Have you ever thought about buying a restaurant? If so, you may want to give it a second thought. Or maybe a third and fourth thought. Restaurant ownership is a major commitment of time, energy and staying power.
It is true that everybody needs to eat. But eating at a restaurant is a discretionary expenditure. And if it’s your restaurant, you don’t know whether the customer will choose to stop by and partake of what you have to offer.
By far and away, the most popular type of restaurant is the office building sandwich shop. The pros are that it is a 5 day operation with only breakfast and lunch being served. Normally it closes at 3:30 p.m., and you are free to beat the traffic going home. Also, the limited menu does not require the skill set of a cook or chef.
The cons are that your market is the tenant population of the office building and possibly some people from other buildings in a complex that has more than one building. If a major tenant moves or goes out of business, you could also be put out of business.
In today’s economy with all the chains offering $5.00 combination meals, you will have to lower your prices which will shrink your gross margin and make the business less profitable. It’s also unlikely that you will get rich from owning and operating just one sandwich shop. Unless you are located in a AAA office building and other options are inconvenient for the tenants, you will always be competing against the fast food chains.
Another popular restaurant is the sports bar. It is a bar first that serves food second and provides multiple televisions showing many different types of sports events. It can also have pool tables, darts, video games and other distractions. The pros are that it can be very profitable if run properly. The cons are that it is normally a 7 day operation, and you must have good and honest help. It will normally have a more extensive menu than the sandwich shop.
The full service restaurant requires different skills than sandwich shops and sports bars. You need to have very talented cooks or a competent chef to prepare all the items on the menu which is more extensive than the sports bar. There will be appetizers, soups, salads, entrees, desserts, beers, wines, liquors, etc.
What is critical in a full service restaurant is keeping food cost down while not compromising food quality. Additionally, you need to make sure you order correctly to avoid wasting food. Most restaurant owners are held prisoner by their business. They must show up on short notice if a key employee does not report for work.
I am constantly amazed at how many people want to own restaurants who have no knowledge of what’s involved. The failure rate with inexperienced people is more than 90%. You are more likely to go out of business within 6 months owning this type of business than any other. So as I said in the beginning, you better give it plenty of thought before committing to taking a bite out of this apple.
After helping sellers and buyers for more than 20 years, I have found that honesty, integrity, full disclosure, patience and a willingness to consider various alternatives makes the probability of success for all parties very high.
Loren Marc Schmerler, CPC, APC is the former business advice columnist for Sam's Club. He has been a business broker since 1986 and works with business owners and business buyers in every state of the country. If you need assistance selling or buying a business anywhere in the United States, you can reach Loren at 404-550-1417, 24/7/365.
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