Buying a Restaurant

There's a reason why buying a restaurant, bar or club is referred to as a buying "process." Each deal has its own unique personality and each with new challenges. There are a substantial number of steps involved and much to consider, especially for anyone who has never bought a food and beverage business in the past.

This is a major decision and investment, with so much at stake it is crucial to prepare properly and be educated for this journey and take the necessary steps to be certain all the right decisions are made along the way.

According to industry statistics, nine out of ten people who begin the search to buy a business, never complete a transaction. Perhaps the biggest reason for this dismal statistic is most people simply don't realize what's involved. Another reason is poor brokerage services and lack of qualified brokers in the marketplace to help a Buyer through the process.

Part of the challenge is many of the restaurant buyers are "first time" Buyers. Faced with crucial decision after crucial decision, Buyers are overwhelmed and frustrated, only to abort the project. This is where a good broker can help relieve the stress and guess work.

FINDING A FOOD & BEVERAGE BUSINESS TAKES TIME

If you don't know where you're going, any road will take you there! As with all projects, planning is the most important step. Define the goals and detail the tasks of how to meet these goals. Knowing exactly what type of food & beverage (F&B) business to buy, otherwise the search becomes an endless road of dead-ends. Know your strengths and weaknesses. If your career has been working in the fast food business, then a full service restaurant probably isn't a good choice. If a full-time job prevents full-time effort on the project, then block-out 5 to 10 hours a week to work on it. But make the time in any case. This is probably the second largest investment a person makes. So invest the time and thought into it.

One of the most frustrating parts of searching for an F&B business is dealing with business brokers. The industry, just like the real estate industry, has good brokers and bad ones. So manage your expectations of the industry, don't expect too much and all will be fine. Business brokers are overwhelmed by daily demands causing non-responsiveness. Most brokers have little, if any, experience selling F&B businesses. F&B businesses are the most complex businesses to sell due to many government entities involved in the process and few banks willing to finance the deals. So if a good broker is found, stick with the broker and be patient in finding the right F&B business.

FINANCING THE PURCHASE

Speaking of financing, if getting a loan is part of the plan, than the Buyer must have at least 5 years of F&B managerial experience, good credit and 20% down payment in cash - some banks will even do 10% down loans. If the Buyer owns real estate with 20% equity or more, expect the bank to collateralize the real estate. And of course, the restaurant must have 3 years (some banks may only ask for two years) of tax returns whereby the adjusted net income is no less than 33% of the selling price. In other words, a selling price of $300,000 would command an adjusted net of $100,000 or more. Check with a CPA to analyze the true cash flow of the business.

STARTING THE SEARCH

95% of all F&B businesses for sale is advertised on the internet, so it makes sense to start searching by surfing the net. If no computer is available at home, then go to a local library. They'll have one. There are two types of websites: (1) websites advertising all sorts of businesses for sales by all sorts of brokers and individuals, and (2) broker owned and managed websites where the listings are exclusive to the broker. Both are good sources to find F&B businesses. Register at all the sites to get the automatic e-mails alerts. Obviously, the advertising websites have the largest selection.

Narrow the search to F&B businesses fitting the goal. Don't chase businesses not meeting the goal! Don't compromise because your patience is running out. If this happens, stop looking! It takes time to find a match.

SEEK LEGAL AND ACCOUNTING ADVICE

Don't be fooled into think an attorney or CPA will make decisions for you. Seeking professional advice is very important, but remember, attorneys and CPA's are naturally risk adverse - they over protect their clients. Look at it their way, if the deal isn't done, they risk nothing and gain a good fee. They will tend to over-protect on remote issues and kill deals. Find "deal-maker" professional advice. These are professionals who know where to make issues and where not to make issues. Visit the attorney of CPA with the answer in your mind and see what the professional's response to the answer is, then modify as needed.

More important, learn the key legal and financial points to purchasing a business such as the lease, bulk sale transfers, basic due diligence requirements, profit and loss analysis, and lessee's responsibilities. Learn the difference between an assignment and sub-lease, a personal guarantee and UCC-1 financing statement.

