Let’s look at option 2
Why buy an existing restaurant? v.s. to start one from scratch.
The answer my friend is in the wind. The stats talk, 92% of new restaurants opening fail. If you buy an existing one opened for at least 5 years or more, you already are in the 8% of those who survived.
If you buy an existing restaurant you will need to do the following:
- The amount of cash, will be determined by the price of the business. The best plan is to give a down payment and have the owner carry the balance. You still will need cash for the rent and the basic expenses, a bond for the State Board of Equalization, food, utilities, payroll, a bond or deposits for utilities and telephone, let’s not forget about the Workman Compensation. You also need a safety to allow extra cash for the unexpected. You bought an existing restaurant who knows about the plumbing, one of the stove giving up on a Saturday night, a toilet plugged in the middle of a rush hour. You also might loose business due to the fact regular customers not returning because the old owners are gone. This might drain your cashflow and not being able allow to reach a positive balance sheet for 3 to 6 months. During the first 6 months you will have to pitch $$ to keep the beast alive. Do not forget about the accountant and maybe your shark. You might want to keep the shark out of nibbling at your hard earned $.
- You will need to change the sign if you decide to change the name. it might not be a great idea to change anything, until the customers have accepted the transfer of power.
- The most important step is to keep the staff or at least most of them. Keep the same food, same menu––Same everything thing. Visit every table and introduce yourself with a smile, stating that you do not intent to change anything of the venerable establishment. You should not make any change for at leas 6 months to 1 year. You bought an existing business for one reason, one reason only. It showed positive income, don’t mess it up with your ego.
- Changes you need to make? Obviously you want to increase the bottomline, you have a working tool, now is the time to think about Nirvana?
- Very carefully, with small steps one at a time, like a ballerina make your changes. You have studied the menu way before you went to Escrow. You have made up your mind about what’s good and what needs change. You have identified the cash cow, the star and the dead horse. With your Business Plan in hand you have analyzed every corner of this new baby. The inventory is adequate, Y or N? The staff? Over-staffed yes or not? The purveyors? Did the previous owners had the best deals? Do you have to make changes? How is the staff Training Program? There is no Training Program…, Ooops, put one in place right away. Is there an operation manual? Nope…, Ooops, put one in place the very minute you take control of the restaurant. What about the Employees Manual is there any? Marketing Plan? Nope every thing was left to random mood of the previous owners. Put a Marketing Plan in action––Right NOW!
- Now the major steps are implemented, you now control this little devil, and are ready to be the captain of the ship.
- Taking over, what does it mean? Changing everything to make it your own? Hey fellow, you have an ego problem? This is ain’t time for that kind of crap. You have to write this down––Rather print a banderole with your computer. The banderole with say in the biggest letters that your printer is capable of = This restaurant is not mine, it’s my guests’ restaurant. My job is to make sure, I give them the best service and food Quality possible every and single time they deign to visit my establishment.
(more to come)