Turn key restaurant business, put simply, is taking over an existing restaurant. Sometimes, when capital is abundant and time is not, purchasing a turn key restaurant or a franchise might be the next great step in business direction. It could even be a very cheap, unsuccessful business that you could completely turn around, right now! We bring you a breakdown of what to do and know before delving there.
The Pros of Buying a Restaurant
It’s a turn key restaurant operation, more or less. While you may opt to make some changes to the menu or overall restaurant design, an existing restaurant is well, existing. In theory, it has proven that it is a profitable enterprise. You don’t need to worry about what type of equipment you should buy, or designing an effective dining room. It’s all done for you. Depending on the final price, buying an existing restaurant can be far less expensive than starting a new restaurant from scratch.
Disadvantages of a Turn key Restaurant
Entrepreneurs considering buying a franchise business should always do their due diligence and be sure they know exactly what a particular turn key restaurant operation includes: franchises often have internal structures and legislation.
Franchise businesses are usually very restrictive – the owner has much less control on how the business is run and compared to an independent business. For instance, the contractual requirement to purchase equipment and supplies from head office means you cannot obtain these items from less expensive sources.
Before Turn Key Restaurant Decisions
Prior to investing any time or money into turn key restaurant projects, there are a few critical questions you need to ask yourself. Consider this a buying an existing restaurant checklist:
- Where does the restaurant currently advertise? Have they found an advertising scheme that works for them, and why so? Even if it didn’t work, maybe you could carry out the idea better. Learn from the successes or failures of others.
- Will they issue you copies of bookkeeping records dating from the last several years? If not, it could be a very problematic secret they are not willing to tell you. Take these to an independent accountant for investigation.
- Does the restaurant have a website? Is it appealing to the eye and does it require some working on to match your ideas for the restaurant, and if so, is there a cost effective web designer for that available?
- Who are the current vendors that the restaurant is using? Are they on good terms with them? Are they reliable? Are there other vendors who the restaurant could be buying from and are not currently? Why not?
- Do the current owners and staff have good relations with other area restaurants? A few examples of reasons to be on good terms with other restaurants: these contacts can be frequently called upon to help you with a problem. You may need to borrow staff, or You may have run out of food. Food may not have been delivered in time for the start of service. It is a very good idea to have friendly relations with other area hospitality operations.
- Request a full inventory of everything that will be coming with the sale of the restaurant from plates to toilet paper. There are inventory companies who may be hired for a small fee to come in and check inventories for you. If the establishment refuses to give you this information there may be things that they want to hide and you should stay away from purchasing this facility.
You can look for examples of turnkey projects in international business for potential answers as to how to address these issues.
Also, why did this restaurant go out of business? Was it the location? The service? The food? A combination of all three? If the previous owners have gone without explanation, leaving the equipment for the landlord to deal with, you may never know the real reason why it closed.
Often turnkey businesses are well-established franchises with a recognizable brand and a solid customer base. A large up-front cost can be expected in buying an already established restaurant, but our agents can help distinguish whether there has been an exorbitant markup, and, if possible, even inquire with other franchisees if necessary for comparison. A franchise fee and ongoing royalty payments to the parent company are also common, or their money may be earned on proprietary products or recipes which must be purchased for the franchise. The regular operating costs of a restaurant are still applicable: utilities, rent, product inventory, insurance, building maintenance, and so on.
We Sell Restaurants is a turn key restaurant auction of sorts, check it out.