restaurant business - inside scoop

Can any one tell me what the ball park profit would be on a full service non corporate 24 hour a day restaurant that is well run and owner run and does 1.5 mil a year. The rent on the space is 2000 mo with a good lease. I was told 4%....is that correct?

Serving diner type food.

I should add that this is assuming all equipment and inventory is paid for. Thanks.

quote:

Originally posted by nyczoo
Can any one tell me what the ball park profit would be on a full service non corporate 24 hour a day restaurant that is well run and owner run and does 1.5 mil a year. The rent on the space is 2000 mo with a good lease. I was told 4%....is that correct? Serving diner type food.

Are you serious? There are so many variables your question only
begs more questions. Are you doing a term paper or thinking about
buying a restaurant? If your thinking about buying a restaurant and
ask this question save you money.
Jack

Sure Im serious as I figured someone that would know as much as you would ask the key questions rather than read a novel and sift out the needed details.

Ok try this from foodservice.com

Before opening, or thinking about opening a restaurant, you should:

Have your personal money matters under control! Credit card debt to a minimum, if any! No late payments, no defaults, no repossessions. Who will be responsible for paying personal debts, business debts? Will you have joint accounts with the business and personal, or separate?

Do you have the cash to back up this venture without mortgaging your house and personal assets? (This is a big NO-NO!)

Do you have any past lingering debt that should be taken care of before starting your venture?

Have you checked your credit history? Do you have any items that are going to cause problems with the financing of your operation?

Have you saved a minimum of one year's salary that would cover your basic living expenses during start-up of your business. This figure may be low because it may take longer than a year to be profitable enough to pay you a salary, must less a full salary. You will be one of the lucky few if you can do this less than one year!

Have you worked to reduce you personal expenses. For at least a minimum of 1-3 years you will be in SURVIVAL MODE, you will have to do what it takes to make your business a success, and that means cutting your personal expenses to the very bone! Sorry the Direct TV is out!

Have your personal affairs in order. Decide who will take care of the kids, are you going to have more kids in the future and does your spouse agree with this.

Is your spouse going to help you in this operation, what will their contribution be to the project. Will they be compensated, how much and when?

Are you going to have a business partner? If so, then answer the previous questions.

Do you have elderly parents, who will care for them? Who will make the trips to the drug store and the doctors. Who will do their grocery shopping and other errands? Are they opposed to this idea, are they going to give you moral support?

Who will be responsible for cleaning your home, especially if your spouse helps with the business? Who will wash the car? Wash the clothes? Cut the grass and do the weed-eating?

When will you spend time with your spouse and family, or just have a personal life outside of the restaurant. Are you willing to work when others are playing? While they are dining, you are sweating!

Have your personal medical affairs in order. It's guaranteed you will not always be young and healthy, what you do now is going to effect the rest of your life. Make your decisions wisely.

How much will medical insurance cost you now, and in the future when your health won't be as good as it once was. Can you afford the premiums? How much will they be? It is NOT what your health is now, but what it will be in 10-15 years!!

Are you healthy enough to withstand the rigors and requirements of the restaurant business? Will you be able to stand the long hours? How is your back, there will be heavy lifting and extensive cleaning projects? Do you have sugar diabetes, is their a history in your family? How about cholesterol? Do you smoke?

Life Insurance, how much do you really need? What happens to the business in the event of your death? Will your spouse be willing to operate it and keep it going. Will it provide an income for them without you being there? Who would dispose of the business should it be decided not to continue? How would it be sold and who would be responsible?

I hear ya on all of this. And I agree that all of what you mention is realism that a lot of people don't look into before they take the plunge.

I was trying to get a handle on potential as an opportunity for a restaurant at a busy exit on the freeway in California. The business is for sale because the owner wants to retire. They have been there for a long time and have been successful as far as I can tell. They have told me what they make. I was looking for an outside opinion as to what potential profits are. Something to compare as I will delve into their books soon enough.

I have worked many aspects of the restaurant industry...but have never owned.