Lease or buy?

Peggy,

Buying to me is preferable, here's why, you own the location so even if down the road you decide to retire from the business, you can sell the business but lease the building. this will continue to give you income even if you aren't operating the business.

The things I look for are properties that have great drive by traffic, I prefer properties that are really in bad shape, that way I can buy them cheaper and renovate to whatever theme or design I want. This can usually be done for about what you would pay for a turn-key building.

You probably want to find a location that is already zoned for commercial, that will avoid all the garbage and expense of re-zoning.

The size and lot size depends of the number of covers you are planning a day and if it is all take out, you need less space than a sit-down place.

I am negotiating right now on an old shack of a building here that the owner wants to lease, we want to buy it. He is considering this, if he does sell the price that he has quoted off the top of his head is over 50% less than a building that used to be a restaurant down the street. We want to renovate it into a trendy upscale joint, not sure of the menu yet, we are waiting on the deal to come through first.

I think buying is better if you can, that way you can put your sweat equity in it, if you have a good banker they like that. my be you should think trailer if you what to do just takeout at least to get started. you may be able to move it to differant locations to seek out a good area for takeout, and build from there.

This comes not as a cook,but as a site rep for restaurants and like properties.

Buying good real property, in an area expected to appreciate,can sure strip you of capital.

Buying bad property and hoping business moves to you is usually worse.

Q might take several years of needing your reserves.

As you know ,banks don't like to lend on restaurants without a large down payment and the managing partner having several years of food service experience.

It depends,usually whether you want to be in the real estate business,or food service.

It seems to me,if you are food service inclined,then you merely want to control the property.

If you can negotiate a lease,with an inexpensive option to buy at a negotiated price,you might be well ahead.

If you decide to make huge improvements,you are assured you can still purchase.

I can't disagree that stealing a purchase isn't a good plan.

Your area doesn't have a lot of "steals" left.LOL

Much of your area may be held in trusts,where they are willing to lease for a goodly amount of years,while waiting on the maximum "taker" to materialize.

This might put you into a normally unaffordable ,high traffic area, at a workable price.

Just a couple of thoughts from the other side of the business.

Peggy some of the questions that you posed were discussed in a post by Bodacious BBQ in the Professionals forum under "if you could start over" last Feb. It's on page two of the archived posts.
CB

Thanks to all of you.
Now I'm mulling this all over while I wait for people to return my calls, between doing mammograms, and trying to please very demanding radiologists.
I love this dream, though. One day it will happen.
Peggy

Another point in favor of buying is that around here, many commercial landlords also get a percentage of your gross once it reaches a certain level. I know this is not unusual, but I wouldn't call it typical either. In some parts of the country it is unheard of. Their thinking is that a certain amount of wear and tear is covered in the base rent, but if you do a lot of business, their upkeep will increase also. It might not sound like much when you sign the lease, but a year down the road having to pay a couple of hundred extra each month just because you're successful kind of sucks.

My partner and I have made an offer to buy a building. Our CPA ran the numbers for us and we all decided that we could get more money with less down because there is real property to leverage against the loan. The plan is to open a restaurant and run it for 3-4 years and then sell the business and keep the real estate, re-invest and repeat. A lot of times the real payback on the business won't be until you sell it and then again when you sell the real estate down the road when you are ready to retire from the game.

Well I'm in the minority in this crowd , I think. I say lease with an option to buy. Look for some place that has alot of the equipment and setup your looking for. It may not be in the #1 best part of town but then what will be your monthly break even point to keep your business alive to. I found one here near KC in Independance Mo. It's on a hiway that has a 40mph speed limit and a fairly good amount of traffic. We are a walkup service and drive thru only. It will take more then you think to keep a location going. Just run the numbers and see. Do a business plan with three employees and a $1000.00 a month lease with all the work comp and insurance you need. It takes $3200 a week to run the break even for us and that # does not include any advertising in it. Look and see what that cost. Everyone has the best way for you to get the word out about you new place. I would say have 6 months worth the operating capital in the bank to invest in your business to get you through the lean times.