Is It Better To Buy A Restaurant Or Start A Restaurant?

That of course is the alternative that people have.

Many budding entrepreneurs try to establish a business, a quick search on google suggests that anything up to 90% of new businesses fail in their first year. Now that may overstate the figures, however the number of failures is quite high.

A study in Ohio State University tracked new restaurants opening from 1996-1999.

The survival rates were as follows:

• First year: 85%
• Second: 70%
• Third: 62%
• Fourth: 55%
• Fifth: 50%
• Sixth: 47%
• Seventh: 44%
• Eighth: 41%
• Ninth: 38%
• Tenth: 35%

Once you’ve hit five years, your odds of survival go way up.

What does this show?

Well firstly that new business owners often underestimate what is needed to start a restaurant, they are often undercapitalised and simply don’t have the skills needed to be successful.

Almost as importantly it shows that buying a business is not as risky. If you buy a restaurant that has been trading for 5 years, the chances of you being unsuccessful are significantly reduced.

Why is this? It is to do with location, location, and location.

There are plenty of empty shops and premises as a result of the recession but these will be the locations where previously businesses have failed, other restaurants, takeaways, cafes, pubs etc.

Often it doesn’t matter how good a chef or manager you may be, the most important criteria for being successful is having the right location, so it is better to buy someone out from a primary location than try to establish yourself in a secondary position.

This entry was posted on 24/04/2009 at 03:45 pm and is filed under Buyers. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.