Restaurant Business is considered one of the most successful branches of the Hospitality Industry, and this success may have encouraged you to run your own restaurant.
Now your plan of having your own restaurant might be put on hold, but you may use this time to check your plans if you’re buying a restaurant business. It is no doubt that restaurants are greatly affected by today’s pandemic but they are slowly adapting to the new normal and steadily getting back to their game. With this article we’ll discuss the pros and cons of buying a restaurant business to help you with your decision.
BUYING A NEW RESTAURANT PROS :
- TIME – Saving time might be the most important reason why you considered buying an existing restaurant business instead of building a new brand. All renovations, planning, processing permits and legalities, hiring staff, and building a customer base are almost covered by the existing owner and if all things are well with you, you just have to take over all of it. It is important because time is not something you can’t buy back.
- TRACK RECORD – One factor you have to check with restaurant businesses before buying them is their track record. An existing restaurant brand will provide you a fundamental customer base and it will surely drive your restaurant to generate cash flow right off the bat. This is something you can expect every month, unlike if you create your own restaurant brand it will take you months – or even years to build a recurring customer base. And since you’re already confident with your customer base, you can now spend more of your efforts to make upgrades (if you want) to your newly bought restaurant business.
A good track record also means less marketing cost. The restaurant business surely has a great following on social media and good website maintenance. Ask the previous owners if you could also manage their existing website and/or channel.
- GOOD FINANCING – Given it’s outstanding track record, buying an existing restaurant business gives you the privileges to access better financing terms. Banks favor restaurant businesses that have already proven themselves in the industry. They are also aware of the fact that businesses in the food industry are most likely to fail during their first year, thus the bias against those restaurateurs who want to build their own brand.
- MARKET INTEL – Buying a restaurant business means owners would have to show your way around the business. You’ll see yourself getting into the industry in fast speed as you’re being already handed the crucial information needed. Starting from the inventory, equipment to use, suppliers to meet, and the important figures to monitor. This is like your shortcut to success and it shaves off years of research and development on your end.
- EXISTING STAFFING – An existing restaurant business would probably do the part of proper screening and training for their staff, and this means you may save tons from hiring and training costs. You just have to ensure that while you’re maintaining the staff, they should do their roles properly.
BUYING A NEW RESTAURANT CONS :
- COMPATIBILITY – Finding the type of restaurant business that would fit in your philosophies and values would be very difficult. An existing restaurant brand may be giving good cash flow and revenue, but if its values are not aligned with yours you’ll have a hard time managing it. Everything may be handed over to you but once you see this mismatch, you’ll want to change everything that’s not fit for you. Making these changes might compromise the existing customer base, in-house staff, and other factors that will cost you more resources, effort, and time
- OLD BAGGAGE – Existing restaurant business means they also have existing reputation. Poor reputation is part of old baggage which you most likely don’t want within your management. It is important to spot these red flags for your transition to be smooth and successful. One thing to also look into is the flow of sales and profit, identify why it is increasing/decreasing. These are manageable just make sure you’re able to anticipate and understand every baggage in place.
- INTEGRATION – Now that you’ve identified the old baggage from your newly bought restaurant business, it is now time for you to face the challenge of integrating it with your own style. The restaurant business surely has their own culture and operations and there’s a high possibility of you clashing it with your own personality and style. This foundation leads you on having less creative input for your business.
Blending in your own personality with the existing culture and practices of the restaurant will take your time especially if you’ve decided to retain their staff. They’re most likely accustomed to certain habits that clash with your vision. Try to reach out to them and build a good working relationship with your team, there’s a big chance for them to align their vision with yours.
Integration challenge is the most taxing part if you decide to buy a restaurant business because you might end up changing many things like the restaurant’s name, menu, and in-house staff. That’s why it is important to keep an open mind during this time and balance what would really make the restaurant business a success.
- HIGHER INVESTMENT – A well-known restaurant business will not come cheap. If you want to reap what they sow, you have to pay their efforts with a good price. But you have to keep in mind that paying a higher amount does not secure success. There would be risks since there would be changes within the restaurant. The customer and in-house staff may have a deeper connection with the previous owners, and they might stop patronizing the brand because of these changes.
There might be issues with maintenance as well. You have to talk to the previous owners regarding the age of the physical assets and if it would be needing repairs.
- MARKET DEMAND – Your newly bought restaurant business may look like the best fit for you and there are no underlying issues, bad PR, or anything that would compromise your satisfaction with it – but you have to check if it also meets the market demand. Though not always the case, customers tend to do business with new restaurant brands as it delivers fresher concepts.
Deciding to own a Restaurant Business is risky but everything will be worthwhile, especially if you have passion for this industry. Buying a restaurant business requires you to have a stable financial back-up, while creating your own brand leaves you with all creativity and responsibility. It is now up to you which way you’re willing to take, just make sure you do your due diligence before crossing that road.