In a town with 400 restaurants, one might be forgiven the occasional restaurant-ownership fantasy. And some of us actually take the plunge, becoming the lucky owners of diners, Chinese takeout joints or high-end date spots. But what do you actually get when you buy a restaurant?
That depends. Primarily, says business broker Stu Rifkin, “You’re buying the right to do business at that location.” In most cases, you’ll be taking over or renegotiating a lease, and that means you should look for a good landlord and location, just as you would when renting an apartment.
Jacie Dunkle, longtime former owner of Fellini’s #9 and current owner of Tin Whistle and The Salad Maker, says the lease must give you enough time to recoup what you’re spending on the business. “At Tin Whistle, when I took over the lease, there were three years left on the original lease with an option for five more,” she explains, “so I have eight years to recoup my money. Hopefully I’ll do well enough to ask the landlord for an additional five years.”
In some cases, buying a restaurant also means buying everything inside it—furniture, glassware, equipment, the works. These may or may not feel like what they’re called: assets. When Dunkle paid $90,000 for what had been Café Bocce, she inherited all its assets “whether I wanted them or not,” she says. “It was an Italian restaurant and I had to pull everything out to make it an Irish pub.”
Rifkin says buyers sometimes also inherit issues with the health department, as he did when he bought The Nook in 2006 (for, he says, “over $150,000”). If health inspectors had grandfathered certain violations with a previous owner, they’ll see the sale as a chance to require upgrades. Rifkin and his partners found themselves required to add four sinks to the kitchen to bring it up to par. You’ll also need additional funds, above and beyond the cost of the sale itself, for a business license, legal advice, and other costs.
From the seller’s perspective, says Dunkle, it’s important to make sure your buyer has some assets to serve as collateral in case she doesn’t end up paying her rent. Dunkle sold Fellini’s in 2015 to a buyer who only lasted a year in the space. “I still was the personal guarantee on the lease,” says Dunkle.
“She had no assets, so when she stopped paying rent I was personally responsible. I had to take the restaurant back and pay back the rent she hadn’t paid.” Dunkle sold again in 2017 to Fellini’s chef Chris Humphrey.
Dunkle says that spending money on a good logo and plenty of advertising at the beginning can be important—especially when trying to overcome a so-called cursed location (as she did at Tin Whistle) or a location that wasn’t previously a restaurant (like the Salad Maker, which used to be a clothing store).
Maybe the most important thing to know as a buyer is that your new business will require a serious investment of time. “You cannot expect you won’t work in that restaurant all the time,” says Dunkle, who estimates she put in 60-65 hours a week at Fellini’s. But she adds, “As many hours as I’ve worked, I’ve never regretted my decision. I’ve had the most fun, met the greatest people, enjoyed every minute of my misery.”