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Texas Restaurant Law

5 Ways to Avoid Costs of Acquiring Restaurants

Posted in Acquisitions, Contracts, Corporate Entity, Franchises, Negotiation, Real Estate, Vendors

Cut Costs

All too often the margins of restaurant acquisition require stringent cost control. To help, here are five things to keep those costs low when considering the purchase of a restaurant:

1. Assemble Your Team – It’s hard to decide when to get your team of counselors (like attorneys, accountants, appraisers) involved in a deal. If you involve them too early, there may be unnecessary costs, but waiting too late can result in paying a premium for their time or unnecessary delays. However, one easy way to avoid both is to put the team together before you have the deal. Getting through paperwork, paying retainers, running conflicts of interest all before you start can reduce your costs of delay.

2. Personally Review The High Points of Due Diligence – Before you get the team together, it’s important to review the due diligence personally to be sure that you approve of the key points. Recall that due diligence is your homework. Thus, make sure you have done your homework on the high points of what you want from the deal before you start the clock ticking at the hourly rate of your accountants, lawyers, etc. This may cause you to say “duh,” but it’s surprising how many people fail to look at even the high points of a deal before they send the deal to their professional consulting team. At the same time, though, consider the points in Item 1 above, and don’t wait too long either.

3. Agree On Key Terms Up Front – In acquiring restaurants, it’s important to agree on deal points from the start. These are the things that are non-starters for your acquisition. Get them in writing from the start in the form of a non-binding letter of intent, and it could save you quite a bit of time later.

4. Set A Deadline For Closing And Stick To It – From the outset, make your team of advisers and the seller aware that you want the deal closed by a set time, and stick to that date. Obtain an agreement with your advisers that requires closing by that date, and help them determine how to achieve your goals in that time. This can avoid deal delay that can reduce your costs.

5. Decide Early What Your Goals Are – Of all of the points above, this last point is probably the most important. All too often, restaurant buyers decide in the middle of a deal what their goals are. This can result in “rabbit trails” that cost money that could have been saved. Rarely can you get everything you want in a deal. Realizing this from the start, it will save you money to decide what you can’t live without. By doing this and communicating it to your advisers, their time and your money can be saved as you get to closing.

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About the author: Matthew Sanderson is a transactional and real estate lawyer focusing on restaurants in Texas. “Good service with a smile” is his motto. Click here to find out more about Matthew Sanderson’s legal practice and how he can help you today. Follow him on Twitter @dealattorney.