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Buying A Restaurant? Check Its Karma - Tips From A Restaurant Broker

Restaurants have Karma! They really do. Karma isn't something you see exactly, it is something you feel.  A restaurant's Karma is something you feel the moment you walk into a restaurant.

I first discovered the idea of restaurant karma many years ago while working in several college dormitory cafeterias at the Hotel School at the University of Denver where I was a student. We were required to work in three almost identical facilities as part of our work program and I discovered an amazing thing.  The feeling of each cafeteria was different even though the facilities and the food were identical.  The difference between them, (and the differences were dramatic), was caused by the person managing the facility. The personality of the manager affected not just the attitude of the employees but the quality of the food, the cleanliness, speed of service and no doubt the bottom line. I worked in all three locations and I found myself changing, in a sense, taking on the personality of the person in charge in each facility I worked in.

I have been involved in the restaurant business virtually all my life.  I have worked in restaurants, managed restaurants, had ownership in restaurants, and have bought and sold hundreds of restaurants.  When I walk into a restaurant for sale I stand back and try to "feel" what is going on.  I look at the big picture, and I look at the smallest detail.  I look at everything from the smallest detail such as the cleanliness in the cracks of the grout in the bathrooms to the "big picture" items.

I also learn a lot about the restaurant by asking the staff simple questions.  When I ask a question, I am not only looking at the answer, I am looking at the attitude of the person giving the answer.  Ultimately, what I have learned is that the karma of a restaurant is directly related to the person or persons who have the most control over the running and development of the restaurant.  Sometimes the person, who created the concept, is not the person who manages it on a daily basis. Believe me, when you meet the owner and you meet the manager, if there is a big difference between them, you will see it in the operation.

I think that sometimes, an owner or manager is not able to feel his or her own restaurant because they are so integrated into the fabric of the business. In this sense, they can't see the "forest through the trees".

The way you treat your employees, your vendors, your customers, it all comes back to you. And keep in mind everyone has strengths and weaknesses.  A restaurant with a strong tough no non sense owner or manager will have a different feel than a restaurant with a "happy go lucky" type owner/ manager. Trust me, the restaurants will feel different. And chances are, the owner or manager won't even know why. The karma of the restaurant will be a direct reflection of the characteristics of the owner or manager. So goes the person, so goes the karma. 

When I valuate a restaurant, naturally I study the financial performance of the business, but I also take into consideration the karma of the restaurant or how it feels when making my estimate of value. I am interested in not only knowing what the results are, but why and what needs to be done to make them better. Understanding a restaurant's karma is just one aspect of the art of brokering restaurants.

#photo#About The Author:  Jeff Back is the founder of J. Back & Associates Restaurant Real Estate. - specializing exclusively in assisting buyers and sellers with: buying, selling and developing restaurants, bars and nightclubs. View more information about Jeff Back at J. Back & Associates & his listings or phone him direct at 925-736-8200 about selling or buying a restaurant in Northern California.

Categories: BizBen Blog Contributor, Buying A Business, How To Buy A Business


Comments & Feedback From Pro Intermediaries & Pro Advisors On BizBen:

Posted By: Joe Ranieri, Business Broker: LA, Orange Counties, California    

Interesting article. A buyer or even a broker who is meeting with a potential seller can find out what type of karma the restaurant has by going on review sites like Yelp, and looking for patterns or common themes. Just like in movies where audiences although not trained in film criticism, but can collectively decide that the third act of the film doesn't work or such and such character is not sympathetic enough, food goers can size up during their meal if there is tension behind the scenes at the given establishment. I have seen Yelp reviews where many people will say, "we saw the owner scream at our waiter or busboy...and we won't come back." If people wanted to eat in a tense and stressful environment, for some they might as just well eat at home. We've all heard the saying, "the food is expensive, but you know, you're paying for atmosphere" when justifying eating at an expensive restaurant, and so the owner and management, as well as staff should keep that in mind, because although they work there 40-60 hours a week, for many patrons eating at a really nice restaurant may be something they do only 3 to 4 times a year.


Posted By: Business Broker: LA County Area

Jeff's terrific observations brings to mind an alternative word for karma. Remember the terrific film "Silver Linings Playbook?" Several characters were obsessed with "juju." Restaurants, maybe more than any other businesses, have discernible juju. Often it starts with the concepts that preceded them at the same location. In any market, retail leasing agents can point to restaurants that are cursed by bad juju, from one owner to the next to the next. No matter how good the concept, it's nearly impossible to overcome.

That leads me to one suggestion for restaurant buyers. Make sure to speak with a couple experienced retail leasing brokers about the space you're going into. Restaurant-goers build up longtime, hard-to-overcome prejudices toward given locations. Buyers need a full understanding of the juju that precedes them.






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