6 Things to Consider when Buying a Restaurant Property

So, you’ve decided to open a restaurant. Firstly, congratulations! As of 2019, there were over 40,000 pubs, cafes and restaurants in London alone, meaning that the scene is competitive but shows no sign of diminishing. There are a few stages to buying a property to house your new eatery, so we’ve put together a quick list of things to bear in mind. 

Budget

Planning is everything and, while there are some things you can’t control, your budget and business plan do not fall into that category. This should cover both what you are able to spend and the kind of return you expect to make from your new venture. Remember to factor in additional costs, such as stamp duty, rent deposit and advisory fees for accountants, property agents and solicitors. Renovations, equipment, furniture, specialist equipment and branding should also be budgeted for in your plan.

Agent

Finding the right property is key, but where do you start looking? Lots of restaurant deals occur off-market, which means registering with a specialist agent is essential. You can tell them your requirements and thoughts on location, type and scale of the business and budget. Although the internet has changed how we access the property market, it is no replacement for an agent with experience who can advise and support you through the process. Instead, see the internet as more of a tool than a substitute for in-person service from an expert. In addition, the majority of restaurants on the market are still trading, and with staff and customer sensitivity, plenty of sellers may inform an agent that they are willing to sell without instructing them to put it on the market in the usual way. An acquiring agent will offer you far more choice and share details of all off-market sites putting you firmly in the driver’s seat. You will also want to hire a solicitor to aid with the legalities of the purchase.

Location

The cliché holds true: it really is all about location, location, location. Your specific requirements will influence where your restaurant will flourish, for example an all-day establishment may do better on a high street, as surrounding businesses can support the lunch and breakfast trade. Big Hospitality have put together a handy list of questions to ask yourself when choosing location:

• Does the area have good evening and weekend trade potential?
• If in the city centre, is it close to good transport links? Or if rural, is there a car park?
• Does it benefit from tourism or local footfall?
• What is the demographic of the local area?
• What are the competing restaurant and leisure outlets nearby, what is their business model and how are they trading?
• Is there any future development planned which could impact restaurants in the area?

Research

Forewarned is forearmed and getting as much information about the previous occupants and their business as possible is a real advantage. This can sometimes be tricky, as vendors can sometimes be reluctant to disclose trading figures. Look at turnover and profitability as well as current associated costs. Past performance is not necessarily an indication of future success, but knowledge is power and knowing times the current restaurant does a roaring trade or about regular diners can be invaluable. You need to calculate your ROI (return on investment) to ensure that your projected takings provide the ROI you require. You should also investigate current rents, utilities and staffing to get an idea of how that will feed into your plan.

Landlord pack

A landlord pack is a vital element of taking over a commercial lease. It is a PDF brochure / pack of information you need to put together as the incoming tenant to present to the landlord to demonstrate to them that you know exactly what you’re doing. These do vary but for restaurants, they often include a business plan, some background on directors, an outline of the concept, example menus, a mood board of the proposed designs and food itself and sometimes even a SWOT analysis and look at your competitors.  

Survey

The final piece of the puzzle is a structural survey to find out if your chosen property is in good physical shape. Your surveyor will be able to tell you what repairs you may be obligated to undertake under the lease. This can be incredibly useful in negotiating the final price of the unit. Lastly, your solicitor will help you to carry out legal checks and establish the exact conditions of the sale agreement, which will include the inventory, what exactly you will own, what will be leased and what is third party.

Please find a round-up of our best deals from 2019 here.