If you can’t find this situation then there are a couple other options.  One, buy an existing business with minimal refurbishing and two, build out a non-restaurant space.  Given the parameters of the type of restaurant we suggest, building a space from scratch can be expensive and should only be done if the cost is minimal.  In that frame of reference, we recommend the first option, buying an existing restaurant.  We covered the necessary details of the physical space in an earlier post. Here we will to talk a bit about finding and purchasing an existing business.

Craigslist

The best place to find an existing restaurant business for sale will be on craigslist under the for sale / business section (also sometimes in the commercial real estate section).   Search for restaurant and several listings should come up.  You can also try other online resources like loopnet, just don’t pay for a premium membership.  Most of the important details are accessible with the free membership.  It is possible to use a broker of your own but this will increase the cost to the seller as they have to pay the broker a commission.  The broker may not have you as a priority as you are only looking to invest a relatively small amount (remember we are trying to do this for less than 30K).  The brokers are used to much bigger deals.

NDA

See what craigslist is offering, reach out to the listings and ask to get a tour of the space as well as the financials.  In most cases you will have to sign a NDA (non-disclosure agreement) which is fine.  It is a document to protect the seller’s proprietary information from public disclosure.  It is agreed to not disclose that the business is for sale and any of the financials.  Just remember that if you sign one of these, it is imperative to protect the information you are given.  You could be held liable for leaks and sued, plus it is just not cool.

Financials

A little detective work will be needed in deciphering the existing restaurant businesses financial statements. They tend to be bloated with unrealistic information so take them for what they are.  Remember that the true revenue and profit margins are probably less than stated.  Why else would they be selling?  They should supply an equipment list, so you can get an idea of what they have and its worth.  They will likely overestimate the equipment’s worth.  Make sure you do your homework and can come up with your own estimate.  Google searches and website like WebstaurantStore should help get a ball park for the new prices.  Depreciate the value given the equipment’s age.

Know the area… financially

Getting your hands on a few different existing restaurant businesses financial statements can also be useful for your location research.  See how much revenue the businesses are bringing in per square foot, and see what area is doing best.  Do enough of these and you will have a pretty good idea of the area you are considering.  Try guessing the sales of each of them.  Can you guess based on their size and location?  You will get better with each one, soon becoming a market expert.  These skills will be very useful when estimating yearly sales for different candidate locations.

Equipment

The equipment is the most important part of buying an existing restaurant business.  There may be a bit of a premium to get the seller to feel good about the sale as they tend to get emotionally attached to the business.  Which is understandable.  Just make sure it is a great deal and the cost is less than building out a comparable space.  The goal should be to build your own business, so it doesn’t make sense to pay a large premium for the “name”.  Just pay for their equipment and a little good will.  Dealing with brokers will be a bit of a challenge as they will put on the hard sell and tell you that the existing customer base is worth a fortune.  Well it’s usually not.

Make visits

Set up appointments to visit the existing restaurant business and be cognizant of the sellers wishes.  Which might mean going when the business is closed to avoid their employees catching wind of the possible sale.  Get a full tour of the place and take pictures and videos (ask for permission first) of the space and equipment.  These pics will be instrumental when deciding between places, figuring out remodel costs, showing it to others and when coming up with an offer.

Remodeling

Get a feel for the age and condition of all the equipment and take notes.  You will quickly forget.  What will you have to replace or add that they don’t have.  How much remodeling is necessary.  Can you get away with just paint or will you have to build walls and counter tops.  Have a ball park estimate of time and expense to open each particular spaces.  Does it look like the sellers been investing in their business or do you see a lot of deferred maintenance?  Check the big-ticket items like HVAC, hood unit, water heaters, plumbing and grease trap.  Also find out what will the landlord fix or invest. You may be on your own.

Make an offer

I would offer what you think the equipment is worth (do your homework) and counter a little higher if the seller is close and the deal is still worth it.  Don’t get attached and pay too much, it will hinder your profitability down the line. Getting open for the right price is critical.  If you find a good deal and agree on a price, take the offer to your business attorney to look over and finalize the transaction.

Opportunities are out there, you never know what situation a person is in.  They might take your equipment only offer right away or not even make a counter.  It’s just business, move on if the deal isn’t very good for YOU.

Do you have an interesting business you are thinking about buying?  Consider a Restaurant Coaching membership!  We can help assess business opportunities.

