5 Mistakes to Avoid When Buying a Restaurant - VR Business Sales Blog

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Thursday, February 14, 2019

5 Mistakes to Avoid When Buying a Restaurant

Buying a restaurant is an exciting investment. Finding the right one can be a process taken over by passion. This can cause you to jump into a purchase too quickly.

In this article, we discuss some of the mistakes that you could make and how to avoid them! Because, running a successful restaurant will mean buying the right one and avoiding any unwanted surprises!

1. Forgetting to check the lease terms

Most restaurants that you buy will be leasing the premises from which they operate. You will, therefore, be taking over that lease. The location of a restaurant is a vital part of its success so this is a task that shouldn’t be taken lightly.

It’s important that you know what lease you’re taking over and how this will impact your business. Every lease is different, and you will need to take your time to understand what is involved in this particular lease before you buy the restaurant.

Identify whether you will need to be re-approved when you take over the business and what the renewal terms are. You don’t want to be denied the lease after buying a new business.

2. Not taking the condition of the equipment into account

The equipment in the restaurant’s kitchen can be expensive and pricey to fix. It’s important that you know what condition it is in before you buy the restaurant you’re looking at.

It can be disastrous for a new restauranteur to have to pay exorbitant amounts to have the equipment in their new kitchen repaired weeks after opening.

Before you sign on the dotted line, have the building and the kitchen inspected by a professional so that you don’t get any surprises when you take it over.

3. Not checking for existing liabilities

While doing your due diligence, be sure to check that there aren’t any outstanding liabilities. When you take over the restaurant, these will become your responsibility. You do not want to be hit with any health code violations or unpaid taxes.

Buying a restaurant will also mean taking on any and all of its financial obligations. It’s vital that you have a clear picture of all of these before you buy any restaurant.

4. Find out what reputation the restaurant has

Despite changing hands, a restaurant will usually carry its reputation with it. It’s important that you find out what the reputation is before you make the investment.

Checking on review sites can be a good way to do this. You can also try to get feedback from people in the community.

5. Forgoing a non-compete

This last step is not a deal breaker; however, a small independent restaurant often relies on its owner. Especially if the owner is also the chef, it will be their recipes and their personality that makes up the business.

Should the owner decide to open a restaurant down the road, you’ll find that they may open something quite similar to the one you recently bought. This restaurant will become your competition and might threaten your business!

If this all seems a bit overwhelming, it can help to use a professional that is able to give you a bit of guidance! Find someone with experience in the restaurant sector so that they know what to look out for when buying a restaurant!

By Bruce Hakutizwi, USA and International Accounts Manager for BusinessesForSale.com, the world’s largest online marketplace for buying and selling small and medium size businesses. Bruce has over 7 years’ experience working within the US business transfer marketplace connecting buyers and sellers.

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