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Restaurants . 6 months ago

What You Need to Know Before Buying Your Own Restaurant

What You Need to Know Before Buying Your Own Restaurant
  • For many, owning a restaurant is a dream come true. For those who love food and people, having your own restaurant sounds like a perfect marriage between those two things you love so much. But it isn’t all sunshine and rainbows, obtaining a restaurant is a significant step to take and a major investment. Before you take the plunge, it’s a good idea to ask yourself “What do I need to know before buying a restaurant?” before committing to anything. 

    How Much Does a Restaurant Cost?

    For a novice, buying a restaurant in Canada might sound easy. All you need to do is have good food to offer your customers. The truth is, there are more factors to consider when buying a restaurant than that one. In addition to good food, you’ll also need location, kitchen equipment, tables, furniture, signage, and employees. For the would-be restauranteur, there’s quite a lot more to do than one might expect.

    Buying a restaurant can be less costly than starting your own restaurant from scratch, but that’s still a significant investment on your part. It always helps to be aware of what you need to know before buying a restaurant, so be sure to do your research before you do anything.

    6 Questions to Ask Before Buying a Restaurant

    Before any undertaking, it’s always a good idea to ask yourself some hard questions before doing anything final. In this case, it’s knowing what to consider before opening a restaurant. These questions are a great way to check how prepared and committed you are to buying your restaurant. Acquiring a restaurant is a major step, and it pays to know if this really is the direction you ought to take. Some essential questions to consider include;

    1. Why are the owners selling?

    The first question to ask before buying your restaurant is why that restaurant is for sale in the first place. If the restaurant is successful, why sell it? Sometimes, the reason is a perfectly innocuous one, like the owners retiring. In that case, you may be able to retain the name, brand, and menu intact and carry on with minimal fuss. 

    However, if the original owners are having problems, that may mean problems for you as well. Once you sign the lease, you inherit the restaurant as a whole, including any problems they may have. Take great care before finalizing any deals to ensure you don’t end up in a difficult situation.

    Alternatively, if the restaurant owners are selling due to financial trouble, it may be an opportunity for you to rebrand or introduce new service models. Keep your eyes open to determine if buying this particular restaurant means opportunity for you.

    2. What is the restaurant’s value?

    Be sure to check reviews of the restaurant to gauge diners’ feedback

    Like any serious investment, it’s also a good idea to find out if the restaurant you plan to buy turns out to be a viable one. Before handing over the payment, it’s worth your time to find out if the asking price is based on a documented, verifiable amount. Go over the financial documents, tax returns, and leases to ensure you’re getting a fair price. For this stage, professionals like lawyers and accountants can help you go over the paperwork with a fine-tooth comb.

    Assessing the restaurant’s assets and finances is also a way to prepare your restaurant’s business plan. Once you have a clear picture of profit and loss, tax returns, and bank statements, it’s much easier to prepare to open the restaurant and ensure you start strong..

    3. What is the restaurant’s reputation?

    One more thing you should know before buying a restaurant is what its reputation is. Resources like Google and Yelp are invaluable because you can get an impression of what the restaurant is like from people who’ve actually eaten there. Even if you’ve eaten there yourself, it’s worth getting diners’ opinions of the restaurant to gauge how to proceed in the future. Knowing which are the most renowned restaurants in Toronto, for example, is also a great way of finding out what resonates with diners and what might work for your customers.

    If the restaurant’s opinion is a negative one, you may still be able to salvage its reputation with a rebranding. It may be a difficult job, but it’s not impossible. In the case of a positive reputation, it might be a good idea to downplay the change in management instead, at least until you’ve found your footing.

    Another reason to pay attention to reviews is that it also gives you an idea of what your potential diners are like. Does the restaurant get plenty of foot traffic or driving traffic? Does it see plenty of families or clients with money to burn? These kinds of questions strongly inform how you proceed once you take over management.

    4. How is the equipment, and will you own it?

    Keep track of the staff to find out if you can retain them after the handover

    5. Restaurant equipment is one of those surprise expenses that can add to the cost of taking over. When you buy the restaurant, you’re also purchasing the furnishings, fixtures, and equipment (FF&E). Take care to inspect all the equipment to ensure it’s in good condition. Take note as well how old the equipment is and when they were last inspected. In case repairs or replacements are necessary, require the seller to repair or replace them to save you from having to do it yourself.

    If the equipment isn’t included in the purchase, take note of what equipment is present to determine what you need to buy. Equipment is essential to a restaurant, for practical and health and safety reasons. You must have everything you need to get the restaurant up and running once you’re in charge.

    6. How will you handle existing staff?

    One question you need to ask when buying a restaurant is what to do with the existing staff. If the business is doing well, it may be a good idea to retain most of the staff. They have experience working at the restaurant, and working as part of the same team. If the restaurant’s finances are healthy, it also indicates that the staff is doing well and it might be prudent to keep them on.

    Alternatively, if you plan on making sweeping changes, it may be best for everyone if you let the staff go. Major changes may affect their performance and morale, and it might simply be best to let them go and start afresh.

    7. Is there an existing liquor licence, and is it transferable?

    For many restaurants, liquor is a major moneymaker. Knowing which licenses and permits you need to open a restaurant in Ontario matters, and that includes licences to serve liquor. If you plan to make liquor part of the menu, take care to ask the owner about the liquor licence. Transferring the licence requires approval by the Alcohol and Gaming Commission of Ontario (AGCO), and requires an application via their portal before the change of licence can be made. For convenience’s sake, remember to take care of documentation early. Getting approval may take time, so the sooner you start the sooner you can resolve any issues with the licence.

    Buying your own restaurant is a challenging undertaking, but if you put in the hard work, it’ll all be worth it. Asking the hard questions is just the way you ensure that you’re acquiring a restaurant worthy of all the effort, and one you can trust to stay afloat when you start operating. Once you know how you can open your own restaurant in Canada, you can start strong and start your new restauranteur life with a bang. 

    At Toronto Restaurant for Sale, we’re all about helping clients buy, sell, and lease their restaurants, and make the process as convenient as possible. When you’re looking for a restaurant for sale in Toronto, we’re the ones to call.  We have a wealth of experience helping clients like you achieve their goals, whatever they may be. Give us a call now at (416) 898-3838 to get help with your real estate needs. 

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