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Mortgage Affordability

Mortgages for restaurants are widely available with the right business plan. Lenders realize that for every two pounds being spent on groceries, one is being spend eating out in the UK. This makes the prospect of opening a restaurant business have very good chances of success.

            While considering lending to an applicant for a restaurant, mortgage lenders look at certain factors to determine their decision.

  • If a new restaurant is opened, a good business plan for projected outcome should be presented. If an established restaurant will be bought, an account for the past 2 years’ earnings will need to be presented.
  • The location of the restaurant will play a big role.
  • The amount of money that will need to be invested for modifications to the building and furnishings for the restaurant will need to be presented.
  • The amount of out of pocket money will be used by the applicant towards this restaurant will need to be stated.
  • Applicants experience in the restaurant business and knowledge of food hygiene regulations will need to be proved.

 

Although many restaurants succeed, lenders are aware that new restaurants have a very high rate of failure. Budgeting well, as well as considering the expenses for furnishings and upkeep will help a restauranteur stay above the flock. Provided that the right decisions are made, a restaurant could flourish. These decisions include what type of restaurant, fast food or sit down, location and marketing, and whether to franchise or not.

 

Location

            Location could make or break a restaurant. The type of restaurant that is being opened determines where it should be opened. There shouldn’t be any big competition nearby. For example, if a restauranteur wanted to open a new Italian restaurant, he shouldn’t put it in the same area as a well establish trattoria.

            Another thing that should be considered is if the area has enough passing clientele. Will the type of people that the restaurant caters to find it convenient to eat there?

Marketing

            Just like in any business venture, the word needs to be spread about the new business in order to get customers. Perhaps the budget allows for some mainstream advertising. If not, a traditional way of advertising the restaurant and getting customers in the door is coupons or flyers.
            Anything to get the business in the public eye will help the restaurant. Contributing to local events or partnering with other businesses for marketing purposes can achieve this.

Franchising

            Franchised restaurants are restaurants that are basically a restaurant in a box. A person signs a contract with the franchise owner and in return the purchaser gets to use the name, products, and marketing from the franchise. This type of restaurant has less risk, since the name has already been proved successful and is known by customers.

            Starting a franchise is usually easier financially because everything is already set up. Financial aid could possibly be given by the franchise company itself. Mortgage lenders also are more invited to lend for this type of restaurant because of the low risk factor.

However, there are some downfalls to franchising that should be considered before any contracts are signed. A lawyer should be consulted to go over the contract and read the fine print with the purchaser for protection.

Franchises want to look and run uniformly. Customers like familiarity. Due to this, franchise companies severely restrict the way a franchised restaurant is run. A restaurant may not just offer something new to their customers without permission from the franchise. If a legal dispute results from non conformity, franchise companies have a lot of money and big shot lawyers. The chances of their losing are very slim.

Franchises make their money by taking a percentage of the profits of their restaurants. The more money a restaurant makes the higher the percentage. This could cut down drastically on the money earned by the restaurant owner.

Pros and cons of franchised restaurants should be weighed carefully before a decision is made.

 

             

 


 
 
     
 

 

 
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