Buying A Cafe Or Restaurant In New Zealand

By Author: Richard O’Brien
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You're a skilled chef, a great people manager, and you think you would operate the café, bar or restaurant down the street better than the present owner... So, what is you next move?

People are eating out in greater numbers than ever before. Therefore, opportunities are there for well-managed restaurants, bars, coffee shops and cafes. If you are sociable, passionate about food and service, and have the motivation and necessary skills to manage the staff, food and operations day after day, then restaurant, bar or café ownership could be for you…

Location is arguably one of the most important aspects to consider. A high profile site on a busy road may look good at first glance, but if there is little foot traffic and little car parking then take a second look. Ease of access is paramount and with our unpredictable weather, prospective patrons are likely to opt for a venue that offers good food, service and easily accessible car parking.

Strong accounts and systems matter but keep in mind that not everything is likely to be done by the book. If you don’t buy the building (which is common), then you will ...
... be paying rent, and the terms of your lease and how much rent you’re paying can play a significant part in the success of your cafe or restaurant. Identify any factors that could have a negative impact on your business – like the possibility of competitors moving in next to you.

Take into consideration the demographics of the area, seasonality aspects, especially if the business you are considering buying is located in a coastal town or tourist destination. Know your market, as a specialist coffee shop may work in some towns but a tearoom may be best suited to others. This same logic applies to your menu, identify what your customers want and tailor the menu accordingly. After all, it’s all about how much you can sell and your margins on this.
The café and restaurant trade can often entail long hours, so consider how it will impact on your lifestyle. If you are open for breakfast as well as evening meals, then you are heading for longer hours and with it, potentially additional stress, unless this is well managed.

Taking all these factors into account, there is good money to be made in food. The trend is towards people eating out more, and spending proportionally more of their income on dining out, and this trend is predicted to keep increasing. Cafes, restaurants and fast food are a cornerstone in our economy, but their survival is dependent on many factors, not least of which are the legal requirements and premises maintenance aspects.

The NZ Food Act

The Food Act requirements include an obligation to operate and register a food control plan from 2011. There are new food safety measures that need to be understood and implemented

Maintenance - Does the Tenant or the Landlord Pay?

A standard lease clause implies that it is the tenants obligation to fix things, except things that need repairing or replacement due to fair wear and tear. After all, the landlord’s fixtures and fittings are part of what the tenant is leasing, so if the landlord fails to undertake repairs, the capitalisation value of the defunct (through fair wear and tear) fixtures and fittings could be deducted from the lease payments. There is in fact another clause in the standard lease which sets the capitalisation percentage to be applied for new landlord funded improvements.

Business Buying Budget

What you pay should be determined by your ability to manage the businesses monthly cash flow, your cash reserves, equity you may borrow against, the bank and/or vendor finance. Exercise care in not taking on too much debt, and ensure you allow for working capital and some cash reserves.
As with anything, we are usually attracted to the best and most impressive looking car, boat, house or business, seeing the lifestyle it can provide. This usually leads to looking at high profit businesses, and with that usually comes the higher price tags. So maybe you are able to extend yourself - you're got the vision, enthusiasm, and a lot of good ideas to implement. Unfortunately there are also a lot of variables in the business world, a number of which can and do lead too failure.

The best position is to reduce your risk. Don't spend the lot, struggle to keep things afloat, and then risk loosing it all. Exercise common sense, spending less will reduce your risk. Additional monies can be used at a later stage to expand or grow the business, once you have a thorough understanding of what the business takes.

Obviously, every business purchase is situation and business specific, therefore difficult in determining how much should be spent.

Authors Bio:

Richard O’Brien operates a New Zealand café, bar & restaurants for sale listings site, where business owners can also buy or sell a coffee shop, bakery or lunch bar.