Things to Consider When Buying a Family Restaurant or Bar

How Do You Go About Buying a Restaurant or Bar?

It’s not always fun to work for someone else, telling you what to do and when to do it. One of the most freeing things you can do is become your own boss by opening a new business or buying a business for sale. When you are a business owner, you are your own boss and get to call the shots. While there’s no doubt that this comes with a lot of responsibility, it also comes with a lot of freedom so long as you are ready to face challenges and handle those responsibilities. So, is it easier to open a brand new business or buy an existing one?

According to Forbes and data from the U.S. Bureau of Labor Statistics, 20% of new businesses don’t last for more than a year. It is difficult to fund new businesses, and even more so to turn them into profitable endeavors that generate consistent revenue and cash flow. However, buying an existing business with a proven track record of success is a much safer option. While you might not have as much creative control over a pre-established business, you will have more financial stability. One of the most popular businesses to own in the United States are family restaurants and bars. Who doesn’t love a good bar or restaurant? They have fun fast-paced atmospheres, delicious food, nice ambiance, and happy customers.

John Howard is a business broker for Alliant Capital Advisors. Business brokers help with purchasing a business, and in this article we’d like to give you our expert advice on what to consider before buying a bar or family restaurant. Let’s get into it!

The Location of the Family Restaurant

Location is a huge piece of the puzzle for the success of restaurants. A bad location might be one that is hard to find, one that isn’t convenient to get to, one that does not have enough parking, or one that makes it challenging or even dangerous to pull in and out of the parking lot. In more urban areas where not everyone owns a vehicle, a bad location might also look like one that is too far or too challenging to walk to, such as being on a road with no sidewalks several miles away from the main urban area. Lastly, a bad location can look like one that is in a poorly developed area or a dangerous part of town. If the area is known for violent crime, carjackings, break-ins, or any other common crime, that could easily deter potential business.

So, when considering whether or not to buy a bar or family restaurant, you need to consider the location. Make sure it is a good location that is in a safe area, allows for safe entering and exiting of the parking lot, that has plenty of parking, that is easy to find, and that isn’t too far from main roads or developed parts of town.

Intangibles & Goodwill of Previous Owner

Sometimes the tangible things such as the building, the tables and chairs, or the kitchen appliances can be the difference in a fair sale. However, it is often the intangibles and the goodwill of the previous owner that make an even bigger difference. When you are buying an existing business, especially one that is thriving and popular, the best thing to do is NOT make any major changes. So often we see new owners buy popular local restaurants, change the name, menu, and atmosphere, and steer away much of their existing clientele. When you purchase the intangible assets, such as the name of the business, the branding, and the existing menu, you are purchasing a good reputation.

This is an important part of successfully buying a bar or restaurant. Making a few minor changes, such as a new sign, a new paint job, a new special, or even a new menu item are fine and allow you to add a touch of your own personality onto the existing business, but it’s crucial to do so in

moderation so you don’t isolate yourself from all of the customers who currently love the business. Make sure these intangibles are part of the sale because they can make the world of difference as the new owner of the restaurant or bar.

The Lease and Rent of the Property

It is very common for restaurants to rent the building that they operate out of, in which case you would have a lease and would pay rent to the landlord of the property. One thing you want to look into is whether the landlord would allow you to take on the current lease, or if they would require you to sign a new lease.

You also want to make sure that you are getting a fair price for the rent. Many restaurants go under because they simply can’t afford to pay the cost of the rent on top of their other expenses. Make sure that you look at the earnings of the business in comparison to the rent so you aren’t buying into a situation where you are immediately drowning financially.

Potential Future Earnings

The last major thing to consider when buying a restaurant is the potential future earnings of the business. Sure, the business might be making money now, but what is it projected to earn moving forward? Are there any factors that might impact the potential future earnings such as changes to the lease, changes to the location, or changes to the nearby area?

Furthermore, you will want to look into the possibility of increasing the income of the business in the future and reducing the costs. Does it look like there are opportunities for the business to grow or make other avenues of income, and are there any ways to cut the costs and reduce the spending? If you can guarantee that the business is set up to continue making money, while also researching ways to increase revenue and reduce costs, then purchasing this restaurant will likely be a success.

Hire a Business Broker when Buying a Restaurant

If you’re not sure how to buy a restaurant, John Howard can help! He has helped many of his clients with an entrepreneurial spirit to find a successful family restaurant or bar to purchase. Buying a bar or family restaurant is an exciting endeavor, but it is best to work with an expert business broker throughout the process to ensure that the business you purchase suits your needs and your goals.

Schedule a phone call with John, or give us a call to set up a consultation. Let’s work together to find a business that’s right for you.

Thank you for reading!