Are you entering the restaurant business but don’t know if you want to buy an existing restaurant or build your own? While purchasing an existing restaurant does have benefits, certain drawbacks could make building your own establishment easier. the-pros-and-cons-of-purchasing-an-existing-restaurant

The Pros and Cons of Purchasing an Existing Restaurant

Entering the restaurant industry can be a risky but rewarding venture. In fact, as much as 90 percent of restaurants close during their first year. Still, this failure rate shouldn’t discourage you; you could be the next great restaurateur!

While many entrepreneurs opt to start their own restaurant, you could also purchase an existing restaurant and make it your own. If you know of restaurant owners who are interested in selling their establishment, you may benefit from purchasing it, instead of starting from scratch and opening a new restaurant. Of course, as with any small business, there are pros and cons that come with buying an existing restaurant. In this post, we’ll reveal what the most important pros and cons are so that you can reflect and determine if this is the right decision for you.

What Are the Benefits and Downsides of Buying a Restaurant?

Pro - Access to an Existing Customer Base
When you buy a busy restaurant that’s already been open for a significant amount of time, this establishment will likely have loyal customers. This can be beneficial, as you won’t have to invest as much money into marketing. Patrons will be aware of your restaurant and will likely want to try your food.

If the restaurant is in an area that receives significant foot traffic, it can be even easier to grab the attention of former patrons. Just remember, you’ll still need to market your restaurant. Ask the previous owners if you can purchase or have their website and social media channels for the restaurant, even if you need to change the URLs (if you’re changing the business name) or update information, it’ll allow you to make sure that people in your area know about your establishment.

Con - The Initial Investment
Of course, there are significant costs that come with starting a restaurant from the ground up. Finding a lease, purchasing equipment, inventory costs, and hiring staff are all costs to consider. Plus, you’ll need additional cash flow to pay bills and afford other costs until sales start rolling in. However, there can be a large initial investment when you buy a restaurant.

Pro - Might Not Have to Hire or Train Staff
By taking ownership of a business, you may be able to keep existing staff members. These individuals will get to keep their jobs, and you won’t have to spend time or money on recruiting employees. Plus, these individuals will be trained on the basic skills that are necessary for performing their roles. Of course, it’s still important to ensure that each employee is performing their jobs correctly.

Con - Changes Might Be Unwelcome
Once you purchase an existing restaurant, you’re faced with some decisions that could make or break your success. Will you re-name the restaurant, take items off the menu, or give the interior a makeover? While some of these changes may be much-needed, others could push away customers of the original establishment. For example, a name-change could confuse people and cause them not to give your restaurant a try. Or, if you remove items from the menu, customers might complain that you’ve gotten rid of their favorite dish. Although it’s important to remember that you can’t please everyone, it can be challenging when your restaurant business is constantly compared to the former establishment.

Pro - Already Own Equipment and Other Inventory
One of the major upsides of buying an existing restaurant is that the previous owners may be willing to sell you equipment and inventory as well. Having an oven, silverware, linens, and other items that you’ll need to run your restaurant will save you time and additional funds.

Con - The Establishment Might Have a Bad Reputation
If you are buying a restaurant that had past PR problems, it might affect your finances. Just like you could attract customers, if people associate the former owners and their restaurant with negative topics (bad customer service, gross food, suspended liquor license, cleanliness issues, etc.), they may not want to try your restaurant. So, if you’re interested in buying an existing restaurant, make sure to do your due diligence and identify any red flags. While there are some financial benefits to purchasing an already-opened restaurant, if the business has a bad reputation, it may make it difficult for you to prove to customers that it will be different under your ownership.

Is Buying an Existing Restaurant Right for You?

As an entrepreneur, it’s important to determine what the best way will be for you to open a successful restaurant. It can be exciting to start your own restaurant from the bottom up, but there are also benefits to buying a restaurant. Before you sign on the dotted line, make sure you consider these pros and cons and determine what’s best for you as an entrepreneur - and your finances.

Katie Alteri is the content marketing coordinator at Fora Financial, a company that provides small business loans to companies across the U.S.