B2B Markeplace

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 in 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. 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.

When you begin trying to buy restaurant business assets, you’ll quickly learn that one of the key skills you’ll require is the ability to decipher information and to communicate effectively. 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.

Before you can start projecting a position in the future, you need to know some basic facts and figures. How many tables are there in the restaurant and what style of food does it focus on? 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.

When you start to compose a check-list of questions for the owner – and you might find you have hundreds, don’t be afraid to be as specific as you need to be and insist on appropriate 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. Sometimes certain suppliers may view a change of ownership as their chance to amend contracts to their benefit. 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. Employee motivation is very important and you should be ready to deal with every situation as it arises, whether that means praise or even termination!

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. Always work with knowledgeable experts in the field who have experience in the restaurant industry and use their findings to backup your own thoughts. 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 President and founder of the prestigious Diomo Corporation – The Business Buyer Resource Center. His celebrated materials, seminars and consulting have encouraged thousands of aspiring business buyers from around the World to pursue their dream to buy a business.