Should I buy a closed restaurant or one that is still open?
A closed restaurant gives you a space and equipment but no sales history, staff or regulars, so you are close to starting fresh. An open one lets you watch real service and read real records. Ask why each one closed or is for sale, and what equipment, leases and licences are still in place.
Both kinds of restaurant can suit a buyer, but they are different purchases. A closed restaurant is mostly a space, a lease and a kitchen. An open one is a working business with people, habits and records you can inspect. Before you look at either, decide how much risk and how much rebuilding you are ready to take on yourself.
What you can see in an open restaurant
A trading restaurant lets you sit through a busy night, watch the line, taste the food and see who comes back. You can ask for sales reports, supplier invoices and staff schedules and compare them with what you saw. Ask the seller what changes if they leave, and which staff and suppliers are ready to stay. The records and the room should tell the same story.
What is left in a closed one
A dark restaurant has little to verify. Ask why it closed, what the landlord says about the lease, and whether equipment is owned, leased or owed on. Staff may have moved on and regulars may have found other places. Kitchen equipment that sat idle may need service, and a clean inspection history from before the closing may no longer tell you much. Your own plan has to carry more of the weight.
Questions to settle either way
- Who owns the equipment, and is any of it financed or leased?
- How long does the lease run, and will the landlord accept you?
- Which licences and approvals will you need, and who can confirm that?
- How much will it cost you in time and cash to get to a normal Friday night?
Our restaurant due diligence answer walks through the papers to request, and the red flags in a business for sale page helps you read what you find. Your lawyer can review the lease and the purchase terms, and your accountant can help you test the numbers.
Related reading
15 pages on the same subject, grouped by topic.
Buying
- Expert answerHow do I transfer a food premises licence when buying a restaurant?
- GuideHow to buy a restaurant in Ontario: licences, ownership rules and what transfers
- GuideHow to buy a restaurant in Quebec: licences, ownership rules and what transfers
- GuideHow to buy a restaurant in British Columbia: licences, ownership rules and what transfers
- GuideHow to buy a restaurant in Manitoba: licences, ownership rules and what transfers
- GuideHow to buy a restaurant in New Brunswick: licences, ownership rules and what transfers
- GuideHow to buy a restaurant in Newfoundland and Labrador: licences, ownership rules and what transfers
- GuideBuying a café or coffee shop in Canada
- Expert answerHow do I read a fast food franchise’s brand audit reports before buying?
- GuideBuying a food truck in Canada
- Expert answerWhat is a restaurant takeover?
- Expert answerWhat should a holdback cover when you buy a restaurant?
- Expert answerShould I buy an existing alterations shop or start one at home?
Sources
This answer is checked against primary sources. Links were last confirmed on the dates shown.
- 01Business Development Bank of CanadaGovernmentWhat are the steps to buying a business?
- 02Business Development Bank of CanadaGovernmentAfter buying a business, what is the next step?
- 03Business Development Bank of CanadaGovernmentHow to conduct due diligence when buying a business
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