Things to Consider When Buying an Existing Restaurant Business

Buying a business can be difficult; the buyer needs to consider innumerable factors that decide if the business is worth buying or not. But when you try to buy a restaurant business, the decision is much simpler. The food industry is one of those industries that will never go out of business and will always have a dedicated customer base. That solves the most important issue of a business selling-buying scenario – loss of customers.

Key Consideration Before Buying an Restaurant Business For Sale in India: Live Case Study

Take for instance – Chami’s Restaurant and Caterers, it’s a small but well-established restaurant. This business was established about 3 years ago and provides home cooked style food to its customers. The restaurant currently attracts about 40 dine-in customers in addition to 20-25 customers daily who order tiffin. With a dedicated customer base of these many customers, the business makes a turnover of more than Rs.2.25 lacs per month. When this business is sold, the new owner inherits the customers, staff and equipment and will also have the turnover right from the start. Buying a business doesn’t get simpler than this.

Of course, buying doesn’t simply mean taking up the first restaurant that is up for sale. There are quite a few factors to be considered here as well. As mentioned before, a dedicated customer base solves quite a lot of issues, but definitely not all of them. Location, Rental or lease agreement, staff, equipment and renovations – if any, cleanliness, reputation and previous year’s sales – all of these are just as important factors. Health and food department regulations and compliance also stand as a key factor to be considered.

What matters is the priority of these factors for the business buyer. When you buy an existing business, you are picking up the work of someone else. It may not necessarily be of your own liking. So, would you, as a prospective buyer, want to spend a lot of money for renovation, or area expansion, or staff upgrading or even getting new equipment? Even after spending money on the above-mentioned points, what is the guarantee that you would be able to improve the sales over previous years? If you do not consider these factors before buying a restaurant, you could end up buying a business that can take you years to get back to the break-even point. Or worse – you may end up in permanent loss. That being said, as long as the buyer is sure about where they stand on each factor, the buying process goes smoothly.

Once you buy a business, the most important element for the growth of business is the customer satisfaction. Websites like Zomato and Burrp are places where customers review a restaurant and the news travels very quickly on the web. If the restaurant provides good service with good food and a good feel, the reviews on these websites can work wonders to increase the customer base for the restaurant. Then, it is just a matter of maintaining the overall quality of the restaurant and the repeat customers will increase.

In the end, if you decide to buy an existing restaurant for sale, make sure you have a good understanding of the financial aspect of the business for sale. If you are investing into a profitable business, how much profit is the restaurant actually making, which will give you an idea about how much to pay. Also, if it’s a loss making and you have decided to buy considering its other aspects, you should only pay for its assets after getting the valuation done professionally.

Wrapping Up

The restaurant business is one of the easiest businesses to buy and should you ever consider buying a restaurant, maintain your priority about factors like location, money, staff and equipment. Without prioritizing these factors, you stand to lose more than you can get. Above all, as read in a book, “Running a restaurant business is like getting your daughter married every day as per Captain Gopinath in his book SIMPLY FLY. From his experiences, running a restaurant means that you make all goodies with the care that you would accord to preparing dishes for your daughter’s wedding because the customer does not care if it is three days you have been running the business or three years that you have been running the business! He wants the best each time he visits your restaurant!”