The Advantages and Disadvantages Of Buying An Existing Restaurant Versus Developing A Restaurant From Scratch
Advantages in Purchasing an Existing Restaurant
1. Less financial risk especially if you’re buying an existing business that is profitable.
2. There is a quicker opening time versus all the red tape you need to go through in a new development.
3. At times there is seller financing and SBA bank financing available.
4. You have an opportunity to capitalize on the existing customer base of the restaurant purchased.
5. You can purchase an existing restaurant at significantly less than a new start up.
6. If the premises lease is assigned the rent can be significantly less than a new market premises lease.
7. If purchasing a going concern business, (a business that is profitable), you have positive cash flow immediately.
Disadvantages in Purchasing an Existing Restaurant.
1. If an assets in place purchase, (a business that is not profitable or marginally profitable and needs a new concept), the poor reputation of the prior business can precede the new owner.
2. There is greater maintenance and repair costs due to the age of the physical assets.
3. A brand new restaurant projects a fresh new image to the customers and attracts more curiosity seekers initially, but this is not always the case.
In my opinion, it is more prudent to buy an existing restaurant versus developing a new restaurant from scratch as the advantages far out weigh the disadvantages and most importantly the risk factor is greatly diminished.