Should I Buy a Restaurant Business For Sale?

By Reza Honarvar

Are you looking at investing in a Restaurant for Sale? Who doesn’t love good food! Maybe you’re a chef, an entertainer, a cook, a BBQ whizz, a waiter, a wine connoisseur or you simply like good, yummy food! The restaurant business has become so publicized in Australia lately with shows like ‘My Kitchen Rules’, ‘Master Chef’ and ‘Come Dine With Me’ that grace our TV screens every day. Australians love to watch cooking shows, they love to cook and love to go out and try new restaurants.

The restaurant business seems appealing for so many people because its fast paced in the kitchen, you can be creative with the food and with the décor, you can feed people amazing meals that they rave about, and you can make money!

If you are looking to buy a restaurant, I would suggest you do your research. Read the restaurant’s reviews and see what customers are saying about the restaurant. Is it getting good reviews? If not, are there things you could change about the restaurant to increase the customers satisfaction. Restaurants, like tourism rely heavily on customer opinions and referrals. If someone comes into your restaurant once and doesn’t like it, they probably won’t come back again, and probably will tell friends about their “bad experience” or worse yet, publicize it on one the of the sights above. Make sure you are monitoring these sights, and if possible, reply to comments and keeping up good customer relations.

I would also suggest you go ‘under cover’ and eat in the restaurant, ask staff for their recommendations. What is the food like? What are the staff like? Is it busy? What types of customers are visiting? Don’t be fooled by smoke and mirrors, do your research and be sure you know what obstacles it may face before you buy a restaurant for sale. Also, if you buy a restaurant that was failing before – make sure you have a ‘grand re-opening’ or ‘under new management’ sign so customers know it has changed hands. It would be a good idea on opening night to have some of the local media and food critics come and see the ‘new restaurant’ it will do your business wonders – if it’s a good review.

When buying a business for sale, you have to make sure you look over the numbers. With a restaurant there can be a lot of different facets that could be affecting its profitability. A restaurants product is based on what the chef feels it is worth. This is influenced by the produce used, the presentation of the meal, the skills of the chef, the creativity of the food, time taken to prepare, the ambience of the restaurant, the friendliness of the staff and its location. So make sure you analyse the numbers, there could be anything in these sectors affecting profitability. Perhaps their paying too much for produce, or wasting too much food, the staff are being paid too much, the ambience is tacky, the dishes are too simple, they’re not charging enough. It’s a complex matter of working out restaurant pricing, and something that may be is shown in the restaurant’s turnover. Restaurants that are profitable are because they have worked out how to manage these different facets. So, before you buy a restaurant for sale speak with your accountant or business advisor and have them review the details with you.

Make sure you have a plan. What do you envision for this restaurant? How long is the lease, will you stay there? Is it profitable at the moment? What capital do you need to make any upgrades? Is everything in working order? Make sure you have enough money and a plan to buy and manage the restaurant successfully.