Billy Couper of property agent Christie + Co

How to buy a restaurant

19th April 2007, 12:07pm

By Billy Couper, Associate Director and Head of London Bars and Restaurants Department, Christie + Co

In buying a restaurant, the same fundamentals apply as in buying any business. First, you must decide if you are temperamentally suited to the restaurant business; next, you must decide on the type of restaurant you wish to buy and run; and, finally, you must set about searching for and buying your restaurant.

You should also be thinking about how much money you can put into the business and about how much money you expect to get out of it. For your restaurant to survive in the intense competition on the high street, you will need to consider and develop your USP (unique selling point), in order to capture your share of the market.

There is a distinction between buying an existing restaurant and starting your own restaurant. Starting a restaurant from scratch is the harder of the two options. Buying an existing one can be relatively straightforward. It will be much easier to borrow money in order to finance a business that is continuing than to finance one that is starting up.

It is very common for people to buy one type of restaurant and change it into another. As with every business purchase, you need to have an adequate plan which includes a Business Plan and a Financial Plan.

The restaurant is essentially a two-function business: one in the kitchen dealing with the food, and the other at the front of house dealing with the customers. These call for two distinct sets of skills. The skills for the daily operation of a restaurant need to be developed alongside the skills needed to run a business.

If this restaurant is your first business, you need to concentrate on learning how to handle money, goods, customers, authorities, staff and family. It is highly advisable to have some direct knowledge of the catering trade; if you lack this, get it by working for someone else for a few months.

One of the best places to start looking for information about the UK restaurant industry is the Restaurant Association (part of the British Hospitality Association - the BHA). It deals with matters of regulation and licensing, staffing and employment relations, education and training, service charges, food safety, and the range of legislation and other issues that will affect how you run your restaurant.

It also works with around 50 approved Patron Suppliers, who offer products and services to full members, often at discounted rates. Good business agents who sell restaurants, pubs and hotels - both in your area and nationally - can also be important allies.

There are various fixed costs which have to be met whether or not people are eating in your restaurant: examples are mortgage payments, staff wages and salaries, insurance, business rates and rent, repairs, heat, light, telephone, marketing, advertising and so on. In the early stages, these costs will probably exceed the income and this must be planned for.

Once you have decided on what kind of place you want to own and run, you then have to set about looking for one. The trade press and business agents are the best places to start.

The restaurant accounts should show the trend of profit or loss over the previous three or four years; any restaurant reviews would also be helpful.

If you are buying an existing restaurant, forecasting is relatively easy since you will have some sense of the historical figures.

Once you have completed your research on yourself, on the type of restaurant, on the location, and on the specific business you want to buy, you have only to finish the actual purchase. Before you do that, learn what else you can. Although the agent acting for the seller is not representing you, they can be of great help in taking you through the process in such a way that everybody benefits. It is essential to have a Structural Survey and Valuation Report for the restaurant you want to buy. The Valuation Report gives you the facts and figures, and the Structural Survey will reveal any physical defects you might take on.

Some helpful tips:

• Build up a fund of ideas - keep a record of good ideas (and bad ones too) gained from every restaurant you go into.
• Entering the restaurant business may be a good way to build up your wealth, but it will not happen immediately. In the early stages, the costs will probably exceed the income and this must be planned for.
• Whatever the type of restaurant and whatever its location, it is important to visit as a client at various times of the day.
• Price alone will not bring customers into a restaurant; but an astute combination of this, the right product, service and image will.
• Be conservative; it is easier to spend than to save, easier to incur more expenses and harder to create more sales.
• Make sure you ask about the number of covers served and consider whether you will be able to increase this.

About the author: Billy Couper, Associate Director, can be contacted in the London Bars and Restaurants Department at Christie + Co on Tel: 020 7227 0715 or e-mail billy.couper@christie.com

For reference: How to Buy A Business by Andrew St George, published by Christie + Co, is available for sale via www.christie.com at £15.45 (inc VAT and P&P)