What to Look for When Buying a Restaurant Business

When people are looking to get into the hospitality industry, they often make the assumption that they’ll need to start from scratch: come up with a concept, lock down real estate, purchase equipment, build a team — the list goes on. But that’s not always necessary.

Buying an existing restaurant business can allow restaurateurs to jump right into daily operations, without a lot of the legwork that’s required when you’re just starting up.

Buying a restaurant isn’t exactly risk-free, though — and it comes with its own set of challenges. If you have dreams of running your own restaurant or bar (or if you’re already in the biz and want to explore other options), here’s what to know about making a restaurant acquisition. 

6 benefits of buying an existing restaurant 

We’ll start with the upsides to buying an existing concept, versus getting your own off the ground. The running theme here is that the groundwork is laid, so a lot of those big decisions, and investments (as well as all the time and brainpower they require) are often already taken care of. 

 

1. You might have a ready-made team

 

The recruiting and hiring process is a big part of launching a restaurant, and the team you build can have a direct impact on your success. But finding (and retaining) good talent is tough: the hospitality labor market has been extremely competitive in the past few years. It can be hard to find qualified, reliable employees who work well together. 

When you buy an existing restaurant, you’ll likely already have a team (and a team culture) in place. While you may find there are some kinks to work out or changes to make once you get a feel for overall strengths, weaknesses and gaps, having a team who knows their role and each other can save you a lot of headache.

 

2. You don’t have to play the real estate game

 

You know what they say: location, location, location…can be a nightmare to find. Another perk of buying an existing restaurant is that you may not have to go through the grueling process of finding a good restaurant location. 

While a previous owner may be selling an existing restaurant because the lease is expiring, this isn’t always the case. In many instances, existing leases sell at below market value. If you have to buy a new lease, the landlord can reset it to a price that’s consistent with the going market rate, which means essentially, that you’ll be charged more. 

Our advice: take advantage of an existing lease to save money. But be sure there is enough time left on the lease to recover your expenses. Also, make sure it will protect you from unexpected liabilities. 

 

3. You might be able to leverage current operating licenses

 

Applying for operating licenses when you open a restaurant can often be a monumental task (check out our post on getting your liquor license, if you haven’t already!). When you’re looking at buying a restaurant, you may be able to use the existing license while your applications are processing, saving you a good chunk of time and money.

 

4. You have access to equipment and other physical assets

 

One of the biggest benefits of buying an existing restaurant is that it will already come with the equipment you’ll need to operate the business, as this is a costly and time-consuming expense. (Keep in mind, though, that the state of the assets will likely be reflected in the purchase price.) Some of the equipment and machinery you’ll most likely find include:

  • An HVAC system
  • A fully-operational kitchen
  • Code-required fire-prevention system
  • A ventilation system 

Of course, you’ll want to evaluate the equipment to make sure it’s in proper working condition. Hire a professional to inspect it if necessary.

Something else to think about is whether the restaurant equipment is owned or was being leased by the previous owner. If it was leased, be sure whatever contract was negotiated can be easily transferred to you with the same terms and conditions. Some questions to ask about previously-owned equipment are: 

  • When was the equipment purchased?
  • Are there any current issues? 
  • When was the equipment last repaired?
  • Is any of the equipment still under warranty?

5. You’ve got an existing customer base

 

Because the restaurant you’re interested in buying has already been in operation, it’s (probably) already got a built-in customer base. While this doesn’t necessarily mean you’ll spend less on marketing and advertising — that’s usually necessary whether you want to maintain or grow your business — it does mean there’s a little less risk involved. That is, have a general idea of what to expect in terms of volume, whereas opening a new restaurant is always a gamble.

 

6. Less financial risk

 

Generally speaking, it costs less to buy an already established restaurant than starting a new one, especially when you consider the risk you’re mitigating and the time you’re saving compared to launching your own restaurant.  

Questions to ask before buying a restaurant

Just like you would before any big purchase or investment, you need to do your due diligence prior to buying a restaurant business. (In fact, it’s never a bad idea to consult a professional advisor, like an attorney, business broker, or even an M&A advisor, depending on the size of the transaction.) 

