a random blog
Posts tagged retail
Valuable Ideas For Buying A Truly Successful Restaurant
Feb 19th
The food and beverage industry has always been one of the most attractive for the would-be entrepreneur. After all, each one of us must eat and drink to be able to survive and we have to pay much attention to the fundamentals! 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. It is very important to value the business correctly upfront and if you go about your due diligence correctly you will have a good chance of surviving against these awful odds.
One of the key skills that you can possess when you get ready to buy restaurant business assets is the ability to communicate and to decipher information. A number of meetings will be required with the seller and don’t be frustrated if the meetings don’t reveal some of the significant information. 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.
Before you can start projecting a position in the future, you need to know some basic facts and figures. What style of food does the business favor and how many tables are there in the restaurant? You need to know how many meals are served per day, per week and by month and if the menu is somewhat specialized, are the supplier contracts strong enough and is the supply chain sufficient?
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 details 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 check-list of questions to ask the owner; you should have hundreds and not be afraid to be very specific, nor to insist on detailed answers. As you are preparing your position, though, remember that this type of business will call on very long hours and is typically 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.
As a new owner, you will need to set up and develop new relationships with all your suppliers. Some suppliers see a change of ownership as an opportunity to significantly “amend” their contracts, and prices. You must be able to deal with distraught people, who may be upset because their table is not available, even though they booked it but arrived late. You must be able to motivate your employees and be able to handle all situations immediately, resulting in praise or termination accordingly.
If you are really sure that you want to get involved with the restaurant industry, have thought about the right questions and received full answers from the seller, have crunched the financials and studied the contracts, then you are now ready to look at the business value. Experts in this field should be engaged to help you understand what you are dealing with and you should use their findings to help you solidify your thoughts. If you know what the business bottom line is, the salary take of the owner, net profits and owner benefits, then you should adjust this figure according to any capital expenditure you feel is important.
With any restaurant for sale, the three major costs involved – labor, rent and food, should be no more than two thirds of total expenditure and always remember that you will have to have a superb marketing plan so that you can tell everyone about your new creation.
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.
Tips For Performing Due Diligence When Buying A Great Restaurant
Jan 2nd
Everyone needs to eat to live, and over time we’ve established a habit of making this process a social one. As such, a restaurant for sale is one of the most popular businesses to buy, and one which may represent an even more attractive purchase proposition if you have a particular taste for a certain type of food!
Conduct due diligence when looking to buy restaurant business even though your heart, or even your stomach, might tell you that this is the vocation for you. This industry is very competitive and there are many elements you want to consider. Allocate a period of time, experts recommend four weeks, to observe the operation of the business. This should provide you with an excellent opportunity to get a really good feel for the situation before you make any final decisions.
You have several key areas to investigate including the premises, the financials, the equipment, lease, the operations and the employees. If possible, always bring in experts to help, including a qualified accountant who is thoroughly experienced in the restaurant business, and as you progress through your observational period, continue to apply your overall business sense – and common sense, to watch and see how everything operates, especially from a customer perspective.
For your paper and number crunching chores, expect to review the tax returns, profit and loss statements, cash flow worksheets, inventory records, employee records, equipment agreements, maintenance schedules, all necessary licenses, health inspections certificates and a history and copy of the lease.
When reviewing the financial documents, it’s essential to keep in mind that the restaurant business has a large volume of cash sales. Some business owners choose to siphon some of this off and not report it. Over time this is not a good practice as this money could have been used for marketing purposes, and when it comes purchase business assets, it can be very difficult to prove income and therefore worth.
When you are inspecting the property, look at it from an overall perspective as well as in detail. Can it be adequately seen from nearby major roads, is signage appropriate, well-maintained and presentable? Are there any other major competitors and are they overbearing? What is your first impression when arriving in the parking lot? Take a look at external dumpsters and trash removal areas to make sure that these are as well-maintained as possible and are unobtrusive.
Moving inside, what is your first impression of the decor. Is the waiting area pleasant and contributory to the overall ambience? Is there adequate signage for bathrooms, emergency exits? Pay close attention to the bathrooms. They should be in perfect working order, comfortable and impeccably clean and well-maintained. In a restaurant, everything, repeat everything should be clean, presentable and in full working order.
Most of the equipment contained in a restaurant and specifically within its kitchen is subject to certification, inspection and permitting. Check to see that this is all up-to-date and timely. While every element of the equipment should be operated according to the letter of the law, you must also ensure that regular maintenance and cleaning schedules are top-notch. For major items and appliances, see whether contractor warranties are available and can be transferred to you.
Very often a lease can be a potential stumbling block when looking at a restaurant for sale. The landlord will want to ensure that the business is being operated as efficiently as possible and may be wary of transferring or issuing a new lease to someone who does not have much experience. Look for terminology within the lease stating that transfers will “not be unreasonably withheld,” and aim to ensure that you get at least as favorable terms during your tenancy. This would be a good time to assess the overall viability of the environment within which the business operates. If in a strip mall of some kind, are the anchor stores in good shape and do the majority of other businesses also appear sound? You do not want to see an anchor store disappear and the overall visitor level to the area decline.
When you analyze the operations of the business, you want to learn how the current owner operates and whether there are any immediate issues or challenges that you will have to take into account. Look closely at any “special arrangements” or unique selling points that involve a particular individual, a style or presentation of food. You want to be sure that these elements are transferable or will be present when you take over.
A restaurant will likely rise and fall on the strength of its employees. While you can expect a high turnover in any kind of restaurant, if you see some loyal staff and a good “team spirit” this can be a definite plus. Check to see how people are hired, the terms and conditions offered to them and exactly how they are paid.
While you should insist on an observation period, before you are involved in formal discussions with the seller why not kill two birds with one stone and visit the restaurant for a few nice dinners or lunches with other companions? You don’t have to show your hand at this stage and can get a really good feeling by observing how the staff come and go, the operation within the kitchen ideally and in general get an opinion of whether everything is orderly and well-structured during the busiest times.
Richard Parker is the President and founder of the Diomo Corporation – The Business Buyer Resource Center. His inspiring materials, seminars and consulting have assisted thousands of business buyers with achieving their life long dream to buy a business.