Restaurants for Sale: How to Find, Evaluate & Buy the Right One

If you’ve been searching for restaurants for sale, you’re not alone. Thousands of aspiring restaurateurs, seasoned operators, and investors search for restaurant opportunities every month. But finding a listing is the easy part. Knowing how to evaluate it, negotiate the right price, and close the deal without getting burned — that’s where most buyers need help.

I’m Charles Smith, Managing Broker at Smith Allen Group, and I’ve spent years helping buyers and sellers navigate restaurant transactions across California. In this guide, I’m going to walk you through everything you need to know about buying a restaurant — from where to find opportunities, to how to evaluate them, finance the purchase, and get through escrow. Whether you’re buying your first restaurant or adding to a portfolio, this is the playbook I wish every buyer had before they started.

Why Buying a Restaurant Is One of the Best Small Business Investments

The restaurant industry generates over $1 trillion in annual sales in the United States, according to the National Restaurant Association. It’s one of the largest private-sector employers in the country, and despite the challenges that come with the business, restaurants remain one of the most accessible paths to business ownership.

Here’s why buying an existing restaurant — rather than starting from scratch — is often the smarter move:

You’re buying cash flow, not a concept. When you purchase a restaurant for sale that’s already operating, you’re acquiring a business with revenue from day one. There’s no six-month buildout period with zero income. You step into an operation that’s already generating sales, has a trained staff, and serves an established customer base.

The infrastructure is already built. Restaurant buildouts are expensive. A commercial kitchen with a Type I hood system, grease traps, fire suppression, walk-in coolers, and proper ventilation can cost $200,000 to $500,000 or more to install from scratch. When you buy an existing restaurant, that infrastructure is already in place — and it’s typically included in the purchase price at a fraction of replacement cost.

Lower risk than a startup. Industry data consistently shows that existing businesses have significantly higher survival rates than startups. With an existing restaurant, you can review actual financial performance, not just projections. You can see what works and what needs improvement. That data-driven approach dramatically reduces your risk.

Favorable financing options. Lenders, particularly SBA-preferred lenders, are far more willing to finance the acquisition of a profitable existing business than a startup concept. The restaurant’s historical cash flow serves as the basis for loan approval, which means better terms and lower down payments compared to startup financing.

The bottom line is this: buying an existing restaurant lets you skip the most dangerous and expensive phase of business ownership — the startup period — and step into something that’s already proven.

How to Find Restaurants for Sale in California

Finding the right restaurant to buy requires looking in the right places and knowing what to filter for. Not every listing is a good opportunity, and some of the best deals never make it to a public listing. Here’s where to look.

Online Listing Platforms

The most visible place to find restaurants for sale is online. Platforms like BizBuySell, BizQuest, and LoopNet aggregate thousands of business-for-sale listings across the country. You can filter by location, price range, concept type, and revenue. These platforms are a good starting point, but keep in mind that the information provided in public listings is often limited. Sellers don’t want their employees, landlords, or competitors knowing the business is for sale, so financials are typically summarized rather than detailed.

Our own listings page features restaurants and other businesses for sale with more context than you’ll find on aggregator sites, including concept type, location details, and key financial metrics.

Working with a Business Broker

This is where serious buyers gain an advantage. A qualified business broker doesn’t just list businesses — they pre-screen opportunities, verify financial claims, and provide access to deals you won’t find anywhere else. When you work with a broker, you get:

• Vetted listings with reviewed financials, not just seller claims
• Confidential access to businesses that aren’t publicly advertised
• Professional guidance on whether a deal makes sense for your situation, budget, and goals
• Negotiation support from someone who’s closed dozens or hundreds of similar transactions

At Smith Allen Group, we work with buyers at every stage — from initial search through closing — and there’s typically no cost to the buyer, since the seller pays the broker’s commission.

Off-Market Deals

Some of the best restaurant acquisitions happen off-market. These are businesses where the owner is open to selling but hasn’t formally listed the property. They might be burned out, approaching retirement, or dealing with a life event. A well-connected broker often knows about these situations before a listing ever goes live. If you’re looking for a specific type of restaurant in a specific area, let your broker know. We often match buyers with off-market opportunities that perfectly fit their criteria.

Franchise Resales

Don’t overlook franchise resales. Buying an existing franchise location gives you the benefit of a proven brand, established systems, and corporate support — combined with the advantages of an existing business. You’ll still need to be approved by the franchisor, but the process is often faster than starting a new franchise from scratch. Check out our overview of how franchising works if you’re considering this route.

What Types of Restaurants Are Available?