While this certainly isn’t an exhaustive list of questions to ask, here are a few to get you started. And remember: don’t just rely on the previous owner’s answers. Make sure you’ve got access to financial/accounting records, contracts, permits, etc., and do your own market research so you get a clear, accurate picture of the state of the business.

 

  • Why is the owner selling the restaurant?

This should be the first question you ask. Maybe the owner wants to pursue other career opportunities or retirement — but there could also be some operational, financial, or team issues that you need to know about. They might not be dealbreakers, but just like you’d inspect a home before you buy it, you certainly want to know the good, the bad and the ugly before you sign on the dotted line.

 

  • How is the restaurant performing? 

A common practice when looking at buying a restaurant is getting access to any and all financial records the previous owner has kept. This will help provide valuable insight into the state of the current business. 

A (very) general rule of thumb is that many restaurants are valued at three to five times the yearly profit — but of course, that’s highly dependent on a wide range of variables. (Here again, it’s helpful to have an advisor who’s been through the process before to help answer questions around business value.)

 

  • What’s the competitive landscape like?

Which restaurants does your target compete against? How do you stand out among them? How do you expect that to change in the next 3-5 years? It’s not a bad idea to do a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) to get a really good understanding of how the business is positioned in the market.

 

  • Which employees can you expect to stay on after the transition?  

When you’re buying a restaurant, it often comes with employees who have a history with the establishment. But sometimes when a new owner comes in, it can change the culture (for better or worse). Plus: some employees — especially key employees — may have developed strong working relationships with the owner. All of this can lead to personnel shifts. Some may be inconsequential, but if a chef or top managers chooses to leave, that could have a direct impact on the business.

You can probably get good insight from the seller, but as soon as you’re ready to let the rest of the team know about the potential (or pending) sale, have some very candid conversations with the current employees and get a feel for culture, chemistry, and their willingness to stay on board. 

Red flags and mistakes to avoid

While there are plenty of good reasons to buy a restaurant, that doesn’t mean there aren’t potential roadblocks to consider. When looking to buy a restaurant, you have the right to know about any past problems that affected the business. Here are some things to watch out for:

 

  • Liabilities and legal issues

Before you make your purchase, make sure there are no existing issues, legal or otherwise — like health code violations, unpaid taxes, ongoing litigation, etc. If there are, they could become your problem. You’ll also be responsible for all financial obligations so it’s vital you have a clear picture of the business’s financial history.

 

  • The restaurant’s reputation and brand

If you’re serious about buying a particular establishment, you’re likely already aware of any serious reputation/brand issues. But just in case: make sure you know how the business is perceived and whether it’s something you’d like to address.

For example, maybe the restaurant you’re buying is geared more toward business professionals, but you’d like to make it a hot weekend spot; or perhaps you get a lot of college kids and you want it to become more family friendly. Even if you’re buying a fixer-upper and you’re well aware that the brand needs work, it’s still worth understanding what needs to change. So: dig into review sites like Yelp, check out social media pages, or even do some research on your local Subreddit and other local online communities. 

 

  • Refusal to sign a non-compete

While this doesn’t have to make or break the deal, if the owner declines to sign a non-compete agreement—a contract stating that employees will not start their own version of the restaurant you’re buying in direct competition—it’s something to be wary of. This is especially true if the owner is also the chef, which means he or she might be able to take the recipes and menu concept with them, forcing you to start over and create your own.

To launch or to buy?

Launching your own concept is exciting — and it puts you in the driver’s seat. Like building your own home, you get to have a say in every single decision from the get-go. 

But it also takes time, money, and a whole lot of patience. If your goal is to simply get into the restaurant business and you don’t have a concept that you’re set on bringing to life, consider feeling out the market and seeing what’s out there. When you ask the right questions and do your due diligence, buying a restaurant can be just as rewarding (personally and financially) as starting your own.

You might also be interested in

We know how important same-day payments are for veterans of the service industry who are accustomed to quick cash — and we’re now seeing that same demand expand into other industries as well. 

Kickfin co-founder Justin Roberts joined MasterCard’s InConversation Webinar series to discuss why immediate payment disbursal is key for the restaurant industry and the gig economy as a whole.

