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Perhaps the first thing you should consider when deciding to buy a restaurant is to understand your true objective. As long as you are doing so because this type of business fits your strengths and experience, it's fine, but if it's a matter of it's always been a dream then think seriously because the failure rate is terribly high in these situations.

Now that we have that out of the way, below are some of the main considerations when buying a business. You might already own a business, and simply want to purchase the assets and location of a new business. In any case, the list is by no means exhaustive, but is meant as a guideline.

Location & Financing

  • Location
    You know the old adage: Location, location, location, in other words unless you're looking at buying a restaurant that is considered a longtime 'classic', chances are that the location will drive the business.
  • Lease
    • - Investigate to determine whether the lease is assignable, the number of years remaining (you want at least 10 years between the current lease and available options).
    • - Be aware that increasingly Landlords have become very weary of assigning leases to new owners who do not possess any restaurant experience.
    • - Usually, you can negotiate with any reasonable landlord, don't take a hardnosed approach initially; however, investigating the lease and transferability thereof should be one of your first tasks in your due diligence phase. Sales and profit history.
  • Financial Condition
    • - Mind you, Restaurants are notorious for having lots of unreported income.
    • - Over the past 3 years, have sales revenues consistently increased.
    • - Have profits consistently increased.
    • - Have costs and operating expenses increased only at a rate consistent with revenue increases.
    • - Do the assets of the business exceed the liabilities of your business.
    • - Is the business able to consistently cover its costs and expenses from sales revenue.
  • Facilities and Equipment
    If you lease your business equipment, are leases long-term and transferable.

Operation, Services, & Clients

  • Staffing
    • - Does the business have a staff that customers or clients know and trust, that can provide continuity after the departure of the previous owner.
    • - Have key staff members signed employee contracts that will ensure a smooth transition.
  • Products and Services
    • - Does the business offer products and/or services that are distinct and superior to those of your competitors.
    • - Is your production or service delivery process one that a new owner can easily adopt and carry on.
    • - Are the production and operations processes detailed in an operations manual or other documentation.
    • - Does the business have staff and management to help a new owner successfully manage the transition after the purchase of the business.
  • Clientele
    • - Does the business have a long-standing and loyal clientele.
    • - Does it have a large client roster rather than reliance on a few large clients or customers.
    • - Does the business maintain a customer database that a new owner can rely upon.
    • - Do the customers rely on the offerings of the business more than on the personal expertise and relationship.
  • Brand and Reputation
    • - Does the business have a name that is well known and respected in its market area and business arena.
    • - Does the business have strong online presence including a strong standing in search results and favorable online reviews and rating.
    • - Does the business have strong and effective marketing tools.

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