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Mind Your Business

Posted by restrealty on November 16, 2005
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Ilana Debare

QUESTION: Can you please give me advice on how to go about buying or investing in a small restaurant business? I don’t know what channels exist to find out about restaurants looking to take on another owner, or willing to sell if the circumstances are right. I imagine there is some networking involved but don’t know where to start. — S.F. Interested Investor

ANSWER: There are business brokers who specialize in selling restaurants, but they typically will not sell to anyone who has not had restaurant management experience.

“We only work with experienced restaurant people,” said Steve Zimmerman, president of Restaurant Realty Co. in Corte Madera. “If you don’t have experience, you don’t get to first base with us.”

If you do have restaurant management experience and are looking to buy your own establishment, you can contact a specialized broker like Zimmerman or a general business broker. Check the listings of restaurants for sale at www.restaurants-for-sale.com, www.bizben.com, or www.bizbuysell.com.

Also check the classified ads in major newspapers like The Chronicle, which often include a section devoted to restaurant sales. Some restaurant franchise companies are willing to sell franchises to people without food service experience.

On the other hand, if you’re simply a food lover who wants to be a passive investor in a restaurant, you’ll have to rely on informal networking. Start by talking with the chef or owner of a restaurant that you patronize a lot. They may be thinking of opening a second site and need additional investors. Or they may know a promising chef who wants to open his or her own place.

“Occasionally, a really good chef develops a relationship with a customer who has money, and the customer says, ‘If you ever want to go into the restaurant business, I’ll be there for you,’ ” Zimmerman said.

But think twice before sinking your money into restaurants in any way other than buying dinner.

“Everyone has a fantasy of owning a restaurant,” Zimmerman said. “It looks glamorous from the outside, but the majority are not successful. I have sometimes sold the same restaurant three, four or five times in five years. It’s a very risky business.”