How To Purchase A Restaurant Business - Contemplate All The Problems - By: Richard K Parker

Always expect the unexpected and look for potentially nasty surprises whenever you get ready to buy a business. You can apply this thought more aggressively when it comes to buying a restaurant, as even though this is one of the more popular purchases out there, you need to worry about its potentially high record of failure. Look for all the potential issues before you consider inking any deal.

Many people mistakenly believe that the decision to swap ownership is merely between the buyer and the seller. While these two individuals are certainly the principles, other entities have considerable say. One of your first jobs must be to communicate with the landlord, assuming that it is a leasehold property. There may well be a clause in the lease which dictates that the business may not be sold without the landlord's consent, as it is in their best interest to ensure that the business is likely to continue and succeed, or the asset could be devalued.

You also have to consult with the health department early on in the proceedings, to see that there are no outstanding issues, but also to be wary of any move by them to use the sale of the business to initiate code enhancements or upgrades. Whenever you find a restaurant for sale, look at the health department's history going back a couple of years and this will help you to work out if you need any money for potential upgrades.

If sales have been somewhat static or not moving in the right direction for some time prior to your considered purchase, dig deeply into the actual reason for sale. The owner may say one thing, but it is your job to determine otherwise and to look between the lines. There may be a number of reasons involved which, when accumulated, could be significant. For example, impending road construction may cause access difficulties in the months ahead. Certain items of equipment may be nearing their end of life and capital investment issues may combine with the threats posed by that road construction. Gather all your snippets of information and intelligence and make an informed decision.

During the process of due diligence take a look into the past and don't be afraid to engage the owner if you see something untoward. If there appear to have been any problems with contractors or other suppliers, get to the bottom of it. While you may not be liable for any unpaid bills following the purchase, the business itself may be on the "blacklist" of some of those disgruntled creditors. It is better for you to reveal these issues now and see if they can be patched over, than to have to try and make up this ground in the future.

Whenever you buy restaurant business assets, it is a good idea to put some of the funding in escrow, to be released to the seller based on performance. This way, if anything comes out of the woodwork which should have been revealed, you have a course of action to protect you.

About the Author

Richard Parker is the president and founder of Diomo Corporation - The Business Buyer Resource Center, his materials, seminars and consulting have helped thousands of business buyers realize their dream to buy a business. Want to find out more about business buying strategies that really work, then look no further than=> http://www.diomorestaurant.com

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