Pubs are a staple of Australian culture. Birthday dinners, sporting events to good old-fashioned drinking sessions with mates, Australians love their pubs!
When you start looking to buy a pub for sale the process can be overwhelming. There is such a wide variation in options from country pubs with accommodation to inner CBD locations with restaurants. Making the decision that is right for you is important.
We will provide 7 tips that will make searching for your new pub easier and more enjoyable.
In most cases, pubs are leasehold. This means you pay a lease to operate your business within the space. Most commercial leases are 5x5x5 or 10x10x10 for this type and size of premises.
It is important to ensure that the pub you buy has a long-term lease from the current owner; otherwise, when your lease ends they may find a new tenant or sell the premises. You need to make sure you are paying for the business and a good lease term. Always read the lease agreement carefully. A lease has a big impact on the business including its cash flow, how you can operate it, and the changes you can make.
If you are buying a freehold pub and premises, ensure you get a building inspection and are aware of any council zoning changes.
When you're buying a pub or restaurant for sale, another thing to consider is the kitchen.
If it's not in good shape or has some issues with it, then think about how much money and time will need to be put into fixing up that part of your new business. If you are buying leasehold, this may be something you may want to negotiate with the landlord before buying the business.
Pubs traditionally sell 'pub food' which includes burgers, steaks, schnitzels, fries etc. Though there has been a growing trend in pubs offering more varied dining options such as Chinese, Thai and high-end steak and ribs . It depends on the clientele, size and location of the business.
Buying a pub can have multiple income streams from food, alcohol and accommodation.
A pub with accommodation is a good investment because it can provide a good option for clients and an extra income for the business. People often look at a pub or motel for sale with a liquor license.
Accommodation attached to a pub is more common in regional Australia. It was very popular during the 1970s and 1980s when the majority of pubs were built to include rooms for rent upstairs. The unfortunate part of many of these establishments is they are due for renovations, which can be costly. So you will need to review on a case-by-case basis and chat with the landlord about any future renovation plans.
Ensuring good occupancy rates is important as it comes with its own unique set of expenses such as cleaning, replacing bed linen, laundry services, marketing, online booking systems etc.
Is everything in good condition? If not, then take the additional expenses into account.
Are there any local developments in progress that could affect the pub such as a major road change or a new shopping centre?
A number of regional towns in Australia have experienced a decline due to the diversion of a major highway that bypasses the town. Look at the 5-10 year plan for the region with the local council.
A lot of pubs that are for sale rely on the tourists or being popular amongst locals to survive. You want to make sure that no new pub or restaurant precinct is being built nearby.
Does the pub have a good reputation? Are you able to improve its image?
One of the most important parts of buying a pub is finding one that meets your needs and has great reviews.
Reading online reviews can help you determine if an establishment will be able to meet your requirements or not. Look on Google, Facebook and industry-related websites such as TripAdvisor.
If it doesn’t seem like the right place for whatever reason, then move on! You want to make sure you find something worth investing in after all this hard work.
It's important to perform thorough due diligence when buying a pub
When buying a business, the biggest indicator whether it is a good investment is how financially stable it is. You will want to perform due diligence on the pub you are looking to buy and ask a series of questions such as:
What is the net profit to the owner?
How long will it take me to earn back my investment (ROI)?
What is the year-on-year growth of the business?
What is the profit to loss ratio?
Will I have added expenses if I rebrand or do a fit-out?
Does the pub have any outstanding debts?
Ensuring you have a professional to assist you during the due diligence is very important, especially when making a big investment and buying a pub.
One of the best ways to truly know if this is the right pub for you is to take a look behind the scenes. You need to find out how much work would be involved in running your own business and whether it's worth all of that effort.
This means taking a good look around when you're there as a patron. How are the staff? Are they happy? Is service efficient? Are there any key people who keep the pub running efficiently? Getting a well-informed picture of the business you are looking to buy is important.
The Australian Hotels Association (AHA) has over 5,0000 members and maybe an organization you wish to be a part of. They represent members who own establishments from small country pubs to inner CBD 5 star hotels.
Now that we’ve covered all the basics to buying a pub for sale in Australia, it's important to remember that every business is different. You should always consult with professionals when buying a pub. These include a conveyancer, business broker, business advisor and accountant.
We hope you enjoyed reading our article on how to buy a pub with these 7 tips for success.