RESEARCH PAPER ON RESTAURANT BUSINESS

Research paper on restaurant business

Research paper on restaurant business

Introduction

The decision to open your own restaurant is an exciting one. You get to be your own boss and you do not have to worry about making money for anyone other thanyourself. Being independent has its perks but it also has its costs-literally andfiguratively. One of the most important considerations is the financial aspects as theywill make or break your business. I will go over some of the key elements of financialrisks and rewards that you must be made aware of before making the leap into restaurantownership. (Laube, J. 2006)

Buying an Existing Restaurant

If you are looking to purchase a restaurant that is currently in operation, it isimperative you do a financial analysis of the establishment. If possible, hire anexperienced accountant to assist you with this process. Having a professional who isfamiliar with the restaurant business will be able to recognize trends from their past andhelp predict their future profit potential. One of the main aspects of your analysis shouldbe assessing all applicable tax filings that include:

Federal income & unemployment tax reports

State income & sales tax reports

ICA filings

Real and personal property tax reports

Workmans compensation reports

Analysis of sales expenses will show the current advertising and marketing expenses incurred. Analysis of sales statistics will give you an idea of typical clientele that currently frequent the restaurant. Shows check averages, gross margins, salesvolume potential as compared to actual sales volume and seasonal tendencies and fluctuations. Analysis of sales volume explains what influences sales volume, its potential as well as potential to increase income outside of food and beverage sales such as retail shops, parking fees, etc. (Laube, J. 2006)

Explanation

Pro Forma income statement this will be most relevant to the buyer as it predicts what the statement will look like in six months after the buyer has taken ownership. This is where an accountant can figure all expenses and sales to determine where you will stand income wise in the future. Other files and accounts to take into consideration are: Annual shareholder reports buyer will be apprised of sellers forecast of restaurants financial future. Credit reports buyer can find out credit history and whether or not they may have problems attaining credit from suppliers. Cash budgets displays working capital requirements and what time of year it may be necessary to get a short term loan when cash is tight Personnel records with these records you can find out about any judgments against the restaurant that may affect the purchase. By conducting these background checks on the restaurant you are planning topurchase, you will have an excellent idea as to whether it will turn over a profit. Onceyou have decided there is potential for a great return on investment (ROI) it is time tostart looking at leasing options. This next section deals with a significant aspect infinancial spectrum: acquiring your property. Buy or LeaseThere are two ways to acquire the main asset you need to get your restaurantventure off of the ground: purchasing ...