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I'm an existing small business owner and I have an opportunity to buy a restaurant that is very close to my existing small business.
My wife has worked in multiple restaurants and has experience including at the one in question. I have experience running businesses, but never a restaurant. The place in question has been operating for several decades. It's successful, and has a fairly loyal recurring customer base plus a good location for opportunistic people to stop in. It's a casual low key place, limited seating.
I'd really love to benefit from all the knowledge and experience here, I've been lurking for a little bit. Some of my questions are, how do you determine valuation when considering a restaurant business? The other businesses I've purchased or been involved in had a split between real estate / assets value and then a valuation based on gross revenue, but it's a little bit industry specific. Do you feel that a standard multiple of EBITDA is reasonable, or are there other factors?
What are red flags you look for in a potential restaurant sell?
Where I have been successful before is taking an existing, "old school" type of business that may be purely pen and paper, no technology or automation, and injecting some reasonable easy to use technology to simplify things. Booking systems, online presence, online orders, etc etc. Do you have any suggestions or ideas on how to streamline an existing restaurant? Do servers taking orders on tablets to send directly to the kitchen save time and steps, or does it create unnecessary complexity?
For pricing, is the best rule to shoot for the 30% wages 30% COGS 30% Infrastructure/costs 10% profit? It means I divide the cost of ingredients in a menu item by .3 to determine sale price, yes? Doesn't this make the assumption that your rent and utilities will fit into 30% of your gross sales?
What are general things you wish someone told you before you purchased? Or soon after?? :) I've always avoided the food and beverage industry for fear of tons of work, low margins, and the turnover in staff.
I'm not rich. I'm just a regular person running a couple small businesses and making ends meet. Looking for all feedback, constructive criticism, tidbits of info, links to previous posts with good answers.. Thank you