HURDLES TO CLOSING THE DEAL

Depending on the complexity of the deal, there are many hurdles a Buyer must jump through in order to close a deal. There could be as many as three major hurdles: (1) Landlord, (2) Lender, and (3) Franchisor and several minor hurdles. At a minimum each major hurdle requires a personal financial statement, business and financial plan, a resume and a credit check authorization. Obviously, each could ask for substantially more information. A good broker will help the Buyer prepare these documents.

LANDLORD

With our experience, if the Buyer prepares a professional package for the landlord containing the above outlined items, chances of success increases many times. Likewise, if the Buyer fails to prepare a good package, chances of failure increase many times. The Buyer and broker should read the lease carefully looking for deal killer issues such as limited menus and hours of operation, signage and usage constraints, are lease options personal to Seller, substantial rent increases between option periods, etc.

Landlords have a bad reputation for a reason. Not all are bad, but those few can certainly spoil the bunch. Some landlords knowingly over-step their bounds in an effort to improve their position and to test the Seller's determination to take legal action. In one recent deal a landlord arbitrarily increased the rent by 20% with no contractual basis to do so. As the landlord's attorney said - "SUE ME!" The Seller and Buyer accepted the Landlord's new terms. Landlord 1, Tenant 0!

LENDERS

The lending process is quite paper intensive, long, and doesn't begin until a purchase agreement is signed. The two biggest F&B lenders are CIT and Banco Popular. Completing the initial application can take a couple weeks while it could take another month before the loan is approved by the underwriter. The bank will publish a long laundry list of documents needed before funding the loan. It could take another 30 days to gather those documents. A good broker will coordinate this process.

Keep in mind the lender will require collateral meaning they will place a lean on your home if the equity in the home is greater than 20%.

FRANCHISORS

Transferring a franchise is much like transferring a lease. In fact the lease and franchise agreement look and read very much the same. Read the franchise agreement and under key elements such as hidden costs, transfer, training, and remodeling, and the franchise fees. Know what kind of support to expect from the franchisor.

GET THE FAMILY INVOLVED IN THE DECISION!

Owning a F&B business has great rewards, but not without sacrifice. If not managed properly, the business can consume every waking moment of an owner. Get your spouse to buy into the deal. If there is not a consensus, don't buy the business. Two minds are better than one. Respect each others opinion and views. But don't let the purchase become a burden on the relationship. It isn't worth it!

HOW MUCH DO YOU WANT TO SPEND?

Determine with absolute certainty how much cash is available to invest. Don't depend on family and friends for money. The best way to break-up a family or friendship is to borrow money and lose it.

If given the choice between buying a profitable business netting $150,000 for $400,000 and a losing restaurant for $75,000, I'd choose the profitable restaurant every time. Don't be so concerned about taking on the debt. The bank won't loan money unless the bank believes you and restaurant will succeed. The bank performs its own due diligence. Even after servicing the debt, there will be plenty of cash remaining to have a comfortable living. But most important, there will be far less stress on the Buyer then trying to turn a restaurant around - a daunting task at best.

Leveraging your money is a good thing. With the same amount of cash, one can purchase a profitable restaurant compared to a 100% cash deal for an unprofitable restaurant. I has been perplexing to me how people spend $100,000 on a losing venture, but they won't spend the same $100,000 on a profitable one?

HOW LONG DOES IT TAKE TO CLOSE A DEAL

Depending on the complexity of the deal, it could take anywhere from 45 days to 120 days to close escrow on an F&B business. There are techniques used to gain "early possession" of the restaurant, meaning the buyer takes possession before escrow closes, but this takes a skilled F&B broker to navigate through the rough waters to properly structure the transaction.

SPEAKING OF BROKERS - Do You Need One?

It depends. Of course, I'm a restaurant broker and I should say yes. But my firm only represents Sellers and we sell nothing but Restaurant, Bars, and Clubs. Our agents are well trained to close deals and to deal with Buyer honestly and supportively. Our forms, contracts and procedures are designed to do one thing - sell and close restaurant deals - we close 90% of the contract we enter into. We encourage Buyers to seek legal and accounting advice. We've made the buying process simpler than any other brokerage firm.

