All too often a buyer steps into a restaurant business only to find that coolers are not holding their temp and the HVAC system is failing in the middle of the summer heat. This can kill a restaurant business before it gets off the ground draining the new owner of much needed working capital for marketing and advertising their business.
Generally, the seller has a duty to turnover a restaurant in good operating condition - not perfect though. Just like taxes and death, restaurant equipment breaks-down often. So it is your duty as a buyer to have a professional inspect the equipment. Don't try to do it yourself and save a buck. Get an HVAC person on the cooler and AC. Get a plumber on the stoves and plumbing and electrician on the electrical circuits and equipment.
Another area where buyers fail to do their due diligence is on the building itself. Most leases require the tenant to maintain the interior of the building and sometimes even the roof and definitely the heating and air conditioning systems. These are costly items should they be worn-out and in need of replacement, draining you of precious working capital.
SO IF ONE SIMPLY DOES HIS OR HER DUE DILIGIENCE NOT ONLY ON THE FINANCIALS, BUT ALSO ON THE EQUIPMENT AND FACILITY OF THE RESTAURANT, THAT COULD BE THE DIFFERENCE BETWEEN SUCCESS AND FAILURE.
I recently had a client who purchased a turnkey restaurant facility on a shoestring budget and he failed to do his due diligence on the equipment and facility. When he got into the restaurant, a lot of things went wrong and broke-down. He spent a large amount of money fixing the HVAC system, ovens and plumbing. This drained his marketing money and a year later, he was out of business and in debt.
So don’t fail to do what I suggest because you think the seller won’t like it. The seller has to fix things, period!
We at SellingRestaurants feel obligated to educate the public, our customers and our clients with information that can help them make more intelligent buying and selling decisions.
Mel Jones is one of the premier restaurant brokers in the nation having published hundreds of articles on buying and selling a restaurant and bar business, selling thousands of restaurants in CA., WA and AZ and building one of the most copied business models in the brokerage industry. Mel started SellingRestaurants in 2004 with the one simple concept, give the buyers the information they need to make intelligent buying decisions without being pestered by a broker or hiding information, prepare the business for market by researching key details that make or break deals and educate the buyer on the buying process to create an intelligent buyer. Prior to SellingRestaurants, Mel was a Chief Financial Officer for Universal Music Group, the largest music company in the world. There he participated in more than $11.5 billion of merger and acquisition transactions. He also work for top companies such as Nestle Foods, USA. He hold a Bachelors in Business Administration Finance as well as attened Law School at Gonzaga University. Give Mel a call at 480.274.7000 or e-mail him at [email protected] if you have any questions.