You’re ready to move forward
You’ve found a restaurant you’re interested in and now you’re ready to move forward. You must obtain preliminary information on price, terms, income, cash flow, and general location. There is no point in continuing the buying process if the amount of cash necessary to buy the restaurant is more than you are willing to invest. At this point, don’t worry about the full price. It’s important, but the key factor is the amount of cash that is necessary to buy the business. There is very little outside financing available such as banks, etc., for those who are purchasing a new business. The great majority of restaurant purchases are financed by the seller. This is why the amount you are willing to invest is a key issue.
The Process
- Complete an NDA (Non-Disclosure Agreement)
- Business Summary
- Visit the Restaurant
- Get Your Questions Answered
- Obtain any Additional Information you may require
- Make an Offer
- Due Diligence
- Start Escrow
- Close the Deal
Complete a an NDA or “Non-Disclosure Agreement”
First and foremost, an NDA must be signed by both the buyer and seller. This maintains confidentiality for all of the information provided to you on the restaurant as we review, discuss, or present. The confidentiality agreement protects the seller and is required. Your information is kept confidential.
Business Summary
After the necessary confidential agreements have been signed, we’ll take some time to review the restaurant with you. This review will generally include: the Business Summary, history, hours, licensing, product overview, sales process, marketing summary, customer concentration, staffing, competition, suppliers, location, lease, equipment, inventory , accounts receivable and payable, expansion potential, training, and non-compete.
Visit the Restaurant
Next we’ll visit the restaurant to see if you like the location and the looks of the restaurant itself – both inside and outside. This is a visual inspection, pretend you are a customer as at this point we are not ready to talk to the owner. If the business is the type that does not lend itself to a visit, we’ll schedule an appointment with the seller to inspect the restaurant, or have the seller’s representative schedule a visit. There is no point in going any further if you don’t like the physical location of the restaurant or the appearance of it.
Get Questions Answered
If you like the restaurant up until this point, you may want to ask additional question. They may include: What is the rent? How long is the lease? What have been the sales for the past few years? Can the seller support the figures you have been told? This is not the time for scrutinization. There will be plenty of time to do that and review other important issues during the due diligence phase. This is the time to get those questions answered that have a bearing on whether you may want to own and operate this particular business. It is also the time to get your questions answered about the restaurant itself.
Make an Offer
If you now have your basic questions answered and you want to proceed with purchasing the restaurant, now is the time to make an offer, subject to verification of all the information you have received. The main purpose in making an offer is to see if the seller will accept your terms, price, and structure of the sale itself. Remember, you will have the offer subject to your verification of the important information. It doesn’t make sense to employ outside advisors and go through the time and expense of due diligence unless you can come to financial terms with the seller.
Due Diligence
At this point, you are ready to perform what is commonly called due diligence.
[idea]Unless you are completely familiar with the type of restaurant purchased, it is beneficial to include as part of the agreement that the seller will stay with you (30 days is fair, with perhaps another 30 to 60 days of telephone consultation) a sufficient length of time to teach you the restaurant – at no charge. If you want the seller to stay longer, it may be best to offer to pay him or her a consulting fee of some type.[/idea]
Escrow
If due diligence is up to your satisfaction, a deposit is made to open escrow. Like buying a home, escrow prepares all closing documents and will conduct necessary legal searches. Closing costs are normally shared by buyer and seller equally.
Closing the Deal
Congratulations! Like so many that have successfully used Business Broker California, you are now a proud restaurant owner. At this point you should announce the new ownership to the employees and begin the transition period with the previous owner.
