No industry is immune to change – especially the restaurant business. As one of the largest and most prominent industries in Canada, restaurants have long been on the front lines of evolution in technology, economics, social and cultural factors, consumer tastes, and more.
If you’re thinking about buying or selling an existing restaurant, starting your own brand from scratch, or investing in a franchise, there are certain things you should be aware of before you head to the market.
A short time ago we covered how the restaurant industry as a whole has evolved in recent years. In this post, we’ll look at new and emerging trends specific to the real estate side of things.
Transactions Are Taking Longer
One of the more visible trends impacting restaurant real estate is extending transaction timelines. Put simply, deals are taking longer than they used to. While multi-week transactions are nothing new, some restaurant sales are now stretching into multi-month territory. Of course, these longer timelines should by no means deter investors or entrepreneurs, however, it is important to be aware of this trend ahead of time.
Looking for complementary restaurant real estate advice? Check out these other resources from our blog – on the house!
- Restaurant Sales: What’s on the Table During Negotiations?
- How to Interview a Franchisor
- Key Terms in Restaurant Real Estate You Should Know
Focus on Finances
So why are restaurant real estate transactions taking longer? There are multiple reasons. Commercial real estate deals are complex, with a lot of moving parts and pieces. However, one of the primary factors influencing today’s transaction timelines is finances.
Financing a business is far more complicated than simply taking out a loan. In addition to personal capital and financing from a lender, you may also be utilizing various grants and government incentives or working with angel investors. These avenues all add extra steps to the buying process.
The total time it takes to sort out your financial resources will depend on your business goals. However, it’s important to note that many of these processes are taking longer than they used to – especially financing. As a result of broader economic factors such as inflation and higher rates of interest, lenders are practicing greater scrutiny when verifying the viability of an entrepreneur, investor, or business.
As the industry evolves and changes, adaptability should be a key proponent of your restaurant’s business plan. Click here to learn more.
Changes to Franchise Deals
In the realm of commercial real estate and the restaurant industry as a whole, franchises are specialized in nature. Due to the distinctive style of the franchise model, real estate trends related to franchises can be somewhat standalone. That said, franchise investors will also be impacted by many of the evolving factors faced by independent restaurants.
On that note, one of the more prominent trends currently impacting franchise deals is greater scrutiny performed by franchisors. Just like lenders, many franchisors have become extra cautious about which franchisees they sell to. This increased degree of caution has led to longer buyer-vetting processes, which in turn has impacted the timeline of franchise sales.
In the past, a franchise transaction could take around 60 days to complete. Today, some deals are reaching as long as six to eight months.
As mentioned earlier, non-franchise transactions are also taking longer, however, not quite to the same extent. This is because there are generally fewer parties involved in the deal.
When it comes to restaurant real estate, location is a crucial detail in setting up a successful investment. Check out these blog posts to learn more.
- Why You Should Open a Restaurant in Markham, Ontario
- 5 Reasons to Expand Your Business Beyond the GTA
- How to Find a Restaurant For Sale in Toronto
Stay Ahead of the Curve
In the restaurant world, change has become the new normal. However, that doesn’t mean that there aren’t still endless opportunities for entrepreneurs and investors to make their restaurant dreams a reality.
As restaurant real estate agents with decades of experience, we’ve long been on the front lines of industry change and evolution. Not only do we know where the market stands today, but our skills and expertise allow us to anticipate and prepare for where it’s headed next.
Whatever your restaurant real estate goals look like, we can help.
Are you looking to open your first restaurant, expand your existing business, or sell? Regardless of your goals, we can help! Send us an email or give us a ring at 416-618-0054 to get started.
