The Money Part II

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:

  1. 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 $.

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