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Are You Cut Out to Own a Restaurant in St. Louis

2017 was a great year for new restaurants in St. Louis. The local cuisine in this city is generally characterized by barbecue and seafood, but no clear trends have dominated the best restaurants, and have yet to make their mark this year.

Buying a Restaurant

Restaurants account for more sale listings than any other type of business. A prospective restaurant buyer will have many choices, so it’s important to determine why the owner is selling before you buy. Common issues to consider when buying a restaurant include the location and value of the restaurant itself.

A restaurant’s location will usually play a crucial role in its success, unless it already has a long history with established clientele. Restaurants should generally be located near other businesses that will drive traffic to them, such as a large office building or mall, or a thoroughfare. Location will affect the cost of a lease, especially the traffic of both vehicles and pedestrians. Landlords might also be cautious about leasing property to a restaurant buyer with no prior experience in that industry. In some cases, it may be necessary to place rent in an escrow account or keep the former owner on the lease.

The methods for assessing a restaurant’s value can generally be classified into asset-based and seller’s discretionary cash flow methods, according to BizBuySell. An asset-based approach estimates value from the equipment that’s already in place and is typically used only for closed locations or unprofitable restaurants. Ongoing restaurants should be valued according to a discretionary cash flow method, which considers factors such as the owner’s net income, perks, interest payments and depreciation of equipment.

Contact LINK St. Louis

If you’re exploring your options of restaurant ownership in St. Louis, contact LINK St. Louis today at (314) 487-0005 or email to speak to an experienced, professional business broker.