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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 866-270-6278 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
William Park, Business Broker - Southern California

Highest Volume Broker in California, Simply Check our HUNDREDS of Listings! Over 25 Associates, Speaking Dozen Languages, Helping Buyers and Sellers of Small Business since 1982, Centrally Located between Los Angeles and Orange Counties, while Riverside & San Bernardino Counties are Very Accessible.

Lee Petsas, Business Broker - Orange, San Diego Counties, Inland Empire

UBI Business Brokers has been successfully selling businesses in Southern California since 1965. Our Agents have over 100 years of experience in selling small to medium size businesses throughout Southern California. We service Orange County, Inland Empire, San Diego. Phone Lee at 714-363-0440.

Hasan Abdullah, Esq. E-2, Immigration Legal Assistance

I have over 10 years experience with E-2's and immigration issues. E-2's approved for as little as $10,000. Let me assist you with E-2 visa strategies when buying and selling a small to mid-sized California business. Mention BizBen.com for a FREE consultation when phoning me direct at 510-500-1155.

Jack Oh, Business Broker - LA, Orange Counties

Business broker and real estate services in the Los Angeles and Orange County areas. 10 years experience with great negotiating skills. To sell a business or buy a business in the LA or Orange County Areas phone Jack and his team at 562-787-4989.

Michael Floorman, Business Broker, BTI, San Francisco Bay Area

Business Team, San Jose (Campbell) located in the Pruneyard Towers at Bascom and Hamilton. Established in 1981 Business Team with over 6600 sales to date has 1000 business listings to choose from, paid Google advertising. We offer highly trained and experienced professionals.

Bob Hughes: Business Broker, Palm Springs Area

Bob Hughes is a business broker & is President of Hughes Properties. Hughes has a wide variety of entrepreneurial experience with the personal ownership & sale of numerous businesses, and has sold over 200 small & mid-sized businesses in the Riverside County marketplace. Call Bob at 760-323-8311.

Jordan Green, JRG Communications - Marketing Services For Brokers, Agents

A marketing communications company assisting business brokers & agents. Services include: social media management, custom website creation & design, content creation services, optimizing & posting listings on business-for-sale websites, custom articles & blog post creation. Call 866-620-2752.

Ken Oppeltz, Business Broker, San Diego County

We have been San Diegos premier business broker and merger and acquisition specialist since 1989. Staffed with some of the best-qualified and most experienced business brokers in the industry, our professionals have all earned or are candidates for the Certified Business Intermediary (CBI).


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