People like to eat. That’s not even up for arguments. While the comfort of home-made food and the satisfaction of cooking for people you love is unmatched, dining outside where you pay for the food and enjoy sitting with other people around you is also enjoyable. This is why it is not easy to be in the restaurant business. You have to rely on the backbone of the business which is your staff, your sales, and your customers. This is where you need to be careful. Otherwise, you will be surprised how much you can lose with a team that has no clue. Or a business that’s losing its customers slowly to the diner right across the street. If you cannot pay your people well, you also tend to lose a staff that’s good enough to make your business survive the competition. Your restaurant’s ability to deliver good customer and food service is vital to the performance of your business because customers, no matter how loyal, will not expect anything less than good food and good service.
A good experience paired with the food that people love to eat will guarantee customers coming back for more. But it takes more than that to keep it going. It will also help if you keep up with the trends that make a diner a favorite spot for the locals. You cannot expect to build champions of a team if your folks does not the heart and talent for it. They can be experts, skills can be taught, but attitude is mostly inherent. A bad apple in the group is going to take away all that you have worked for, or at least, most of it. And mismanagement of a good team, no matter how competent they are, could be the result of a cafe’s downfall too.
If they end up being disappointed, then you will be at the end of the line. Profit is dependent on the people coming in to dine and putting their money on the food. But no matter how delicious the food is, if the service is bad, they are likely to remember their experience with your staff more than what they have eaten. And they will stop coming. When they do, you lose your customers and profit starts to diminish by the thousands of dollars.
It could also be that a restaurant business is losing their customers to the new cafe and other restaurants in the same location, because that’s what too much competition can do to any business. It can hurt them financially, and it can lead to the brink of being crippled. To manage the damage, and while your restaurant still has value, an owner sometimes has no other option but to sell, rather than suffer closure and lose everything completely.
If you figured out you want to start a restaurant business, or improve yours, the best way to do that is find one that’s either up for sale in the area, or in danger of closing. Or one that’s currently at the mercy of mismanagement and too much local competition. Building one from scratch, even if you’re thinking of a bakery that sells only pastries, can still be pretty expensive, especially if you have limited funds. It can also be difficult for a buyer to adjust their expenses when they eventually decide to sell but being able to find a restaurant or cafe that’s still in business but only just, and doing some changes on the concept can sometimes turn into a successful venture.
1. Location is a big deal.
Find the right location and then evaluate if your business concept for it has high chances of working. A buyer should always consider the visibility of a business while making sure it’s not in an area that has too much going on for their type of service and the kind of food they plan to serve. For example, there could be a listing of a Mexican restaurant with decent food and service, enough customers at first but in the end had very low gross sales because of too many other restaurants serving Mexican food within a mile. Someone buying it and turning it into a rustic, country style bar could prove to be a huge success. With the right concept, location and strategy from finding out how much competition yours would have, if you would have any at all, should be a big deciding factor in signing your agreement for sale and purchase.
2. Inform the landlord about your plans before the escrow is closed.
A business enjoying enough success to afford paying a high rent would usually have a landlord that wouldn’t agree of a buyer’s plan to change concepts. In the event that the one you find has low rent as well as monthly profit or gross sales, the landlord would likely agree to a buyer having their own type of food to serve, and a completely different design to boot, if that’s what it would come down to, just so he can enjoy his part of the deal. The landlord has to be notified on what the buyer plans on doing otherwise another business might have an exclusivity clause in the lease agreement that wouldn’t work with the new buyer’s plans. As a buyer, you should develop a business plan for the restaurant’s menu, to give the other people involved in the purchase and sale contract an idea when you submit it to the landlord. You may then get the other party to sign the agreement indicating that you will be able to do your own concept, as part of the terms, after the escrow closes.
3. Notify customers of planned changes.
When the deal is sealed and after the escrow is closed, and you had renovations made on the place already, make sure to have an announcement in forms of fliers, other print materials, a sign outside or a social media post that the business is being closed to make way for changes, if it needs to be closed at all. Assuming you’re entitled to change the type of food being served, you still have the opportunity to get what might be left of the precious business’ traffic. You can send out coupons or mailers within a mile’s radius or two, for the first few months to allow people to adjust and get used to coming to the restaurant that’s now yours.
4. Check and Observe restaurant trends.
About a decade or so ago, many buyers became interested in turning businesses in the restaurant and cafe industry to restaurants that served Asian food. For one, sushi was very popular and they were trendy. However, because they were popular, there eventually was a shortage but a few years after, there were many owners who decided to sell their businesses when the market value was low, so their sales price was obviously lowered as a result. As much as possible, a buyer should observe movement in the market and take note of food trends. Know what sells and what type of food aren’t a hit to customers. But of course, if you’re confident that the food in your business plan is really good, then there’s a great chance that customers would always keep coming back for more.
5. Consider value of the business and read the fine print.
Prospect buyers who wants to only go for marketable, operating restaurants that still have enough value from a menu that’s already established locally, a competent staff that works great as a team, a strong reputation, steady flow of sales, attractive profits, patronizing customers may just be able to get what they want and find a great deal more. But if the buyer wants to change absolutely everything from top to bottom and not the concept only, their might be a risk of a dozen or so pitfalls. This is why you have to make sure that everything is defined well in the terms and conditions of the sale or purchase contract.
6. Do business only with honest sellers.
The seller has to be very honest about his tangible assets just as much as he should come clean about intangible ones, so that the buyer will know which area he needs to prioritize when doing changes. On the other hand, if the buyer has no plans whatsoever to use assets that are still valuable, he has to at least ensure that location and what’s left of the infrastructure are worth the asking premium price, otherwise, negotiate.
Deciding to buy a restaurant that has gone through so much, has enough loyal customers, but failed to make it through the competition or any other reason that caused its sale will be difficult to pursue, no matter how much or how little changes you plan to do with it. But starting from scratch is even more challenging. Who knows. If you can still get the team that established it years ago, invest on the right areas to improve it, then it might just be a hit for years and years to come.