There are several steps to opening a restaurant. But if you plan on buying one outright, the most important step is evaluating its real estate value. Regardless of how successful an establishment is, its real estate-particularly the property it sits on-remains its most durable asset. Therefore, investors should carefully evaluate restaurant locations before they buy restaurants.
How to buy restaurants that have solid real estate value
Normally, a restaurant is frequented for its cuisine, but its building and surrounding property play an important role in its revenue potential, as well as its sale price. If you are in the market for food service establishment, asking the following questions will help you find a building and property combination that offers what you need.
How close is the location to pedestrian or vehicle traffic?
Real estate, as the old saying goes, is all about location. Concerning restaurant real estate, truer words were never spoken. If an eatery sits in poor proximity to pedestrian or vehicle traffic, it will need something special-such as an awesome reputation-to keep its seats full. If an eatery is part of a winery or bed and breakfast, this isn’t the case. But for restaurants that operate as restaurants alone, being easily visible-or at least easily accessible-to pedestrians or drivers is critical for business.
Is the location in an area where people feel safe?
Restaurants located in unsafe areas seldom draw patrons outside of their direct area. If you plan on buying an establishment in a familiar area, you won’t accidentally buy one in a bad area. But if you plan on buying one in an unfamiliar city, research the area you plan to buy in before you buy.
Does the location need work on its curb appeal?
While landscaping seldom increases the value of restaurant real estate significantly, it plays a crucial role in creating the right impression on potential customers. If a restaurant’s poor curb appeal can be fixed, many investors will still buy it. However, depending on the level of work needed, the establishment’s asking price should perhaps be negotiated down.
Does the location have features that require special upkeep?
Some restaurants have a curb appeal that includes ornate flower gardens and fishponds, which can be a plus. But if you plan on maintaining such a curb appeal, ask what services are necessary to keep it intact, as well as how much they cost.
Does the building have unresolved repair issues?
Most building owners resolve obvious repair issues before they put their property on the market. But they may leave some unobvious ones for you to discover on your own. The easiest way to detect such issues is to have a building inspector conduct a full building inspection. Having a pest inspector conduct an inspection is a wise idea too.
Have the building and its location been valuated?
Never purchase an establishment that hasn’t received a business valuation. The current value of a restaurant’s real estate is only one aspect of its fair market value (FMV). But having its real estate value established by a professional valuator is critical to arriving at the right purchase price.