Should you invest in a restaurant in 2023?

In today’s economy, owning a business comes with a myriad of challenges. With interest rates and inflation especially causing difficulties for small businesses such as restaurants and bars, now could be the perfect opportunity for an investor to enter the industry. Here are some pointers to get you started:

How inflation and interest rate affect small business

Interest rates are a key factor when it comes to running a business. Interest rates are high at the moment, which means that any existing loans a business has could be more expensive. They may be having to pay more money back and it could take longer to complete the repayments.

Shorter-term loans that would typically be used for unforeseen events are also harder to obtain, which can slow down the growth of a company significantly.

Customers’ spending habits have also changed recently due to the cost of living crisis. Typically, people are going out less because they cannot afford it and want to save money. They are therefore spending less at bars and restaurants, which directly affects the profits of those businesses.

Will this create an opportunity for investors?

Businesses within the hospitality industry, unfortunately, do close to avoid bankruptcy. This, however, could create an opportunity for future investors. Along with money, investors can offer unique insights into different industries that can aid struggling businesses in their recovery.

Some investors prefer to have a different company operate on their behalf. People that do this are called investment managers. Investment management is beneficial as the agents work with you to create a tailored plan to achieve a specific goal. Companies that specialise in investment management have the expertise to guide you through the process and are responsive to economic changes.

Where should you look?

When looking for a restaurant to invest in, location is everything. While there are many different factors to consider, accessibility for all is a major one. For example, a business selling alcohol may find it beneficial to be near public transport so that customers can get home easily.

Furthermore, scoping out the current competition is vital. If there are a lot of businesses offering the same cuisine but with worse food hygiene ratings than the restaurant you are considering investing in, that may place it higher in your estimations.

Big cities such as London, Birmingham and Leeds are all packed full of restaurants, so starting your search in more densely populated areas could be a good start.

However, it is important not to rule out places off the beaten track. A good social media presence can make up for an establishment being outside of a city.