How to buy a restaurant in France?

Buying a restaurant is an exciting and ambitious investment! But it requires a lot of preparation. Who will be in charge of running the restaurant?  Will you take out a bank loan in your own name or through a company? In this guide, we'll explore the options available to finance the purchase of your next restaurant!

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Table of Contents

1. Conditions for Buying a Restaurant
2. Sources of Funds for Restaurant Purchase
3. Creating a Financing Plan for Buying a Restaurant
4. Considerations Before Buying a Restaurant
5. How to Finance the Purchase of a Restaurant
6. Alternatives to Bank Loans
7. Summary
8. FAQs

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1. Conditions for Buying a Restaurant

The way you buy a restaurant depends on two factors that directly impact the financing of your project:

1. The legal structure of the restaurant you intend to buy;
2. The origin of the funds you bring in.

• If the restaurant you intend to buy is a sole proprietorship of the EURL (Individual Limited Liability Company) type, you have two options:
  • Buy the restaurant with your own funds;
  • Purchase the restaurant through your company or one of your companies.
• If the restaurant you want to buy is a SARL (Limited Liability Company) or SAS (Simplified Joint Stock Company), you also have several options:
  • Purchase shares of the company personally (if a loan is needed, it must be taken out in your own name);
  • Acquire the business assets in your own name;
  • Acquire the business assets through a company you own (if a loan is needed, it must be taken out in the name of your company).

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2. Sources of Funds for Buying a Restaurant

To create a purchase plan, you need to study the current situation of the restaurant and list all the expenses to be incurred.

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3. Creating a Financing Plan for Buying a Restaurant

Before buying a restaurant, you need to consider the following:

• Geographic location: Is the restaurant located in a busy area? What is the pedestrian traffic like? Is it located in a downtown area, an office park, or a commercial zone? Are there any changes expected in its location area (opening or closing of a large company)?
• Commercial lease: How much is the rent? What is the duration of the current lease?
• Customer base: What type of clientele frequents the restaurant? What is the average budget?
• Restaurant equipment and layout: Are there any investments needed in terms of professional equipment (oven, stovetop, fridge, freezer, etc.)? Is it necessary to redesign the layout?
• Alcohol sales license: What type of license will you need to apply for (restaurant license or licenses 2, 3, or 4 for selling alcoholic beverages outside of meals)?
• Restaurant staff: How many employees does the restaurant have? What is the salary amount for each of them? Will the employees stay after the takeover?
• Turnover: Is it stable, decreasing, or increasing?
• Annual accounts: It is necessary to examine the accounts of the last few fiscal years.

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4. Considerations Before Buying a Restaurant

The financial forecast should include:

• The acquisition price of the establishment;
• Working capital requirements;
• Purchase of stock after the transfer of the restaurant;
• Registration fees related to the purchase of business assets and/or company shares.

If your restaurant purchase is assisted by legal, tax, and/or accounting professionals, then you will need to add their fees to your expenses.

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5. How to Finance the Purchase of a Restaurant?

The classic option: Business loan

A business loan is a financing system reserved for businesses. Its operation is similar to that of loans for individuals (fixed-rate loans, variable-rate loans, early repayment, or monthly installments, etc.).

Buying a restaurant involves a significant need for financing, which may prompt you to take out a business loan.

If this loan is necessary to help you finance your operation, it will be included as a suspensive condition in the sale agreement of the restaurant.

This means:

• If you fail to obtain the loan, the purchase of the restaurant is canceled;
• In the case of a positive response, the loan is unlocked when you sign the purchase deed.

Obtaining a business loan requires demonstrating the financial viability of your project to credit institutions.

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To do this, here are three levers to activate to convince the banker sitting across from you.