The post Buying an Existing Restaurant Business appeared first on Restaurant Coaching Online.

We have already talked about what type of restaurant to open, so given those parameters what should you look for when searching for a restaurant space?  There are three main options, lease a former restaurant, buy an existing restaurant and finally, build out a non-restaurant space.

If you are reading this blog then I am guessing that you don’t have millions to build out a new space.  It will be hard to maximize your profit if you have to start from scratch.  It will take years or decades to make back your initial investment.  We don’t recommend this option for the type of restaurant that we suggest.  There are more than enough former and existing businesses around that will save the majority of build out costs.

Whether buying a business or just leasing out a former restaurant space, there are many items to look for in a space.  The better the restaurant space is setup already, the cheaper the opening cost will be, and the more profits you will make long term.

Front of house space and build out

Lets start by looking at front of house considerations.  The front of house is broken into two main parts, the dining room and counter space and area behind of the counter.  A space where your dining room can have a minimum of 6 tables each with 4 seats, up to a maximum of maybe 10 or 12 tables.  Remember you want to keep the square footage and overhead low.  

Two top tables work great as you can push them together for dinner and larger groups, then for lunch it is possible to set the dining room up as 2 tops as the diners will most likely be solo or pairs.  These will also allow for building 6 tops easily without totally losing another 4 tops.  This will allow for the best optimization of the space.  Counter style seating if the restaurant space has room can fit several guests in a small area, it also provides a great place for people to wait when ordering takeout.

Tables and chairs

The dining room should be cohesive with new matching chairs and tables.  It is worth spending some money to make the dining room as professional as possible.  Commercial table and chairs can be inexpensive if you do a little searching.  Don’t fall in love with those fancy $200 boutique chairs and tables, $40 a chair should do it.  Dark colors work well with most styles and will hide wear well.

The dining room should get a fresh coat of paint before and after you open.   It is imperative to make people feel comfortable and a nice clean space will do that.   Make sure the color of paint matches your theme and add some nice artwork or decor items that also match your theme.   Avoid cheap plastic items, really put some work into designing the dining room.  Get creative but keep it tasteful.  Avoid promotional items from suppliers, maybe one if you are promoting beer sales.

Menu

A menu board is an obvious must.  Try to avoid the standard type and do something different.  A large chalk board can work if you have an artist friend who can come in to add the menu items.   A large TV can work, the prices are plummeting an an 80 inch TV can make a great menu.  All that is needed is the menu design in picture form and a casting app on an inexpensive tablet.  Bonus: that tablet can play your music and show online orders.

Make sure the ceiling is nice whether it is ceiling tiles or just open, get it cleaned and painted and keep up with it.  Check the ceiling tiles for water damage which can be signs of a leaky roof and make sure the landlord will address it.  Replacing a tile floor can be very expensive so try to find a space where the dining room floor is decent.  Wood is good and can be refinished inexpensively if needed.  Avoid a carpet floor like the plague, they are wear badly, can be stained easily and can harbor nasty smells.  If a potential restaurant space has carpet take a peak underneath, hopefully there is wood, or even concrete which can be refinished stylishly these days.

You will want rugs for the high traffic / walk ways and should be vacuumed at night and during the day when necessary. Get a rug service like Cintas so you can get new ones each week (they can also provide aprons, dish towels and other items). Do your homework with these services, many will only offer long term contracts, try to avoid that and at least get a trial period.

POS

Moving behind the counter you will need a place for the customers to order, and I strongly recommend getting a POS (point of sale) system.  Be sure to do your homework there are many players in this market some good some bad and some horrible.  Look for another lengthy post soon on these systems.

There will need to be some space behind the counter for dining room supplies, plastic silver ware, napkin, garbage bags, straws, etc.  Also, behind the counter you will need a beverage cooler of some kind.  We don’t really suggest going with a soda fountain as it takes up a lot of room and limits what you can offer, plus you can deliver it.  If you have the room you may want to price it out, but there really isn't much difference when you factor all the costs.  

Beverage

You can usually get a cooler at no cost to you through your local or national beverage distributor.  They are usually happy to give you one (really just borrowing it).  Some conditions might apply so you may only be able to put their product in the machine.  Just check with multiple providers and see what they will offer.

