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What to Know Before You Consider Buying an Existing Restaurant

by Elsa Stringer

If you have a good amount of money, investing your finances in a business could be a very good idea. In case you choose a profitable business, you won’t just get your money back, but you’ll also enjoy a steady revenue for very many years to come. In fact, you may even secure yourself after retirement. But, what kind of business is worthy to take into consideration?

Obviously, you need to find one that will be just as successful in the future as it is today. Restaurants are appreciated these days and most certainly they will stay this way in the future as well.

However, even if buying an existing restaurant may seem easier than starting a restaurant from scratch, there are some aspects you must be aware of before you purchase the business. For example, the restaurant may be up for sale due to a series of problems.

If these problems are real, you need to be aware of them and see if you’re ready to handle them. But, regardless of existing problems, you still need to do some research to see if the business has indeed potential. Here is a list of aspects you seriously need to think about before buying an existing restaurant.

Why are the owners selling the business?


This is probably one of the trickiest questions to ask, but also the one that provides one of the most important answers. Try to use your communication and detective skills to find a genuine answer to this question, so you’ll know what you’re getting into. Some people are simply tired of this type of business or wish to retire, selling their business so they can have money for something more relaxing.

Maybe they have personal issues and can’t take care of the business any longer. If the case, make sure that the business is right for you. Take a good look at the insights of the restaurants and see if you can indeed manage it effectively.

Others may try to sell a restaurant because they can’t handle the expenses anymore. And this is why you see so many restaurant listings available on the market. In other words, the expenses are higher than the profit. This should be a warning sign for you. In this case, you may be making a risky choice.

If you really want to look into the problems of a selling restaurant, you should ask the assistance of an experienced manager. See how serious the problems are and if you have what it takes to handle them.

What about the finances


Not many people are aware that restaurants, in spite of their great prospects, will eat a lot of resources and will require attention around the clock. So, whether you’re starting a new business or getting one that is already standing, having a detailed action plan is required. This is even more important if you want to get a loan for the business.

Thus, there are some costs you need to look at like costs for food and beverages, paychecks for employees, utility costs, rent costs, insurance for the restaurant, and taxes. You should at least cover all these to keep the business on the floating line.

So, make sure to ask the current owner of the restaurant to show the business’s books regarding finances, especially when it comes to expenses.

Ideally, you should see the profits it has been making. In case a restaurant owner refuses or avoids showing you the books, don’t even bother showing interest in the business. There’s obviously something the owner doesn’t want you to see and you should never buy a business under such circumstances.

Are there issues connected to taxes or the law?


It’s probably worth knowing that some businesses are up for sale because their owners failed to pay the taxes. When this happens, the government applies penalties, which rapidly transforms into a downward whirlpool, engulfing all the business’s money.

You certainly don’t want this, so hiring a lawyer to check into the restaurant’s public records is a very good idea. This will let you know if the business has any legal issues or tax problems you should know about. Otherwise, you may end up in a lot of legal trouble with your newly purchased business.

Details about the location and reputation of the restaurant


The location of a restaurant counts very much for the success, or lack of it, of the business. Ideally, a restaurant should be placed in a busy location, where people can discover it by simply walking by it. Having an easy-to-reach restaurant can mean more customers that walk in every single day, including people that never tried eating there.

Of course, you can also improve the marketing and advertising of the restaurant, making sure people find it.
Also, do take the time to check what people think about it. The reviews and feedback regarding a restaurant will contour its reputation. If things are not great, it won’t be such a bad idea to rebrand the entire business once you purchase it.

Of course, if you are sure you can solve the issues that led to a bad reputation in the first place. It is not uncommon for people to adopt a different brand name for a purchased existing business, paired with a renovation of the space. This way, it will appear like a brand-new restaurant, giving you the chance to carve its reputation according to your desires.


Still, there’s no need to fix what is not broken. In other words, if the brand of the restaurant, its menu, and other details work just fine, don’t spend your money to change them. It’s pointless to invest in things that don’t need changing or improving.

Do this only if the current brand, menu, and so on, are inefficient or bad for the business. Even if you don’t change anything, do expect to invest a lot of time and effort into your new business, if you decide to buy the restaurant.

This is a type of business that usually requires a lot of attention from the manager in order to work well and be profitable. A restaurant is not the kind of business you can let to run on its own and expect to bring in good amounts of revenue.