In any case, a good broker should:

o have sold many food and beverage businesses in the past.

o provide access to a vast database of food and beverage businesses for sale.

o understand financials and be able to perform detailed financial analysis. And be able to explain the numbers in plain English.

o keep the deal moving forward when obstacles are encountered.

o identify solutions and negotiate compromises to obstacles.

o ensure all documents are properly prepared and executed to close the deal.

o be honest in his dealings and maintain his integrity throughout the transaction.

SUMMARY

Commit to a deadline for buying a food and beverage business (not just "looking" for one).

1. Set aside time everyday to work on the project, even if it's only an hour a day. Stay focused on the objective.

2. Organize your finances. Understand your financial strength and weaknesses. Don't over shoot your financial goal and don't undershoot it either. Define how much you need to earn. Determine if your cash on hand can purchase a business that earns that much.

3. Work on determining what type of restaurant will thrive from your strengths and not suffer from your weaknesses.

4. Seek professional advice from a qualified accountant and attorney during the purchase process. But be careful, most attorneys are hypersensitive to over protecting their client to the point of killing deal. Get a deal-maker attorney, not a deal-breaker.

5. Unless you have a wealth of experience buying restaurants, then educate yourself about this process. Learn as much as you can. When it comes to investing in your future, you can never know too much!

Top tips for renting to a new restaurant tenant

Each month will be issued on average over 90 food service licenses in each state. And "more than 4,500 new restaurants in the economy every month in this country.

They have a dining room that you fill with tenants of quality? Although there is no shortage of tenants who may be interested in your site failed, then finding a tenant for? This information has been specifically designed for owners who want to find the ideal tenant created forProperties.

If the prospective tenant is looking for a restaurant in the area, as potential owners need to know what they want, and that their order can make a lease, a site whose design concept in the range of the visible signs fulfilled, and parking. Beyond all this is secondary.

Yes, the quality of the location of crucial importance is the accessibility of the site is essential. Armed with this information, you should be able to giftThe scope of supply for your future tenants in order to understand that they can. When you enter your site easier financially, which will get your prospective tenants more money for other things to commit to give the new restaurant from the ground in context.

To protect itself against a tenant is not entitled to, there are some questions to answer. Tick your expectations with the parties concerned at your first meeting. In this way, andlisten carefully to the answers, you can avoid many potential pain, for both.

Six factors that will help you to select the tenant the right to

# 1 Make a list of the survey. You want to cover much ground with the potential new tenants, and want to be you, ask questions. Depending on your specific situation, you may have legal restrictions on its ability to impose ask questions if you want to check your interview schedule with your attorney. ThisThis information is for informational purposes only and should not be construed as legal advice or accounting.

# 2 Solvency. Let the prospects that you will care about their history and likely to prompt payment in person to the lease. Restaurateurs few want to personally sign a rental agreement and will be important to pursue the question of the correct address to. If the prospective tenant knows that their credit staffimportant to you, you can cut right to chase every time. Are you a landlord willing to rent to a company with little operating history? Perhaps if you have a free space, which for some time that you want to consider, but you want a significant amount of financial security ahead.

# 3 Background Check. There is an old saying that goes something like: "What has to be done in the past, is indicative of what will happen in the future." This is your future tenantshave a background that can not be innocent. Only you can judge what you are willing to tolerate, but do not forget that old saying. Background checks are inexpensive and can provide valuable information about the relationship of your future tenants.

# 4 Feasibility study. Your prospective tenants had a feasibility study or is planned? This study will assess the chances for the success of the company, a new restaurant, an examination of the site and facilitiesavailable (eg, walk in cooler doors, supply, toilets, and the availability of electricity), concept, competition, niche markets, the financial and economic viability of the project. This study will offer you and your tenants the assurance that the new restaurant may be the right concept in the box on the right side. If the prospective tenant is not considered a studio, and you, what you see from the perspective of the owner as far as you can the cost of a feasibility study SplitStudy with the conductor, or simply pay the bill for you and future tenants to go back in time. The results are hard, and the factors for May, which was never envisaged, can be highlighted. In particular, the feasibility study will identify and confirm the corner, trying to fill your prospective tenants, too. This is of crucial importance for you and your prospective tenants.