Handicap access is important and may be mandatory in your area.  If the space doesn't already have easy access entrance, make sure it can easily be upgraded to allow handicap access.  Restrooms will be necessary, try to find a space with at least two, one for customers and one for staff. Having separate men's and women’s for customers is great if you can find it.  You will most likely have to deal with what your space allows, because adding restrooms can be expensive.

A good rule of thumb is to have about 40% of the space for counter room and dining room.  The kitchen and storage should be around 60% of the space.

Back of house space and build out

The layout of your space is going to be very different depending on your exact situation, so let's talk about some general ideas to help.  We already talked about the FOH where you will have a dining room and a counter area.  Hopefully the space will allow for the counter space to be in between your dining room and kitchen.  The kitchen can be walled off with a pass-through window or it can be open.

The kitchen will be anchored by your hood unit.  Finding a space that has a hood unit already with fire suppression system will be paramount. It is very costly to install one from scratch and most likely outside the affordability of this project, unless you are well financed.  10 or 12 feet of hood space should be sufficient to hold the necessary equipment.  Existing hoods can be extended to handle pizza ovens or other equipment easily.

HVAC

Make sure to test the HVAC system. Make sure the AC works and the heat works WITH the hood unit on. Look for some divider between the kitchen and front of house.  You need to vent the cooking fumes AND keep the customers conformable.  The hood unit can suck all the air-conditioning or heat out of a restaurant in a few seconds if there isn't a good divider and/ or proper make up air.  If the space doesn't have adequate makeup air you may have to crack the back door or a window to keep the hood unit from pulling all the heat or air from the dining room.

The main line should be across from your hood unit with a sandwich unit, pizza station and frozen food freezer right across from the hood.  If the space is large enough put some prep tables behind the main line and put your main refrigeration behind that to create your secondary line.  The second Holy Grail after an existing hood would be a walk-in cooler and / or freezer.  Walk-ins are very expensive to install, but not might not be 100% necessary.  It is likely that reach in fridges and freezers will be sufficient if the space doesn't have the walk-ins already.  Just keep an eye out for spaces with them.

Plumbing

The space will need a dish station, which may be set in stone depending on the plumbing situation.  Be sure to locate the plumbing and how it fits in to the kitchen layout.  The plumbing can be moved and added, but it may cost thousands.   Run the hot water for a long time to get an idea on the condition and size of the hot water tank.  Make sure it will be sufficient.   Check for a grease trap, they will most likely be required locally.  They can be expensive to install if the layout is not right.

Bringing in an electrician to run some new outlets may be necessary but can be affordable.   Try to find a friend or try trading food.  Opening a trade account for handymen or tradesmen can save a bunch of money.  They are often out on the road and need to get lunch.

Office

Keep an eye out for a space that can be an office, maybe the space will have a dedicated office, or a nook that can be used for one.  All that is really needed is a little space for a locking file cabinet and computer.  There should be a utility closet, and hopefully it has a mop sink, or you may have to put one in.  Check with the health department because the mop sink may be required.

The restaurant space will need a private place for a safe.  Maybe in a closet or in the basement, preferably somewhere where you can lock it up out of view.  A safe with a drop slot works great so your employees can make drops without having the combination.

The restaurant space is going to need three dumpsters, garbage, cardboard, and grease. Make sure the outdoor space has room for all three and there is a decent way to conceal them if they are not out of sight.  Hopefully these spaces already exist.

Visibility

A good restaurant space will have visibility from the street and or a nice sign on the street.  Make sure it has easy access from the road and a good number of parking spaces.  Five would be the absolute minimum and hopefully there are a few on the street or in other lots for overflow nearby.   Decent street appeal is a plus but not necessary.  Most pizza shops are in strip malls, so the public will accept it.  If you can find something unique that fits the other requirements, jump on it!  Make sure you can mold the location to fit with your theme.

The fact is there is no perfect location and if you wait for it you will never open your shop.  There may not be many options where you are, so you are just going to have to settle and make it happen.  The demographics of the area are more important than a perfect restaurant space so make sure to weight each factor appropriately.  A great area with a bad space is much better than a great space in a bad area.  Just choose a space in a good to great area with the least out of pocket costs.

If you have a space in mind, or would like some more details about the description above, consider a Restaurant Coaching membership!  We can guide you through a space finding decision.

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