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Don't Buy a Restaurant for Sale Until you Review This

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Masterchef and MKR make running a restaurant look glamorous. You will serve delicious foods, people will come and eat and enjoy. It all looks blissful and successful. Maybe stressful when you burn a dish or it doesn't have time to set - but a real world restaurant sounds like a good idea.

If you have watched a few episodes of Gordon Ramsay's Kitchen Nightmares you will come to realize there is so much more involved. The owners' opinions, chefs, customers, wait staff, everyone has a piece in the pie and everyone is important to the success of a restaurant. These are elements that are important to consider when you look at a restaurant for sale.

What people need to know when reviewing a restaurant for sale is how much workload is actually involved. There are alot of people working behind the scenes in these shows, there is a lot of work that may not appear but any restauranter will tell you, running a restaurant business is hard work!

So it's important you don't buy a restaurant for sale until you have read these 3 pointers.

  1. Profit Matters!

How much money the restaurant is making is so important. Don't get caught up in the glitz and glamor!

There are so many elements that go into making a restaurant profitable from the produce you order, to the dishes you make to the number of staff you have working to the penalties you have to pay. Working out that sweet spot between what you are spending and what you are making is important.

Here is a list of major expenses every restaurant for sale will have, ensuring it is making more money then these items when a restaurant is profitable.

  • Rent - this will be a big chunk of the expenses especially if in a prominent location such as a Westfield Shopping Centre or popular tourist location

  • Wages - You can’t run a restaurant without a chef and wait staff. These are high expenses and there are weekend penalty rates to consider

  • Produce - What dishes you are making and the cost of produce will impact the net profit you make on a dish. If the price of lettuce increases, like it recently did to $12. How will you account for that in your dish? You need to source good produce that is cost effective and you can have a decent profit on.

  • Marketing - Where the restaurant for sale is located will probably dictate how much is spent on marketing. If you're in a high traffic area, your marketing budget may be lower than if you are expecting people to find you in an obscure location.

  1. Lease is Everything!

Don't buy a restaurant for sale if the lease is ending soon! What are you actually buying? The success of a business is heavily dependent on the location - especially a restaurant. If you buy it, and the landlord does not renew the lease, all you have is the equipment and the brand name. Once you try to move it, you will find it very hard to get the customers to follow you. Even if they do, is it worth the same value you paid for the restaurant for sale?

What you may find is the current landlord may not renew your lease, then rent it to another restaurant that is willing to pay more. The clientele will just think you have rebranded and you will have paid way too much for the business for sale. So always check the lease.

  1. Experience

Do you know what you are doing? Experience in hospitality is very important. Maybe you are a chef and want to have your own business so you look at restaurants for sale. This is great! You know how to cook, manage a menu and price products. You have a very good understanding of what is involved.

What a lot of hospitality specialists forget, especially chefs, is that a restaurant is a business and it's so much more than just the menu. It's the marketing, listening to clients, managing staff, balancing books, staying on top of reviews and social perceptions. You can't run all of that whilst cooking the food. You need a good team around you.

If you plan to buy a restaurant for sale make sure you have experience not only in hospitality but also in running a business. If your partnership and one of you can run the front of house and the other the kitchen - this is a good combination.

Final Thoughts

If your dream is to buy a restaurant for sale and serve delicious food then you're on the right track. Always get advice from professionals so you don't make any major mistakes like not having a good lease.

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