# 5 Business plan. A business plan is based on the restaurant menueverything revolves around them, including income, expenses, equipment, projected salary and all other characters and concepts into a business plan in place. It is unrealistic to believe that your prospects is a business plan yet, because the question of location is exceptional, as she seats, and many other variables. A prospective tenant wants to with the quality of something big surprise? Give them a long-term lease agreement that a business plan is one thatare willing to pay (and, of course, included in the lease). What distinguishes you as an owner of a cure, wants the best for the tenant. Do you think this is the right to close the deal? Non-owners, as well as a few have a business plan with a signed contract, and you can end the choice of the owner! In Nice, hidden factors in this equation that, as you have given the business plan as a landlord in order, you need nowhave the opportunity to offer your contribution to the whole concept to be done? Well, not only the owner, has been recently a partner to work informally, and gives a good overview of what is happening in your area, but not surprised.

# 6 Business Team. A team of administration, a restaurant is not only the owner (s) and managers who consult outside the Running Day, and guidance counselors play a very important role in the success of the new restaurant.Legal, accounting and restaurant consultants play a unique role and contribute to the profitability of the farm. Regardless of the experience of the purchaser, is this team on site at a very early stage, and if that person is ready to begin the search space should be a red flag for you if the owner of this team is not together.

Norman Vincent Peale said: "We tend to get what we expect." To get planning, as lessee, andenable us to create a positive atmosphere around this goal by using the method described above. Concentrate on the goal of long-term relationships with the tenant profitable.

How to Open a Restaurant and Stay in Business

If you've always wanted to open a restaurant and the next big success, but never quite sure whether you should continue with your plans, the fact that today more and more people are looking out for meals or prepared food to take home, you should take your interest raise enough to finally give serious consideration to the possibility.

However, realistic about your future efforts will be the best way to ensure that, in contrast to many other new businesses'll BeCompetition with, you will stand far apart from the others and have for many years to come successfully.

Well, just in the United States alone there are over 900,000 different food service operations currently in business, but even with this number, there are still plenty of room to make the market for a new business model to make a name for himself. But although the industry as a rule a lucrative, there are certainly no guarantees when it comes to whether your restaurant is indeed aSuccess.

Before you try to open a restaurant there are a variety of important aspects address and familiarize yourself with the first. It is no secret that as a restaurateur takes a lot of hard work, including long hours, plenty of determination and will for several different "jobs" as managers plan, menu, head of public relations and accounting responsibility.

Here are four steps to be observed, for opening a restaurant and turned it into a profitable establishment:

1. Begin with aA thorough business plan: If you already have the funds actually, you will be dependent on a loan. With a complete business plan that describes how you want to make this restaurant profitable lenders She shows seriously by big business, and better able to repay the loan.

2. Find a suitable location: not the ideal location set up shop, your restaurant is not much prospect of success. Location may be everything when it comes toOpening a new business, especially a restaurant that may or may not be sufficient competition in the area. Full analysis of the demographic situation in the areas of interest you before it's time to negotiate a lease.

3. Development of Design and Layout: To open a restaurant and become a success in the industry can also be found on your first target and according to plan. The menu and type of food you plan to have a lot of meals are also served with the generalConcept and the physical layout of the restaurant that you create.

4. Maintain Accurate Accounting: Without a good bookkeeping and accounting are required to place you in serious financial trouble after you open your restaurant not really. After an honest and trustworthy local staff will help with prevention, but you also have a strong on important issues such as cash flows from and to.

To open a restaurant and takes a steady income in any caselot of hard work together with the skilled expertise needed to set itself apart from all the competition, but it is possible, provided you are committed to early to start planning and see your dreams into reality.

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