How to Buy a Restaurant

culled from:wikihow.com

Steps

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Qualify yourself to buy a restaurant. There are several hurdles one must go through to qualify to purchase a restaurant. The first hurdle is the landlord so your credit needs to be good as well as your experience needs to be relevant to the restaurant business. The experience can be covered by buying a franchise. Second, how much cash on hand do you have and do you have enough for working capital as well? You'll need plenty of cash and working capital to buy a restaurant. For example, if one is buying a restaurant for $200,000 and there is no loan, than one will need about $250,000 cash on hand to have enough for closing costs as well as the purchase price and working capital. Don't leave yourself short, because that seriously increases one's chances of failure. If you want to get an SBA loan, you must have 5 years restaurant management or ownership experience, a good credit score as well as plenty of cash to show the bank for the down payment.

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   Define what you want and more importantly, what fits your lifestyle before you go on the search for the perfect restaurant. The authors of the book Appetite for Acquisition include an entire chapter on the ten questions you should ask yourself before you begin your search. This can include the profit level you need as well as the lifestyle questions that every restaurant owner should consider.
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   Choose your target client. Are you going to aim at a high turnover of pizzas to young professionals, or will you seek out a more mature and discerning crowd? A diverse and experimental menu might be appropriate in the latter case, whereas for the former a more traditional selection focusing on quality ingredients would be more suitable. Remember that younger people will eat out more and will see it as less of a special event – although they will rarely spend in excess of £15 or $10 per head. On the other hand, it is likely that they’ll spend less time in the restaurant so fitting in more sittings is a possibility. Older people will probably still see eating out as a treat or luxury and are likely to spend more in terms of both time and money.
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   Pick a location. Town centre premises with ample parking and a proximity to pubs or cinemas are usually the most successful, but are the most costly to maintain. The rents are higher than those located on street, but the turn out of customers will be higher as well.
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   Confirm that the area you choose has the demographics to match your intended client base. Do some research on household income and spending patterns for the neighborhoods you consider. Can they afford to eat out on a regular basis at a restaurant like yours, and more importantly, do they? There are loads of database services online that gather and sell income and spending data...it's well worth the cost of the reports to have that information in hand before you make a decision.
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   Pick a specific restaurant you want to buy. Before you introduce yourself to the owners, visit as a customer during different times of day to see what their trade is really like. Count tables, and try to estimate the cheque totals per table so you can compare that number to claims made by the sellers.
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   Make an offer to buy the restaurant. Check the books of the restaurant owners. Visit often to see how crowded it is, at various times of day. Look at the eating patterns of the customers and mode of dress.
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   Consider the cost. The restaurant may need substantial redecoration or equipment may need upgrading. Figure the expenses against what you think might be the income, depending on the customers you have seen, and the meals they have purchased.
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   Get the word out. While word-of-mouth is a restaurant’s lifeblood, advertising in local papers or distributing leaflets might be a necessity – especially if you are trying to turn around a flagging business.