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03/12/2020 ARTICLE

Risk assessment, return on investment and growth opportunities. Fundamentally, these are the three main topics an investor takes into account within most, if not all, merger and acquisition processes. The goal here is clear: invest money now in order to earn it back later. But is investing in the restaurant business really as simple as that? Not entirely. There are many pitfalls and challenges associated with the industry that can threaten future return on investment. The restaurant industry as a whole is much more complex than most other industries. This is a direct result of the rapid cycling of trends, the changing needs and demands of guests, the operational complexity, low barriers of entry and the relatively low loyalty of guests, that are all major factors within the restaurant business. Conceptional acts as a hospitality consultant in large projects related to mergers and acquisitions within the restaurant industry. The expertise brought to the table by a hospitality consultant is in our eyes something that is definitely worth the investment. The following five common pitfalls will show you why we believe a hospitality consultant is indispensable in mergers and acquisitions in the restaurant industry.

 

As hospitality consultant, the most common pitfalls we see within a merger and acquisition project are as follows:

01. Underestimating the complexity of food and beverage

02. Inadequate future proofing of the concept, leading to a reduced number of guests

03. An overly optimistic estimate of growth potential

04. Inability to correctly translate or interpret the restaurant-specific financials

05. Inadequate risk-assessment

 

Why involve a hospitality consultant?

Legal experts, accountants, advisors: many parties are called upon throughout the entirety of most merger and acquisition projects. Even so, the restaurant experts are often involved too late, or even not at all. A missed opportunity, which can have big consequences down the line. Our two cents on the matter? Don’t start off your merger and acquisition project without an experienced restaurant consultant. A good restaurant consultant is someone who, based on extensive practical and executive experience, knows everything there is to know about the industry and who can translate specific restaurant-related financials into tangible prospects and risks. An expert who can tell you why ambitious growing strategies, through which investors try to walk in the footsteps of giants like McDonalds or Starbucks, might demand an alternative approach. The goal here is to balance prudence and realism with a healthy dose of ambition. A restaurant consultant that acts as an advisor for mergers and acquisitions guided by knowledge of the industry, processes, margins, prospects and risks will support you in achieving this goal.

 

The impact of COVID-19

The restaurant sector has changed drastically within a very short timeframe due to the COVID-19 crisis, and some of these changes are here to stay. This also means that a different approach to mergers and acquisition is warranted within the industry. Doing what you have always done, is no longer automatically the right way to operate. We take these changes into account and apply them to the processes involved in merger and acquisition projects, allowing for a smooth trajectory without any unpleasant surprises.

 

In our next article on mergers and acquisitions in the restaurant industry we will be discussing some key subjects to take into consideration. These subjects should be top of mind, not only for investors, but also for restaurant companies who are looking to enter into a sales project with one or more of their restaurants.  Conceptional is here to act as a hospitality consultant within merger and acquisition projects, both nationally and internationally. Want to know more about our projects? Don’t hesitate to contact us, we’d love to tell you more. Click here to read more about our M&A services. 

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