As professional restaurant real estate agents, we come across plenty of myths and misconceptions in our work.
The restaurant industry is unique in many ways, so it is understandable that some elements of the business aren’t always common knowledge. However, if you’re an entrepreneur who’s looking to buy, sell, or run a restaurant, there’s a ton of important information you’ll want to know about.
In this blog, we’ll go over some of the things you (probably) don’t know about restaurant real estate. With these insights in your pocket, you’ll be better equipped to turn your restaurant dreams into a reality. Let’s dive in.
Looking to become more knowledgeable about the restaurant industry? Click here to access our glossary on key terms in restaurant real estate.
Restaurant Selling Unknowns
First, let’s break down some of the lesser-known aspects of selling a restaurant.
Restaurant Equipment Doesn’t Appreciate Like Real Estate
More often than not, restaurant owners overestimate the market value of their kitchen equipment, furnishings, and other chattels. Much like a new car, the value of your equipment starts to depreciate the minute you buy it. This doesn’t mean that any older item is completely worthless, however, it’s important to give credence to the valuation provided by your agent or broker.
Have Your Financial Records Ready
If a buyer is seriously interested in purchasing your business, they’ll want to see your financial records. Regardless of how profitable your restaurant is, the more financial documentation you can provide, the better.
The Impact of Profit on Business Value
Another big misconception about restaurant real estate is that failing businesses have no value. While it is true that the more profitable a business is, the higher its resale value will be, the same does not go for the opposite end of the scale. Even struggling, failed or shuttered restaurants have value.
You’re Not (Usually) Selling Your Brand
Nine times out of ten, restaurant buyers are looking for a place to bring their personal vision to life. In other words, they’re shopping for an existing business that they can shape into their own brand rather than continuing the legacy of another restaurant. While you may be proud of your restaurant’s brand, product, and service, most buyers are coming in with their own concept.
Restaurant Real Estate is its Own Field
You’d be surprised how often restaurateurs hire non-commercial Realtors. If you’re thinking about buying or selling a restaurant, you’re going to need a specialist – not a residential real estate agent. Put simply, residential real estate agents do not understand restaurant deals. These are formal business deals and are infinitely more complicated than your standard home sale. And don’t ask a residential agent to put a price on your restaurant. The only valuation you can trust is going to come from a restaurant real estate agent with experience in the field.
On the hunt for more advice related to restaurant operations? Check out these other resources from our blog – on the house!
- How to Hire Restaurant Staff
- Buying a Restaurant? Here Are 5 Questions to Ask
- How to Find a Restaurant For Sale in Toronto
What Misconceptions Come With Buying A Restaurant?
Just like selling, there are lots of under-considered elements to buying a restaurant.
What You’re Paying For
The sale price is for the business. That refers to the business infrastructure; the fixtures, equipment, the water/gas/power hookups, the leaseholds, licenses, goodwill and inventory. Not to mention the location.
There’s a Difference Between Buying a Restaurant and Starting From Scratch
Choosing to build a business step-by-step is a lot of work. Not only do you need to source real estate, equipment, staff, utility providers, and a whole host of other elements, but there’s also a ton of red tape to navigate. Not to mention, because you’ll be working with the City and Province to obtain various permits and licenses, you can also run into costly and frustrating delays.
All that said, there’s a reason it usually takes a year (or more) to start a restaurant from the ground up. Therefore, an existing restaurant that is ready to do business has an inherent value – which is represented in the asking price. And that’s why struggling or shuttered restaurants still have a lot of value, because of the infrastructure that’s already in place.
Looking for a crash course on Canada’s restaurant industry? We’ve carved up some helpful resources on our blog.
- How is A.I. Changing Restaurant Real Estate?
- What Should Restaurant Owners Know About Ghost Kitchens?
- How Restaurant Real Estate is Evolving
Turn Your Business Goals Into a Reality
Whether you’re looking to buy a restaurant, sell a restaurant, or do both, Carve Real Estate can help.
As professional specialists, we know the unique ins and outs of restaurant real estate across Ontario. Not only can we help you find the perfect spot to bring your dreams to fruition or accomplish a profitable sale, but we’ll also serve as your long-term advisor on all things restaurant-related.
Have more questions about restaurant ownership? We can help! Send us an email or give us a ring at 416-618-0054 to get started.
