchange monitoring goals. Thus, it isn’t permitted for them to propose services for locals and businesses not previously getting Central Bank’s approbation. It makes it easy…

Read more 21.03.2023

Offshore bank license in Gambia

Having a permit such as offshore bank license in Gambia gives possibilities to offer accounts opening and management services, and to carry out all related operations related to them. Offshore-accounts in the Gambia give certain advantages. The list of such privileges includes: strong assets protection-mechanisms; higher interest-rate; low-rates or no taxation. How to get offshore…

Read more 16.03.2023

Offshore bank license in Labuan

Possessing such a permit as offshore bank license in Labuan requires passing through a complicated process. All local commercial structures are administered by Labuan FSA. This authority is in charge of managing jurisdiction’s International Center and acts as main local enforcement body. Firms intending to get permission for such activities apply in person to FSA….

Read more 16.03.2023

AEMI license in Cyprus

AEMI is a financial establishment that carries out electronic money circulation. According to Cyprus law, AEMIs must have an appropriate license from the Central Bank of Cyprus to ensure a high level of protection of client funds. Overview Cyprus legislation allows AEMI to carry out a wide range of financial operations, such as issuing electronic…

Read more 13.03.2023

AEMI license in Czech Republic

Today’s country has favorable legislation that makes it easy to register and conduct business in the country. The government seeks to create favorable conditions for entrepreneurial activity, which makes the Czech Republic one of the most suitable countries for obtaining a permission for an Electronic Money Institution. Authorized Electronic Money Institution (AEMI) in the Czech…

Read more 13.03.2023

AEMI license in Ireland

Ireland has one of the most developed virtual money industries in Europe. The country has several key players in the market such as PayPal, Stripe and Skrill. These firms issue virtual money and supply remittance favors to millions of customers worldwide. Overview The E-Money Act in country requires all electronic money issuers to be licensed…

Read more 13.03.2023

AEMI license in Poland

Today’s country, which has been a member of the EU from 2004, when supplying the issue of virtual money and remittance systems, must be controlled by the Second Directive of Europe and the demands of the GDPR adjustment. At the state level, the monetary controller (Financial Supervision Committee) has not formed liberal or proscriptive terms,…

Read more 13.03.2023

Crypto Regulating in Poland 2023

The popularity of crypto is growing rapidly. But the work of crypto-companies is complicated by the lack of a developed legal workspace in most states. In Poland, the government regulates digital currency. Entrepreneurs who want to work in this field register corporations in the state and supply services to inner and foreign markets. Crypto license…

Read more 09.03.2023

Cryptolicense in Germany

Germany is a favorite territory for investors searching to enroll a crypto business-company in Europe. This country is a highly-developed EU participant country with the fourth biggest economy worldwide. Country was one of the first states in the world to propose monetary establishment legal certainty permitting them to retain crypto assets. State’s crypto adjustment stipulates…

Read more 09.03.2023

Crypto registration in Isle of Man

In the past, many businessmens were interested in one of the tax-free jurisdictions – the Isle of Man. To date, Isle of Man administration agencies have passed a series of laws aimed at controlling crypto actions, mostly ICOs. If you are interested in acquiring a Isle of Man Crypto exchange permission , you should keep…

Read more 04.03.2023

UK Forex Brokerage License

The British FX brokerage permit is one of the most authoritative permissions in the world. In order to complete the operation of achieving a FX broker license in the UK, the firm must be enrolled in the country. An organizational and lawful form such as a limited liability corporation (LLC) is the best choice. Regulation…

Read more 03.03.2023