The restaurant industry is broad, and the type of restaurant you buy should align with your experience, budget, lifestyle goals, and risk tolerance. Here’s a breakdown of the most common categories you’ll encounter when searching for restaurants for sale.

Full-Service Restaurants. These are sit-down establishments with table service, a full bar program (in many cases), and average check sizes ranging from $15 to $60+ per person. Full-service restaurants tend to have higher revenue but also higher operating costs due to labor, food quality expectations, and overhead. They work best for buyers with restaurant management experience or a strong operating partner.

Quick-Service and Fast Casual. QSR and fast-casual concepts — think sandwich shops, poke bowls, Mexican grill counters, and pizza shops — typically have lower labor costs, simpler operations, and more predictable margins. They’re often the best entry point for first-time restaurant buyers because the systems are more straightforward and the price points are accessible.

Bars and Restaurants with Alcohol. Restaurants with a significant bar component can be highly profitable, but they come with additional complexity. You’ll need to navigate California’s ABC (Alcoholic Beverage Control) licensing requirements, which can add time and cost to the transaction. A Type 47 license (on-sale general for bona fide eating places) is the most common for full-service restaurants and can take 45-90 days to transfer.

Food Trucks and Mobile Concepts. The food truck segment has matured significantly. You can find established food truck businesses for sale with commissary agreements, event schedules, catering contracts, and social media followings already in place. Entry costs are much lower — often $50,000 to $150,000 — but so is the revenue ceiling.

Ghost Kitchens and Virtual Brands. Delivery-only concepts operating out of shared commercial kitchens have become a legitimate segment. They offer low overhead and the ability to run multiple virtual brands from one kitchen. However, they’re heavily dependent on third-party delivery platforms and their fee structures, which can erode margins quickly.

Franchise Concepts. From major national brands to regional chains, franchise resales are a significant portion of the restaurant-for-sale market. The advantage is a proven system with brand recognition. The tradeoff is less creative control, ongoing royalty fees (typically 4-8% of gross revenue), and required adherence to franchise standards.

Understanding what factors determine a business’s value will help you compare opportunities across these different categories.

How Much Does a Restaurant Cost?

This is the question every buyer asks first, and the honest answer is: it depends. Restaurant prices in California range from under $50,000 for a small takeout operation to well over $2 million for a high-performing full-service establishment. The price is driven primarily by the business’s earnings, not its revenue.

SDE-Based Pricing

The standard method for valuing a small restaurant is based on Seller’s Discretionary Earnings (SDE). SDE represents the total financial benefit to one owner-operator and is calculated by taking net profit and adding back the owner’s salary, interest, depreciation, amortization, and other discretionary or non-recurring expenses.

You can estimate a restaurant’s SDE using our SDE Valuation Calculator, which walks you through the add-back process and applies industry-appropriate multiples.

Multiples by Concept Type

Once you know the SDE, you apply a multiple to arrive at the asking price. Multiples vary by concept, risk, and market conditions:

For larger restaurants with SDE above $500,000, buyers and brokers often shift to EBITDA-based valuation because the owner is less likely to be the primary operator.

What Drives Price Up or Down

Several factors push a restaurant’s price above or below the standard multiple:

Price drivers up: Long-term lease with favorable rent, consistent year-over-year growth, strong online reviews and brand reputation, transferable systems and trained management team, ABC license included, high barriers to entry in the location.

Price drivers down: Short remaining lease term, declining revenue trends, owner-dependent operations with no management layer, deferred maintenance on equipment, pending health department violations, landlord unwilling to approve transfer. If you’re also considering the seller’s perspective, our guide on tips to successfully sell a restaurant covers what sellers do to maximize their price — understanding their playbook makes you a better buyer.

Understanding fair market value is essential before you make an offer. A good broker will help you determine not just what the seller is asking, but what the business is actually worth.

How to Evaluate a Restaurant Before You Buy

Finding a restaurant for sale that looks good on paper is one thing. Confirming that it’s actually a sound investment is another. Here’s how to evaluate a restaurant opportunity systematically.

Financial Analysis

Start with the numbers. Request at least three years of federal tax returns (not just P&L statements the seller prepared). Tax returns are harder to manipulate because the seller filed them with the IRS. Compare the tax returns to the P&L statements — significant discrepancies are a red flag.

Calculate the SDE yourself using the seller’s financials. Look at revenue trends month by month to identify seasonality and any concerning declines. Examine the cost of goods sold (COGS) as a percentage of revenue — for most restaurants, this should be between 25% and 35%. Labor costs should generally run 25% to 35% as well. Together, these make up the “prime cost,” which should ideally fall between 55% and 65% of total revenue.

