Looking to buy a restaurant and want to do a thorough background check? here are 20 important questions to ask when buying a catering business for sale.
One way to start a business is to buy a business. While not as easy as it may sound, the truth remains that buying a business will allow you to overcome some of the hurdles you will face if you start your business from scratch.
Please note that buying a business by itself does not guarantee your success, especially if you haven’t done your due diligence before purchasing a business. Performing due diligence means you need to be able to ask the right questions, and the right questions will help you make the right decision.
Knowing the right buying questions for any restaurant for sale is key to a successful purchase and will help you find the right business information. In fact, if you ask the right questions, you can buy a successful restaurant business that will start making profits for you in no time.
I must mention that no salesperson would be happy to point out any red flags or issues that are causing them to sell a restaurant. It is your responsibility to ask the right questions that will tell you everything you need to know before making a financial commitment. If you don’t ask the right question, you risk losing. So, if you are interested in buying a restaurant business, here are 20 important questions you should ask a salesperson.
Buying a restaurant business for sale 20 questions to ask
- Why is the restoration for sale?
The main question you should ask a restaurant salesperson is why they are selling a restaurant. While you aren’t supposed to give an unbiased answer to this question, you will surely get an indicator of the real reason the restaurant is listed for sale.
After that, you will be able to know whether you should make a deal or cancel it. For example, if you find that the reason a restaurateur sells a restaurant is because the government has awarded the property for demolition and the restaurant owner has been given a 2 year grace period to move out, would you like when even close the deal? Of course not!
- What is the asking price?
The second important question that is expected to be asked of you, especially if you are in cold blood with why the owner is selling the business, is knowing the asking price. Of course, the asking price will determine whether you can continue to decline. Please note that regardless of the asking price, it is always open for negotiation and you must negotiate according to your financial capacity.
For example, you might be surprised to find that the restoration is for sale with an asking price of $ 200,000, which could sell for $ 50,000. It all depends on your negotiating skills and, of course, the seller’s desperation.
- What assets are included in this asking price?
When a business is put up for sale, there are also assets that a buyer can get by acquiring the business.Another key question that you will need to ask yourself if you want to buy a catering business is knowing what assets are included in the business. the asking price.
The truth is, in some cases, the assets included in a restaurant’s asking price may just be a tempting bait to get you to buy a restaurant.
For example, a restaurant for sale may have delivery vans, standard cooking and cooking equipment, free parking, and security gadgets, among other things, as part of the assets you inherit when you buy the restaurant.
- What is the history of the company?
Another important question that you should ask yourself when looking to buy a catering business or any other business is knowing the history of the business. Knowing your business history is part of the information you need to make an informed decision.
In fact, it won’t be a wise decision to buy a restaurant business that you don’t even know exists. At least you need to know when the restaurant was founded, who was the founder, how consistent the business was, what difficulties the restaurant had to face, why the restaurant is famous and its achievements. years.
- Do you have the experience you need to make this restaurant business a success?
Besides asking the restaurant salesperson why they are selling their business, it is very important that you also ask yourself questions.
One of the questions you should ask yourself before buying a restaurant business for sale is whether you really have the experience you need to ensure the restaurant’s success when you eventually acquire the business. Note that there is not enough money to buy a catering business, your experience is one of the important factors that will help you grow your business towards profitability.
- How long is the seller willing to give you the due diligence your lender requires?
Another important question to ask when buying a restoration business is how long the seller is willing to give you due diligence as requested by your lender, which is of the utmost importance as no lender will not want to give you money to buy. business if you haven’t done your due diligence. So try asking this question even if you are borrowing money to finance the purchase of your restaurant.
- Is the catering rented now? If so, will the lease expire? Do I have to renegotiate the contract after the expiration of the current contract?
Part of the questions you should ask yourself when buying a restaurant for sale is whether the restaurant business is currently leased.
If the restaurant is entered into on a lease, it means that one day the contract will expire, therefore you need to know the date of the end of the lease, and whether, as the new owner of the business, you can freely negotiate the terms of the lease. In fact, if you are a good business negotiator, you can get a fantastic deal that will help you cut costs, especially for a new business like a restaurant.
- What licenses or permits do I need to operate a restaurant business?
In the United States of America, and of course in most of the developed countries of the world, you cannot freely conduct any business activity without applying for and obtaining the necessary licenses and permits to do business in the city. Therefore, it is imperative that you ask the owner or the restaurant salesperson has all the necessary business licenses or permits to do business in the city and, if possible, how to apply and obtain a license or permit.
- Who are your main competitors and how does each directly affect your income?
Another important question you should ask yourself if you are truly interested in purchasing a catering business is to educate yourself about the business’s biggest competitors, as well as how each of the competitors directly affects the business. business income.
Answering these questions will help you develop highly competitive strategies that will give you an edge over your competition. Note that there is hardly any business that has no competitors in and around the business, so you need to know them and how to maximize your sales despite their presence.
- What kind of staff do you need to make sure you stay in the restaurant after closing?
It is interesting to note that when a business is sold, it is a tradition that one or more key employees or members of the management staff are appointed when the position of the company is closed to ensure a smooth transition of the company. business from the previous owner to the new owner, as well as to train new employees to run the business without too much stress. …
Basically, one of the key questions you should ask yourself is what employee (s) will be needed for this purpose and what role they currently play in the restaurant.