Watch the webinar here or read our recap for the highlights: 

People live paycheck-to-paycheck

Not just some people are living paycheck to paycheck. Most people are. 

That’s right: around 64% of U.S. consumers are just getting by. Even more shocking, 51% of consumers who earn over six figures are still living paycheck to paycheck, despite their higher tax bracket. 

It’s a major reason why employees need access to their earnings sooner rather than later. The pressure of watching your bank account slowly drain in the two weeks between payday is putting a lot of pressure on people, leading to a much greater demand for instant payments than ever before. 

Instant payouts are now table stakes

A PYMNTS study found that people of all ages prefer to be paid out immediately, as well as some other interesting statistics:

  • When given the choice, 68% of respondents said they would opt for an instant pay out
  • 40% of gig workers surveyed were willing to pay a fee for an instant disbursement
  • 81% of respondents were willing to switch jobs to an employer that offers instant access to earned wages and tips

It’s safe to say instant payouts are becoming the expectation for today’s modern workforce. But not all instant payouts are created equal.

Consumers are much more likely to engage with an instant payout system if they aren’t required to share their bank account and routing numbers and can access funds with just their debit card credentials. Why? It’s faster, more convenient, and feels more secure. 

Instant payouts and tip management: a perfect use case.

Instant payout innovation has come at the perfect time for the restaurant industry, which is struggling more than ever with the hassles and cost of cash.

If you’re in the restaurant biz, then you know: Most consumers pay with credit cards these days, not cash. That means there’s rarely enough cash on hand to pay out tips at the end of a shift. But employees still want and need instant access to their tip earnings.

Enter: instant payouts. Offering employees the option to receive their tip earnings directly to their bank of choice, the second their shift ends, can go a long way in improving employee satisfaction and ensuring their financial security.

But instant payouts are more than a work perk for employees. The operational benefits for employers range from reduced administrative burden and significant time savings to stronger compliance and streamlined reporting.

Modernizing your tip management strategy: 5 best practices 

There are three key components to your tip management strategy: 

  • Tip pool policy: How are you divvying up tips among your staff? 
  • The payout method: How are you distributing those payments?
  • The systems and tech: What are you using to facilitate those payments?

Under the current circumstances, restaurant operators are under immense pressure to bring their tip management into the future. 

5 best practices for tip management 

Based on our experience working with restaurant operators across the country, we’ve found that these five practices are the perfect recipe for building a successful tip management system.  

  1. Determine the right model and method for your restaurant, based on your location and tech stack
  2. Get a written tip policy (and get it legally approved
  3. Solicit employee feedback in a structured way
  4. Leverage technology for efficiency, accuracy, and compliance
  5. Don’t over-complicate (but do over-communicate!)

Tip management solution must-haves

When seeking a new tip management solution, make sure you carefully vet each system to see if it really meets your needs, or if it’ll be just as frustrating as cash. Here are a few suggestions for what should be on your checklist: 

  • Instant payouts
  • Direct to bank of choice
  • Availability of employee funds
  • Payroll option 
  • Integrations 
  • Simple implementation + onboarding process 
  • Around-the-clock customer service 

Big emphasis on strong customer support teams. Restaurants and bars don’t have “typical” business hours, so neither should your tech support.

Bar Louie automates payouts with Kickfin 

In a recent case study, we took a deep dive into our partnership with Bar Louie, a chain with over 60 locations that took advantage of our new integration with Toast. They made the switch from cash payouts to Kickfin’s instant, direct-to-bank payouts and haven’t looked back.  

Two-minute tip-outs

Before Kickfin, managers spent an average of 45 minutes per shift working through Bar Louie’s complex tip out policy and counting cash. The tip pooling rules were important to them — it’s what makes the entire staff feel like they’re getting their fair share. 

Using the Kickfin0Toast integration, Bar Louie was able to automate the tip pool calculation process and send tips straight to employees in under two minutes – a potential annual savings of 15,000 labor hours across all locations.

>> See more customer success stories 

Do you want to see these kinds of cost-saving results at your business? Let’s talk. Get a demo of Kickfin and see why restaurant owners and employees alike trust us to manage their tips.