Lease Review

The lease is arguably the most important document in a restaurant transaction — sometimes more important than the financials. Even a profitable restaurant is a bad investment if the lease is about to expire and the landlord wants to double the rent.

Key lease factors to evaluate:

• Remaining term: Look for at least 5-10 years remaining (including options). Lenders typically require the lease term to match or exceed the loan term.
• Rent-to-sales ratio: Monthly rent divided by monthly revenue should be under 8%. If it’s over 10%, the rent is likely too high for the business to sustain healthy margins.
• Renewal options: Are there options to extend? At what terms? Are increases capped?
• Assignment clause: Does the lease allow transfer to a new owner? Some leases require landlord approval, which can delay or derail a deal.
• Exclusive use provisions: Does the lease prevent the landlord from leasing to competing restaurants in the same shopping center?

Location Assessment

Evaluate the location as if you were a customer visiting for the first time. Is there adequate parking? Is the restaurant visible from the street? What’s the foot traffic like during different times of day? Are there complementary businesses nearby that drive traffic?

Research the area’s demographics and development plans. A new residential development nearby could be a tailwind. A major road construction project could temporarily devastate traffic. Check with the local planning department for any upcoming changes that could affect the business.

Equipment and Buildout Condition

Walk through the kitchen with a critical eye — or better yet, bring a restaurant equipment technician. Evaluate the condition of the HVAC system, hood and fire suppression, refrigeration, cooking equipment, plumbing, and electrical systems. Major equipment failures shortly after purchase can cost tens of thousands of dollars and disrupt operations.

Get the age and service history of critical equipment. A 15-year-old walk-in compressor or a hood system that hasn’t been serviced in years should factor into your offer price.

Licenses and Permits

Verify that the restaurant has all required licenses and permits in good standing. In California, this typically includes:

• Health Department permit — Check the restaurant’s inspection history on the county environmental health website
• ABC license — If the restaurant serves alcohol, confirm the license type and that it’s transferable. Apply early, as transfers can take 45-90 days through the California ABC
• Business license — City-level operating license
• Conditional Use Permit (CUP) — Some locations require a CUP for restaurant use, especially if alcohol is involved. CUPs run with the property, but check for any conditions or restrictions
• Fire department permits — Hood suppression, occupancy limits, fire marshal approval
• Seller’s permit — California Board of Equalization sales tax permit

What Is Due Diligence and Why Does It Matter?

Due diligence is the formal investigation period after a buyer and seller agree on terms but before the deal closes. It’s your opportunity to verify everything the seller has told you and uncover anything they haven’t. Skip it or rush through it, and you risk buying someone else’s problems.

Step-by-Step Due Diligence Checklist

A thorough due diligence process for a restaurant acquisition should cover:

1. Financial verification — Obtain and review 3 years of tax returns, monthly P&L statements, bank statements, sales tax filings, and POS reports. Cross-reference these sources to confirm revenue and expense claims.
2. Lease review — Have your attorney review the full lease document, all amendments, and any correspondence with the landlord. Confirm the assignment process and timeline.
3. Employee review — Get an employee roster with positions, pay rates, tenure, and any employment agreements. Understand wage obligations, accrued PTO, and any pending HR issues.
4. Vendor and contract review — Identify all contracts, subscriptions, and vendor agreements. Determine which are assignable and which will need to be renegotiated.
5. Equipment inventory — Create a detailed list of all included equipment with condition notes and estimated remaining useful life.
6. License verification — Confirm all licenses are current and transferable. Begin ABC transfer applications if applicable.
7. Lien and liability search — Check for any outstanding liens, judgments, unpaid taxes, or pending litigation against the business.
8. Insurance review — Evaluate current coverage and get quotes for your own policy. Ensure there are no pending or recent claims.
9. Physical inspection — Walk the premises thoroughly. Check for deferred maintenance, code violations, pest issues, and ADA compliance.
10. Customer and reputation analysis — Review online reviews, social media presence, and customer feedback trends.

Red Flags to Watch For

In my experience as a broker, certain patterns consistently indicate trouble:

• The seller won’t provide tax returns or insists on “adjusted” financials only
• Revenue is trending downward with no clear explanation
• The lease has less than two years remaining with no options
• Multiple key employees have recently quit
• The seller is in a rush to close and won’t negotiate a reasonable due diligence period
• There are unresolved health department violations or pending litigation
• The seller claims significant cash income that isn’t reported — you can’t finance what you can’t prove

If you encounter any of these, proceed with extreme caution or walk away. There are plenty of restaurants for sale — don’t let urgency push you into a bad deal.

