BigHospitality puts one reader's question about what to look out for when acquiring a new restaurant, pub or hotel property to Simon Chaplin, director at property agent Christie & Co.
Problem: We are taking over a small restaurant in London (Soho) but what key areas do we need to address and double check before signing on the line with the landlord? - Lisa Rudolf and Francesco Cunsolo.
Solution: Every business up for sale must be carefully scrutinised before you sign on the dotted line. You’ve decided on the business that you want but how do you know you are paying the right price? There isn't a quick and easy answer to this as there are many factors to take into consideration. Ultimately the value of the business is linked to its potential to make money, either in its existing format or as you intend to operate it.
As the majority of restaurants are generally leasehold, you will need to take into account how long is left on the lease, what rights you have under the lease, and when your next rent review is due. With all the costs confirmed you need to establish what is the minimum amount of money the restaurant needs to generate to meet your targets?
The value of the business will also depend on how much of the custom is dependent on the current operator and how much is down to the property itself. If the reputation is attached to members of staff, will they be staying on after the sale?
Get a full rundown of the business’s accounts. Is it making money? Is it a stable business? Is there evidence of growth and how up-to-date are the accounts? Examine each asset that comes with the business. Is the current equipment leased, outdated or under warranty?
Research the local area
You should always research the local area in which your business is based. Is it the best area for the restaurant you are looking to operate? Who are your rivals? Is their parking for customers? What is the average age of the local population and the average wage?
Always check out any impending changes in the area or market which could impact on the business. Call the local planning department to find about any planned road changes or new proposed developments. Are there any restrictions on signs you can put up or to external seating? Will it be difficult or expensive to get, or change, your alcohol licence?
Finally, get some professional advice from a licensed property agent, finance broker, bank or accountant to get the best overall picture of what you can afford, what your returns could be, and whether any site you have chosen is actually worth buying.
All this week BigHospitality will be looking at how operators can expand their business and brand across two or more sites. For more help and advice on acquiring a property, financing and fitting it out, see our Special feature on building a chain.
Please send your questions to firstname.lastname@example.org with Ask the Experts in the subject line.