Kickfin’s best-in-class tip calculation tool has some exciting new bells and whistles.

If you’re already using Kickfin’s tip pool calculator, then you know how much time and hassle you’re saving by automating everything. (And if you’re not? Head over to our tip pooling software page to see how it works!)

As we partner with more restaurants to bring their tip management into the future, we’re continuing to innovate our product so we can address their biggest pain points.

In this case, that means enhancing our tip pooling features so you can auto-calculate tip amounts even for the most complex or unique tip pool or share policies.

Check out a few of our latest features that will make tip calculations easier than ever.

New Release: Splitting Large Party Tips 

If your restaurant often hosts large parties, you know that the tip share can get confusing. Say one server is taking care of a party of 40 with a bartender assigned to only make drinks for that party. Meanwhile, the server has a few other two-top tables that are getting drinks from the main service bar. At the end of the night, how do you ensure that the large-party bartender gets their fair share of the tip out (without spending an hour on your phone calculator)? 

Kickfin can now automate that process for you, alleviating questions from your event bartender and saving time and effort on the part of your managers. 

Seamless Integrations 

Kickfin is partnering with your POS system to integrate seamlessly with your existing restaurant tech. Already, we’re serving Toast customers through our integration — and your POS just might be up next. 

Kickfin integration users get access to new product features first, like our new tip-out transparency tool. Your employees can log into their Kickfin accounts and see exactly how their tips have been split between team members, offering them full transparency into your tip policy in action.

Manager Tips 

We’re always listening to feedback to improve the Kickfin experience, and this one goes out to all of our restaurant partners who asked us to streamline the manager tip reallocation process.

>>Learn more about managers & tipping laws

In most cases, managers are not allowed to earn tips since they are salaried employees. But we all know that managers often step in and take care of tables to help servers get out of the weeds. Well-meaning guests will most likely leave a tip, not knowing that the manager technically can’t accept them — so where does that money go?

Kickfin now features a default pool, where tips “paid” to a manager are automatically redistributed to tipped staff based on your restaurant’s tip policy. 

Improved Labor Data Accuracy

We all know how easy it is for an employee to forget to clock out after a long shift. And sure, they aren’t going to get paid for a 16-hour overnight shift, but when payday comes around, those extra hours create a nightmare for your payroll team. 

With Kickfin, all employees are required to be clocked out in order to finalize payments — so you’ll catch the labor data mistake long before your payroll team has to sort it out. 

Even Better Security 

We’re committed to protecting you and your employees’ hard-earned money, so we’re adding an extra layer of security for certain transactions. You can now enable double approval of payments that meet certain conditions:

  • First payment for new employees
  • Employees getting their first payout in X number of days
  • Employees receiving more than X payouts in a 24-hour period. 

With these extra guardrails in place, you can always be sure that the right money is going to the right person. Reach out to our support team to configure your custom security measures.

Using Kickfin is a win-win for operators, managers, and employees alike. Restaurateurs save on cash delivery and labor costs, managers shave hours off their workload, and servers have the same instant payment that they’re used to — without the hassle and uncertainty of cash. 

Want to learn more about Kickfin? Let us show you the ropes with a demo

You heard it here first: 2024 is the year of integrations. 

In an effort to make Kickfin even more user-friendly and adaptable for our partners, we’re working with restaurant tech leaders to integrate our tip management solution with their existing systems. 

First up — Toast! A trailblazer for cloud-based restaurant management technology, Toast is a favorite POS system for restaurants, food trucks, and bars. You probably know them best for being the first to create handheld POS devices, drastically changing the entire restaurant ecosystem. To make life easier for their customers, Toast partnered with Kickfin to create an integration that makes tip pooling, tip distribution, and calculation smoother. 

As restaurant tech innovators ourselves, this partnership is the perfect fit for Kickfin. 

Our goal at Kickfin is always to save time for managers, prevent loss for operators, and create more financial freedom for hospitality employees through pioneering technology that digitizes many of the analog processes that the restaurant industry is built on. 

As a member of the Toast Partner Ecosystem, we’ll be able to deliver our product to Toast customers and modernize their tip management systems with ease. Using technology that they’re already familiar with, Toast customers can reap the benefits of Kickfin with minimal ramp-up upon implementation.