If you are not satisfied with the employee designated to play the role, you can request a change during negotiations; that’s part of the deal. You can also find out if the restaurant vendor will be staying for some time after the sale to ensure a smooth transition.
- Does the restoration strongly depend on the personality of the owner or is it sufficiently independent of the owner?
You might be interested in the fact that some businesses are driven by the personal brand of the owner and not the brand of the organization. For example, a restaurant business that is owned by an award-winning chef probably depends on the personality of the owner, and you wouldn’t want to buy such a business because you are likely to have a hard time growing the business.
So part of the question to ask when buying a catering business is whether the business relies heavily on the identity of the owner or whether the restaurant is independent enough from the owner. If you have to buy a restaurant, it is advisable to buy one that is quite independent of the owner. That being said, you can easily continue to grow your business rather than trying to go into business.
- What were the gross annual revenues of the restoration? over the past two years and on time?
Another important question that you shouldn’t ask yourself when buying a catering business is knowing the annual gross income of the business. from the last two years to the present day. The answer you get to these questions will help you make a financial projection. You will be able to learn more about the profitability of the business, and if you plan to buy a business with a loan, you will be able to design and work on a viable payment plan.
- What has been the annual net profit from catering over the past two years and today?
Besides the information on the gross annual turnover of the business over the past two years and up to today, another key financial question that you should ask yourself is the annual net profit of the restaurant business. for the last two years and the latest data.
This will give you a clearer idea of the profits you are likely to generate from the business, as well as strategies that will help you increase the profits of the business when you eventually take over the business.
Just because some companies don’t make a profit doesn’t mean they can’t make a profit. So, if the business is not profitable, there is no sufficient reason to refuse to buy the business. With the right business strategies and approaches, you will be amazed at how profitable the business is.
- What are the existing obligations of the restoration?
Without a doubt, when a seller wants to sell a business, he will make sure that he will do his best to hide anything that will cause him not to sell the business and hiding the commercial commitment is part of it. Therefore, if you are considering buying a restaurant for sale, you should definitely ask questions that will help you determine what existing obligations will be transferred to you.
Some of the responsibilities you are likely to inherit are unpaid overtime, unpaid sales tax, health code violations, or other obligations. Believe me, if these obligations are not handled properly, they can compromise your ability to successfully run a restaurant business.
- Is the rental contract transferable?
Earlier we talked about the need to know if a restaurant is rented. In the future, you also need to know whether the restaurant lease is transferred to the new owner unconditionally. Please note that in addition to the establishment’s rental agreement, some restaurants also have a rental agreement for their equipment, vans, even furniture, etc.
- What is the condition of the hardware you inherit?
Another important question that you should definitely ask yourself when shopping for a restaurant is the condition of the equipment you will inherit. The truth is, as a new restaurant owner, you wouldn’t want to start by earning huge amounts of money for renovations and trying to make sure that the equipment you intend to inherit is in. good condition before starting the business. If you need to inherit equipment that is not in good condition, you can use it as a beneficial trade condition.
- How do people perceive a restaurant? in the city?
Another important question that you should definitely ask yourself when buying a restaurant for sale is how people perceive the restaurant. Of course, you don’t expect to get a real response from the restaurant salesperson so you should do all you can to ask people in the near future. community, what do they think of the restaurant.
For example, if you find out that the restaurant you’re about to buy is a household name in the city, and customers proudly identify with the restaurant, do their best to purchase the restaurant. Remember, in the restaurant industry, perception is everything.
- Is the restaurateur ready to sign a non-competition clause?
One of the downsides of buying a restaurant based on the personality of the owner is the owner’s ability to open a similar restaurant in the same location. This will make it easier for the owner to transfer most of his customers to his new restaurant.
This is why it is very important to ask if the restaurateur wants to sign it. non-competitive disclaimer when a restaurant is sold to you. For example, for a restaurant built with the owners’ recipes, cuisine, and culinary style, it is easier to create a new restaurant in the same location while attracting the majority of old customers.
- Will you inherit a liquor license from the restaurant owner, if applicable?
Restaurants looking to maximize their profits often sell alcohol and beverages, which is why a liquor license must be applied for and obtained. Therefore, if you are interested in buying a restaurant for sale, it is important to know if it sells alcohol, and if you need it, you should know the status of the alcoholic beverage license. and the possibility of transferring it to you. Of course, you don’t want to be on the other side of the law selling spirits in your restaurant without a proper spirits license.
- Who are business people, what are their roles and what do they do every day?
Finally, you may want to know all the people in the company and the roles they play in the day-to-day management of the restaurant. The answer to this question can give you a clear idea of how many people will be working and what role they should play. You will also be able to find out if you can merge a certain position in the restaurant, particularly in an effort to cut costs, as it is the new leadership that is running the business.
There you have 20 important questions to ask if you are interested in buying a restaurant for sale. Note that there are more questions you can ask and all you have to do is make sure you are creative with your questions and you will definitely get more information than you expect. Good luck with your restaurant purchase.