1. A solid financing file. The elements and data you have gathered when preparing the financial forecast should be presented exhaustively to banks. Consider highlighting the following elements:
   • Analysis of the restaurant's recent financial data (turnover, annual accounts, gross margin rates, etc.);
   • All essential information for the business (lease characteristics, staff list, area study, etc.);
   • A financing plan covering the next three years
2. A mature and well-prepared project. Your restaurant takeover project must be consistent. On the one hand, bankers will be attentive to your experience in catering and more generally in staff management. On the other hand, they will ensure that you are able to maintain the restaurant's upward trend in results. If they are declining, you will need to explain how you will reverse the situation (marketing plan, menu change, facelift, interior decoration, etc.).
3. A significant personal contribution. Even with a consistent project and a solid financing file, bankers still need to be reassured. It's best to have a significant personal contribution (ideally, a contribution of around 30% of the total capital).

If not, banks may refuse to grant you the loan and/or ask for too many guarantees.

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6. Alternatives to Bank Loans

Alternatives to bank loans can be used in two cases:

• Your contribution covers more than half of the project cost, and you want to supplement the financing without taking out a loan;
• You want to increase your contribution to make it easier to apply for a business loan.

Help from friends and family

If friends or family are interested in your project, you can invite them to participate in the company's capital. By investing money in the purchase of the restaurant, they will become shareholders of the company. If your restaurant is a great success, they will benefit from significant financial returns.

This form of financing can also help you increase your personal contribution, making it easier to obtain a business loan.

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Crowdfunding

This form of financing involves seeking help from individuals through crowdfunding platforms. This financing method is currently booming. In France, 167 million euros were raised in 2015, and over one billion euros in 2020.

There are several types of crowdfunding:

• Donation: A reward is offered to the donor according to the help provided (lifetime discounts, free meals, goodies, etc.);
• Investment: It allows financing a project through the subscription of debt or equity securities, with a return in case of profits;
• Loan (with or without interest).

How to choose the most suitable crowdfunding platform for your project? You can visit the dedicated crowdfunding website created by the Public Investment Bank (BPI France) and the Deposit and Consignment Fund (CDC).

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External investors

Understanding investors in the catering industry is a real advantage. To find external investors, you will need to double your efforts. You can seek your network or contact investors

who might be able to help you. Unlike banks that only assess your ability to repay the loan, external investors want to know as much as possible about the growth potential of your restaurant. Therefore, presenting a solid business plan is crucial to highlight your project.

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7. Summary

In summary, one prominent way of financial support is through a business loan. However, it comes with its drawbacks. Due to it, you will need to repay the loan (including interest) to the bank over several years.

If you only need straightforward financial support, there are other solutions available:

1. Financial help from friends and family.
2. Crowdfunding.
3. External investors.

Are you ready to get started? Micco is here to support you immediately in creating your restaurant and paving the way for your restaurant journey!

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8. FAQs

How much investment is required to buy a restaurant?

‍To buy a restaurant and obtain a business loan, you must be able to provide between 20% to 35% of the total capital. This figure can be adjusted based on the profitability of the restaurant you intend to buy.

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How to finance the purchase of a restaurant without any investment?

‍Buying a restaurant without any investment is relatively difficult. With high costs involved, banks typically require providing between 20% to 35% of the total capital. You can opt for leasing the operating rights or seek investors, friends, family, or seek personal assistance through crowdfunding platforms.

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What financial assistance is available for buying a restaurant?

Several assistance programs can help you obtain significant funding when buying a restaurant:

• Entrepreneurial Guarantee provided by BPIFrance;
• New Business Assistant Plan (NACRE);
• Regional assistance.

By taking advantage of these assistance programs, you can accumulate essential financial support for buying a restaurant.

Now that you have learned about the financing options for buying a restaurant, I hope this information helps you and paves the way for your restaurant journey!

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As a financial services company, Micco provides comparable services and solutions tailored to the needs of modern businesses. With a user-friendly platform, competitive pricing, and a commitment to customer satisfaction, Micco is a viable option worth exploring.

Whether you're a freelancer, startup, or established enterprise, Micco offers the tools and support needed to streamline financial operations and drive business growth. Check out Micco today to discover how it can complement your business banking needs.

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Explore Micco's solutions today

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