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Don't Buy Restaurant Businesses Without Checking The Competition


In order to buy a restaurant, savvy buyers should perform their due diligence on everything from the financial aspects of the deal to a restaurant's popularity and menu and everything in between, including the local competition. When investigating the competition, most entrepreneurs looks for competitor restaurants in the same price range, those that offer the same style of food, have similar atmospheres, or cater to a similar demographic.

All of those types of restaurants are part of the competition and need to be considered when deciding to buy a restaurant. The latest Census reports that there are approximately 62,000 restaurants in California alone, so there will always be plenty of opportunity and competition.

Don't Get Blindsided By This Competitor When You Buy A Restaurant

There are some competitors to a restaurant business that an entrepreneur might not see beforehand when they buy a restaurant. Not every competitor is another food service establishment down the road with a bright neon sign advertising the same food that you want to sell.

What would happen if, three months after you buy a restaurant, the main road in front of your facility is shut down for long term construction? Now your restaurant is inconvenient to find and get to, which will severely hurt your business. Did the previous owner know that the road work was scheduled and that is why they sold? That doesn't matter; what does matter is that a little bit of research is required to prevent a catastrophe like this from happening when you buy a restaurant.

Thankfully, you can check on this contingency before you buy a restaurant. Look up the local and state transportation agencies in the phone book or online. They will list upcoming road closings and construction online and via phone if you call. This is a vital step during due diligence when you want to buy a restaurant.

Get A Non-Compete From The Previous Owner When You Buy A Restaurant

That's right -- the seller that just sold you their business could end up being a potential competitor. Without a non-compete agreement, there is nothing stopping the previous owner from opening a new business and competing with you. Worse yet, they can entice former customers into the new restaurant and hire old staff to work in their new restaurant.

When creating a non-compete agreement, it is always best to consult with a legal representative. A non-compete agreement must be clearly written with discreet terms in order to be legally valid. Typical terms might include a restriction on the previous owner from opening a competing restaurant in the surrounding area for at least two years.

When it comes time to perform your due diligence and buy a restaurant, be careful of these 'hidden' competitors that can drain your business.

Looking to buy a restaurant business? See all restaurant businesses for sale in California - or sell a restaurant business and reach thousands of restaurant buyers. Also keep up to speed on the California restaurant market (with industry business brokers & experts) with upcoming BizBen Online Talk Shows & Webinars.

About The Author: Peter Siegel, MBA is the Founder of www.BizBen.com (established 1994 - 7000+ California businesses for sale, 200 new listings daily) and the Director of the BizBen Network (16,000 business buyers, 4,000 small business owners, 1,800 California business brokers & agents). Peter Siegel can be reached direct at 925-785-3118 to discuss getting resources for selling a restaurant, financing a restaurant purchase, or buying a California restaurant.

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







  Helpful Resources To Assist In Selling And Buying California Businesses
Shalonda Chappel: Escrow & Bulk Sale Services - Southern California

Escrow services to brokers/agents, sellers, & buyers. Established 43 years. Extraordinary service. Experienced with handling difficult transactions. One stop for all your escrow needs: Bulk sales, lien searches, UCC searches, liquor license transfers, publishing & recording services. 951-808-3972.

Prabhjot Randhawa, Broker: SF Bay Area, Central Valley

I'm a Business Advisor at Liberty Business Advisors of San Francisco. I have over 20 years of experience in all phases of entrepreneurship. During the past 15 years my concentration has been in business of mergers and consulting. I have owned and operated over 10 businesses. 209-815-3842 Cell.

Peter Siegel, MBA, BizBen Founder, ProBuy, ProSell Programs

Founder & President Of BizBen.com (since 1994) & BizBenNetwork.com. I am the Lead Facilitator for the ProSell & ProBuy Programs on both websites. I consult daily with buyers, sellers, and intermediaries daily about buying and selling businesses. Call 925-785-3118.

Michael Davidson, Business Broker - Southern California

Los Angeles Business Broker providing M&A quality services for Small Business Owners. We leverage our technology and expertise to Simplify & Expedite the Business Sales Process. Matching the right buyer with the right business is how we define success.

Mike Nova, Business Broker: North Bay Restaurant, Retail Specialist

I have over 30 years of direct restaurant industry experience, including my personal experience as a restaurant owner. For the last 7 years I have worked as a Broker specializing in this challenging and ever changing field of restaurant and bar sales. Contact me at 510-708-6682 Cell.

William F. Ziprick, Attorney: Legal Services For Buyers And Sellers

Through creative problem solving, attention to detail, accessibility, & understanding that unnecessary delay is often a deal killer, I work closely with my clients and other professionals to consistently achieve a high rate of successful closings. Office: 909-255-8353, Cell: 509-951-7230.

Diane Boudreau-Tschetter: Escrow & Bulk Sale Services - CA

California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.

Elizabeth McGovern: Escrow Services - San Francisco Bay Area

McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.


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