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
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.

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 closings. Office: 909-255-8353, Cell: 509-951-7230.

Helen Yoo, New Century Escrow - Escrow Services In Southern California

New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.

Timothy Cunha JD, Business Broker: SF Bay Area

SF Bay Area experienced attorney, & business broker. I & my EvergreenGold team offer owners sound advice & expertise to build business value & achieve profitable sales. For a FREE business evaluation & SWOT analysis for your business call me direct at 650-600-3751, 650-866-5393 Text.

Mike Brewer: Liquor License Broker, ABC Consulting Service

Liquor license brokerage and consulting services. We provide: Alcohol License Transfers Application Consulting & Processing, Liquor License Purchases & Sales, City Zoning Permits & Land Use Entitlements, Public Convenience or Necessity Findings and Letters. Phone Mike Brewer direct at 800-437-1100.

Peter Siegel, MBA: Business Purchase Financing Solutions

Niche business purchase financing advisory and loan placement services with SBA and Non-SBA Financing, Retirement Fund Rollover Solutions, Combo Financing Packages. To get professionally pre-qualified or more information on the ProBuy/ProSell Programs: 925-785-3118.

Rick Carlson, Business Broker - Southern California

You Will Never Feel Lost In The Shuffle. Many Brokers Simply Send Out An NDA And That's The End Of Communication. All Buyers Receive A Personal Meeting With An Ace Acquisition Specialist So They Can Recommend The Perfect Business For You. Phone Rick direct at 800-985-4939.

Harry Sidhu, CBB, Broker: SF Bay Area, Central Valley, SAC Region

Assisting both sellers and buyers of businesses - dealing mainly with Liquor Stores, Grocery Markets, Gas Stations, Smoke Shops, Restaurant Related, Retail Related, Service Related. Serving SF Bay Area, North Bay, Sacramento area. Call Harry Sidhu, CBB for assistance at 510-366-6130.


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