Buying a restaurant that is already in use can be both financially rewarding if the right criteria are met or can be a money pit if they are not. One of the most important considerations when deciding whether to invest in a running establishment is: why are they selling? Are they retiring from the business or just want to move on to another project? Many entrepreneurs start restaurants, get them up and running smoothly and then move on and do it all over again.
- Request a full inventory of everything that will be coming with the sale of the restaurant from ladles to toilet paper. There are inventory companies who may be hired for a small fee to come in and check inventories for you. If the establishment refuses to give you this information there may be things that they want to hide and you should stay away from purchasing this facility.
- Will the existing staff agree to stay if the restaurant acquires a new owner? Are there any employees who have contracts with the current owner that need to be renegotiated and transferred? Chefs and General Managers generally will want to stay on as employees. They will usually take this opportunity to try to renegotiate their salaries and any benefits.
- Where does the restaurant currently advertise? What have they found works for them and what has not? It can be very helpful to find out in advance that they have tried radio advertising in the area and it did not result in any additional business. Don’t rule out previously tried advertising ideas because they may just have not been carried out correctly. They may have found niche advertising somewhere that is cost effective. If you don’t ask, you may not find out about it.
- You should request copies of bookkeeping records going back at least five years. Take these records to an independent accountant whom you trust and have them audited. If the establishment refuses to give you this information, a very large red flag should go up in your mind.
- Does the restaurant have a website? Is it well designed and user friendly? When someone Googles “Armenian food Waterbury CT” does the website come up? Does the contract with the web designer need to be renegotiated? Is there a more cost-effective company with better service who you may be able to use?
- Who are the current vendors that the restaurant is using? Are they on good terms with them? Are they reliable? Are there other vendors who the restaurant could be buying from and are not currently? Why not?
- Do the current owners and staff have good relations with other area restaurants? If so, ask for introductions to these owners. A few examples of reasons to be on good terms with other restaurants: these contacts can be often called upon in a pinch to bail you out. You may need to borrow staff. You may have run out of food. Food may not have been delivered in time for the start of service. It is a very good idea to have friendly relations with other area hospitality operations.