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Building a New Restaurant Vs. Buying an Existing Restaurant

Building a New Restaurant Vs. Buying an Existing Restaurant

You’ve decided you want to manage your own restaurant. First, you must decide whether you want to purchase a business that is already established, or build one from the ground up. Each has its advantages and disadvantages. Your decision should be based upon cash flow as well as your short term and long term business goals.

Starting your own restaurant

If you have the cash flow and a specific restaurant idea in mind, starting from scratch is definitely an adventure and a challenge. Not only will you have to design your own blue prints and floor plans, but you also have to have faith that your business will eventually be profitable after all of the hard work that goes into getting it started.

Marketing strategies need to be well thought out and ready to advertise the opening of your new restaurant. Time and money need to be invested in advertisement as well as the building, the equipment, staff, etc. Even if you have a fantastic cook and wait staff in a beautiful restaurant with gourmet food, if your customer base isn’t aware it exists, they won’t know what they are missing!

If you can’t financially start a business on your own, business partners can help you get started. While two, or even three heads, are often better than one, there will only be one final byproduct of the brainstorming. Make sure you and your partners have similar goals for the restaurant before getting started.

Investors and loans through the Small Business Administration are also an option for getting financial support. If this is the case, a thorough plan must be established before anyone will be willing to back your venture.

Building vs. Buying
construction hard hat
Pros
  • You can build every aspect of the kitchen and dining room to your own specifications
  • Since you’re starting fresh, you won’t have to deal with the lingering reputation of the previous restaurant
  • You have the ability to pick and choose your staff as well as control all of the marketing
Cons
  • A lot of money is required up front, and the business won’t start making its own money right away
  • Marketing campaigns are necessary to build a customer base
  • All equipment must be bought by you, as well as all staff trained by you
pile of cash
Pros
  • Immediate cash flow comes with the business
  • Staff is already trained and ready to go
  • Building is already standing, and equipment is already present
Cons
  • Equipment made need replacing and the building may need renovating
  • Not as much freedom to add your personal touch to design, since structure is already built
  • If the previous owner received a bad reputation from the community, you may have to work hard to reverse the negative publicity
Buying an existing restaurant

For first timers, buying an existing restaurant makes the most sense, and requires less start up costs. While this venture certainly isn’t cheap, and can have pitfalls associated with it, the risk is much lower than starting your own business from scratch. When looking into buying an existing restaurant, pay close attention to the front and back room design as well as the condition of the equipment. If you buy a restaurant because you want to save money, and then find out it needs a lot of work, and has equipment that is on its last leg, then buying an existing business can be expensive. Have a consultant walk through and check the place out before buying if you want a second opinion.

There are many advantages to this option as immediate cash flow won’t be a problem. The business is already built and running and already has its own built-in customer base. Sometimes businesses change hands because the previous owner retires. But sometimes businesses change hands because the previous management wasn’t doing an adequate job. If you take over a business with a bad reputation, some marketing and advertising money will be needed to help change the minds of your customers and local community.