Why You Should Acquire an Existing Restaurant!

If you are looking to be your own boss through restaurant ownership there are several avenues that you can pursue to reach your goal.  Typically people consider one of three routes: they start up a restaurant from scratch, buy a franchise, or acquire an existing restaurant. Many times, people don’t consider that the last option is extremely viable.  When done successfully, acquiring an existing restaurant can be one of the greatest ways to make great money in the short run and have control over growing your investment in the long run.

Start ups and Franchises

Both startups and franchises typically require a great deal of upfront money, a great deal of planning, and a period of time before they generate income and even longer before they generate a profit. While some franchises and startup restaurants begin to make money early on, we’ve spoken to many who, even after five years or more, have never made a profit.

At a recent roundtable event in front of career professionals who were considering going into business for themselves, one of the trusted accountants speaking there stated that when helping her clients create their profit and loss projections for their business plans, she typically did not project profitability until after the third year.

Look at this list of just some of the things you must accomplish when starting a restaurant from concept to operation :

• Creating the concept
• Market research
• Brand design
• Testing and proven concept fits market
• Site selection
• Zoning
• Design and layout
• Purchase of equipment
• Funding (challenging for many startups and usually only provided to a limit number of franchises on the SBA’s approved franchise list)
• Build out costs
• Recruiting and training entire staff
• Identifying and vetting appropriate vendors and service providers
• Menu design
• Product cost and margin
• Startup cost
• Grand opening
• Operation Manual Design
• Marketing Cost
• Time period operating before breakeven (may be months, years or never
• Much, much more

Existing Restaurants

Restaurant acquisitions on the other hand can provide immediate income upon you taking over. There is still a great deal of planning and upfront work that needs to be done when acquiring an existing restaurant, but consider that an existing restaurant typically has cash flow, customers, systems in place and more.

When acquiring an existing business, most of the start up steps have already been accomplished and proven. Even if you have plans to update or change some things about the restaurant, you know the working basics are in place and generating a certain cash flow. A running operation allows you to focus on the key things you see in most need of improvement.

These are some of the many reasons why you should carefully consider acquiring an existing business.