How to Finance a Restaurant Purchase

Most buyers don’t pay all cash for a restaurant. Understanding your financing options is critical to structuring a deal that works. Here are the most common approaches for funding a restaurant acquisition.

SBA 7(a) Loans

The SBA 7(a) program is the gold standard for small business acquisition financing. These loans are partially guaranteed by the U.S. Small Business Administration, which reduces the lender’s risk and makes them more accessible to buyers.

Typical SBA 7(a) terms for restaurant acquisitions:

• Down payment: 10-20% of the total project cost (purchase price + working capital + closing costs)
• Term: Up to 10 years
• Interest rate: Prime + 1.75% to 2.75% (variable)
• Collateral: Business assets plus personal guarantee
• Requirements: Good credit (680+), relevant experience, adequate cash flow coverage (typically 1.25x debt service coverage ratio)

SBA loans require more documentation and take longer to close (60-90 days is typical), but the lower down payment and longer terms make them the most popular choice.

Conventional Bank Loans

Some buyers prefer conventional business loans, which can close faster than SBA loans but typically require higher down payments (25-30%) and have shorter terms (5-7 years). Conventional loans make sense when you have significant capital and want a faster close.

Seller Financing

In many restaurant deals, the seller carries a portion of the purchase price as a note. This is common when the buyer doesn’t qualify for full bank financing or when the seller wants to demonstrate confidence in the business’s continued performance. Typical seller financing terms include 10-30% of the purchase price, 5-7 year terms, and interest rates of 5-8%.

Seller financing benefits both parties: the buyer gets easier access to capital, and the seller often gets a higher total price because the financing makes the deal accessible to more buyers.

Combination Structures

The most common deal structures combine multiple financing sources. For example:

• 10% buyer down payment + 80% SBA loan + 10% seller note
• 20% buyer down payment + 60% bank loan + 20% seller note
• 30% buyer down payment + 70% seller financing (no bank)

Your broker can help you structure the financing in a way that works for both buyer and seller while satisfying lender requirements.

What Happens During Escrow?

Once you’ve completed due diligence and secured financing, the deal moves into escrow. Escrow is the formal closing process managed by a neutral third party — typically a business escrow company. Here’s what happens during this critical phase.

Opening Escrow and Setting the Timeline

Escrow opens when the buyer deposits earnest money (typically 3-10% of the purchase price) with the escrow company. The escrow officer prepares instructions that outline the terms, conditions, and timeline agreed upon by both parties. A typical restaurant escrow runs 30-45 days, though SBA-financed deals can take longer.

Bulk Sale Notice

In California, most business sales require a Bulk Sale Notice under the Commercial Code. The escrow company publishes a notice in a local newspaper and sends notifications to the seller’s known creditors. This gives creditors at least 12 business days to file claims against the sale proceeds. It protects you as the buyer from inheriting the seller’s debts.

ABC License Transfer

If the restaurant holds an ABC license, you’ll need to file a transfer application with the California Department of Alcoholic Beverage Control. The process involves a background check, premises inspection, and public posting. Transfer times vary, but 45-90 days is typical. Many deals include a Temporary Operating Permit (TOP) provision so the buyer can continue serving alcohol while the permanent transfer is processed.

Lease Assignment

The landlord must approve the lease assignment (transfer from seller to buyer). This often involves submitting a financial application, personal financial statements, and sometimes negotiating new lease terms. Start this process early — landlord delays are one of the most common reasons restaurant deals take longer than expected. Some landlords use the assignment as an opportunity to renegotiate rent or terms, so be prepared for that conversation.

Final Walkthrough and Closing

Before closing, conduct a final walkthrough of the premises to confirm that all included equipment and inventory are present and in the condition represented. Once all conditions are met — financing funded, licenses transferred or in process, landlord approval obtained, bulk sale period cleared — the escrow company disburses funds to the seller and records the transfer. You get the keys, and the restaurant is yours.

How a Business Broker Helps You Buy a Restaurant

You might wonder whether you really need a broker to buy a restaurant. Technically, no — just like you don’t technically need a real estate agent to buy a house. But here’s why experienced buyers almost always work with one.

Access to quality deal flow. Brokers maintain networks of sellers, other brokers, and industry contacts that surface opportunities long before they hit public listing sites. The best deals often sell through broker networks without ever being publicly advertised.

Financial pre-screening. Before presenting a restaurant opportunity to you, a good broker has already reviewed the financials, identified potential issues, and assessed whether the asking price is reasonable. This saves you from wasting weeks investigating deals that don’t hold up under scrutiny.