“No two restaurants split tips the same way, but invariably, it takes too long and involves too much risk,”  said Justin Roberts, the co-CEO of Kickfin. “This integration allows for the utmost customization with a near-zero learning curve — truly the best of both worlds for restaurants that want to save time, reduce labor costs and make life easier for their team.”

And one of their partners is already enjoying the ROI with Kickfin. Bar Louie takes great pride in making tip distribution equitable for all of their employees, so they rely on a complex tip pooling system to ensure fair pay. Prior to using Kickfin, managers at each of their 60 locations spent 45 minutes at the end of every shift to make calculations and divvy out funds to all of their servers. Now, they’ve streamlined their tip-out process with Kickfin — and managers are doing the same work in less than a minute! That’s an annual average of 15,000 hours saved across their entire chain. 

>> Hear more Kickfin success stories

After implementing Kickfin, managers can spend their time on what matters most: delivering excellent customer service. That means more table touches, more support for your staff, and more time to focus on server training. 

With managers spending more time on the floor (instead of counting cash in the back), you’ll see better customer reviews, better service, and increased sales — all from digitizing your tip-outs with Kickfin.

We’re excited about our new partnership with Toast and the opportunity to make digital tipping a reality for their customers. For restaurants who aren’t using Toast, don’t worry! We look forward to providing similar integrations across the restaurant tech industry.  

Want to see these results for yourself? Find out how to become a Kickfin integration partner or check out a demo of our platform.

No growing pains here! 

We’re thrilled to announce that Inc. listed Kickfin in their list of the top 10 fastest growing companies in the Southwest. (In fact, we earned the #1 spot in the software category and were listed as #9 overall!) We’re honored to be included alongside innovative companies that are making a big difference in our region. 

Inc. measured Kickfin’s growth from 2020 to 2022 — which wasn’t an easy time for the restaurant industry, to say the least. In spite of the challenges posed by the pandemic, restaurant concepts across the country embraced Kickfin’s technology. 

As a group, the 2024 Inc. honorees averaged 136% growth and created 17,606 new jobs over a two-year period. Individually, Kickfin grew by a whopping 1,304% (yes, really!).

We want to recognize and thank both our amazing customers and the Kickfin team for being part of our success story and allowing us to be a part of theirs. 

Our Customers

For years, restaurants manually calculated and paid out cash tips — despite the increasing hassle and liability those old-school methods entail. It’s not because operators are tech-averse; there simply wasn’t a good way to automate the process that didn’t create new friction or require new workarounds. 

That’s precisely why we developed Kickfin. Of course, we’re proud of what we built and the team behind it (more on that below). But we owe a great deal of our success to the customers who trusted us enough to give Kickfin a shot — especially those early adopters who are now some of our longest-standing customers.

There’s a leap of faith involved when you partner with a vendor and layer in new technology, particularly when it impacts something as important and sensitive as how you pay your people.  We don’t take that lightly, and we are incredibly grateful for the opportunity to serve each and every customer who’s been on this journey with us.

>> Hear from our customers about their experiences with Kickfin

Our Team 

Every person on our team wholeheartedly believes in our mission and vision for the future. In short: we’re here to make the tip management process insanely easy for everyone so that paying out your people is (almost!) as great as getting paid. 

As backstory: Our co-founders, Brian and Justin, came up with the idea for Kickfin while dining out together and noticing that an armored car was dropping off cash. They asked why a restaurant would need a cash delivery when most patrons pay by card; the manager explained the cash was needed to pay out tips at the end of the shift. The inefficiency (and expense, and risk…) of that process was a lightbulb moment for Brian and Justin.

They set out to build a team who not only understood the problem, but could think critically and creatively about a solution — and bring it to life. 

From sales and marketing to product and support, every Kickfin employee has had a hand in the growth and success of our company, thanks to their passion for our purpose and their commitment to being best in class.

We’re proud of what we’ve achieved thus far, and we’re excited to continue collaborating with our customers, innovating on their behalf, and taking Kickfin to the next level together. Onward and upward!

See Kickfin in action!