Should You Build or Buy Your Restaurant?

One of the first decisions budding restaurant owners make is whether to build or buy the property. Your choice will shape the initial investment and launch process and set the tone for your eatery’s future trajectory. 

When starting your own business, you’ll want to consider the market, your finances and your personal goals to make an informed decision.

Pros and Cons of Building a Restaurant

Building your own restaurant from the ground up has various pros and cons you’ll want to consider before embarking on this entrepreneurial journey. Pros include:

• Complete customization: Building a restaurant allows for complete customization. You’ll have creative control over every aspect of the design to ensure it reflects your vision. If you have a unique idea, building your own restaurant might be more beneficial.
• Brand identity: Establishing a restaurant lets you build a brand identity that resonates with your target audience.
• Personal satisfaction: Building your own restaurant can be a fulfilling and rewarding experience. You can watch your vision come to life and leave a lasting impression on the culinary world.

Cons of building your restaurant can include: 

• Time delays: Building a restaurant can take a long time, with the potential for construction setbacks and permit approvals to delay opening. This can impact your revenue projections and operational timelines.

• Environmental impact: Construction projects can have a harmful effect on the land and water in which you’re building. Typically, projects will need a stormwater pollution prevention plan, as rainwater can carry sediment from the job site to storm drains.
• High initial investment: Building a restaurant requires a significant upfront investment, including the costs of permits, equipment, construction materials and staffing.
• Market uncertainty: Starting a business from scratch can lead to challenges in attracting patrons in the beginning stages. Since you’ll be building your restaurant from the ground up, you’ll need to consider that your consumer base will also expand gradually in competitive markets.
• Operational challenges: When building a restaurant, consider the challenges of managing construction and meeting regulatory compliance. The process can be lengthy and complex, requiring careful oversight to avoid costly mistakes.

Pros and Cons of Buying a Restaurant

Buying an existing restaurant offers the following pros:

• Established customer base: If you take over an existing restaurant, you’ll have immediate access to existing clientele. You’ll get to capitalize on the momentum and revenue the business already has in the market, giving you a headstart.
• Proven track record: Buying a successful restaurant means inheriting a working business model proven to work, which can help you collect more revenue and expand in the future.
• Faster launch: Choosing an existing building rather than building your own can help you avoid construction delays and allow you to start operating sooner.
• Better for the environment: Purchasing an existing restaurant lowers your carbon footprint, as new construction generates waste and requires high energy demands from transporting materials and powering heavy equipment.

Cons of buying a restaurant include:

• Limited flexibility: Buying a restaurant offers less room to customize compared to building from scratch.
• Higher acquisition costs: Purchasing a building can come with a high price tag, impacting your initial finances.

Factors to Consider Before Buying or Building a Restaurant

Ultimately, the decision to buy or build is up to your personal preference and finances. Consider the following to make a decision.

1. Financial Analysis

Compare the costs of building vs. buying while factoring in long-term projections. Consider your initial investment budget, operational costs, return on investment and tax implications. You might consult with a tax advisor to determine how each option can affect your tax liabilities, deductions and overall financial position before making a decision.

2. Market Research

It also helps to conduct market research in your area — including local competition and consumer preferences — to inform your decision. Visit the potential location of your restaurant and note foot traffic, visibility, parking and overall accessibility to determine if it works with your target market and goals. Check out the existing restaurants in the area, noting their concepts and customer bases and how your restaurant might distinguish itself from the competition.

3. Licensing and Permits

Make sure you understand the regulatory requirements for opening a restaurant in your chosen area. You’ll need to follow the process of obtaining the right licenses, permits, health inspections and compliance with local regulations. This way, you can avoid delays or legal issues down the road.

4. Staffing Considerations

Think about your staffing requirements when deciding between buying or building. Determine whether you have the expertise and resources to train a new team on intricate cocktail recipes if you’re building from the ground up. Acquiring an existing restaurant may come with an established team that can handle the management changes.

5. Sustainability Practices

Whether you’re building or buying, you’ll want to consider sustainability. Constructing a new building can generate waste and high energy demands. If you’re hoping to attract eco-conscious customers, consider how you could incorporate eco-consciousness into your brand and differentiate your restaurant in the market.

What Are Your Goals?

Consider your culinary and business aspirations and the level of risk and control you need when establishing your restaurant. For example, if you want to enter the industry with less risk and financial investment, you might consider acquiring an existing restaurant. 

If it’s always been your dream to build your own restaurant, you might consider the venture as a way to grow and see your creativity come to fruition.