Negotiation expertise. Restaurant transactions involve more moving parts than most buyers realize — price, terms, training period, non-compete agreements, equipment inclusion, inventory valuation, and lease assignment. An experienced broker knows what’s standard, what’s negotiable, and how to structure a deal that protects your interests.

Transaction coordination. A restaurant acquisition involves attorneys, accountants, lenders, landlords, the ABC, the health department, escrow companies, and sometimes the franchisor. Your broker coordinates all of these parties and keeps the deal moving forward. Without this coordination, deals frequently stall or fall apart.

Risk reduction. Ultimately, the biggest value a broker provides is reducing your risk of making a costly mistake. We’ve seen hundreds of deals — the good, the bad, and the ugly. That pattern recognition helps us spot problems early and steer you toward opportunities with the best risk-return profile.

At Smith Allen Group, we specialize in restaurant and food-service business transactions across California. If you’re looking to buy a restaurant, we’d welcome the opportunity to help you find the right one.

Common Mistakes First-Time Restaurant Buyers Make

After years of working with buyers, I see the same mistakes over and over again. Here are the most costly ones — and how to avoid them.

Falling in love with the concept instead of the numbers. A beautiful restaurant with great food can still be a terrible investment if the numbers don’t work. Always lead with the financials. If the COGS are 40%, labor is 38%, and rent is 12% of revenue, it doesn’t matter how good the pasta is — the business isn’t making money.

Underestimating working capital needs. The purchase price isn’t the only capital you need. Budget for at least 3-6 months of operating expenses as a cash reserve. Unexpected equipment repairs, slow initial months as you learn the operation, and seasonal dips can drain your cash if you’re not prepared.

Skipping the lease review. I’ve seen buyers fall in love with a restaurant only to discover the lease expires in 18 months with no renewal options. Or the rent-to-sales ratio is 14%. Or the lease prohibits the menu changes the buyer wanted to make. Read the entire lease — every page, every addendum — before you commit.

Not verifying the financials independently. Don’t take the seller’s word for revenue or expenses. Verify with tax returns, bank statements, POS reports, and sales tax filings. If the seller says they do $1.2 million in revenue but their tax returns show $900,000, you have a problem — and you should walk away.

Buying without relevant experience. The restaurant industry is unforgiving. If you’ve never worked in a restaurant, you need to be honest about the learning curve. Consider partnering with an experienced operator, retaining key management staff, or buying a concept with simpler operations (like a QSR or counter-service model) for your first acquisition.

Ignoring the training and transition period. Most purchase agreements include a training period where the seller stays on to help transition the business. Don’t shortchange this. Negotiate for at least 2-4 weeks of hands-on training, and use that time to learn everything — vendor relationships, recipes, staff dynamics, customer expectations, and operational workflows.

Rushing the process. Buying a restaurant is not a decision to make in a week. Take your time with due diligence. Visit the restaurant multiple times at different hours. Talk to neighboring businesses. Research the competition. The best deals will survive thorough investigation — if they don’t, you just dodged a bullet.

Key Takeaways

• Buying an existing restaurant is typically less risky and more financeable than starting from scratch — you’re acquiring proven cash flow, built-out infrastructure, and an established customer base.
• Work with a business broker to access vetted listings, off-market opportunities, and professional guidance throughout the process. Buyer representation usually costs you nothing.
• Restaurant prices are based on SDE multiples, typically ranging from 1.5x to 3.5x depending on concept, performance, and risk factors. Use the SDE Calculator to estimate values.
• The lease is critical. Look for at least 5+ years remaining, rent-to-sales ratio under 8%, and clear assignment provisions. A bad lease can kill an otherwise great deal.
• Conduct thorough due diligence. Verify financials with tax returns and bank statements, not just seller-prepared P&L statements. Check all licenses, contracts, and equipment condition.
• SBA 7(a) loans are the most common financing method, requiring 10-20% down with terms up to 10 years. Seller financing can fill gaps and demonstrate the seller’s confidence.
• Escrow takes 30-45 days and involves bulk sale notices, ABC license transfers, lease assignments, and final walkthroughs. Start early on anything that requires government processing.
• Avoid common mistakes like ignoring the numbers, skipping the lease review, underestimating working capital, and rushing due diligence.
• California-specific considerations include ABC license transfers, bulk sale requirements, and county health department inspections — all of which add complexity that experienced professionals can help you navigate.

If you’re actively searching for restaurants for sale in California, reach out to Smith Allen Group. We’ll help you find the right opportunity, evaluate it properly, and get the deal done.