Restaurant as a passive Income in Your Retirement Planning
Is a restaurant a good way to earn a passive income for your retirement years? No, it is not. The food service industry is a very fast-paced and labor-intensive business. Unless you are willing to work long hours, then you are not going to make any money from your restaurant. But, what about automation and remote management, aren't those viable ways to make a passive income from a restaurant? Again, no, not at all. There are only three ways to get a passive income from a restaurant, and all three are discussed in this article.
Build a Very successful Restaurant and Hand it Over to a Management Team
If you have built up a good business, you have a reasonable customer base, you have your liquor license (perhaps a license for California State), then you can sell, or you can keep your business running with a management team. They take the lion’s share of the profits and cut you in as the business owner. A one-time payment for your restaurant may be far less lucrative than a long-term agreement. Plus, there is a chance that only a team under your supervision can keep the business running, in which case having people run the place for you seems like a good idea.
Own a Partial Share in One or Several Restaurants
A good way to earn a passive income during retirement is to own a partial share in restaurant businesses. You don't want to own a majority share because you don't want to be down there all the time having to make sure things are running correctly. Nevertheless, holding ownership of a restaurant can be angled so that you earn money at certain intervals during the year. Just like with other businesses where you may earn a dividend just for owning stock, you may own a part of a restaurant business and be entitled to a share of the profits.
Franchise Your Restaurant and Live Off The Fees
If you have your own ideas, a strong brand, or even a special kind of food, then you can create a franchise. How much you put into the franchise depends on you. It may be that you offer your business name, your secret recipes and your pricing structure. Or, you could go the McDonald's route and provide everything from burgers to printed napkins. Getting a franchise up and running is difficult, but it may be possible to sell out to a single company, which then creates a series of franchise locations. This is very similar to selling your business, but instead, you are selling your business name, and whatever else you feel will help make the business a success. Again, you can retire on this simply by earning a small share of the profits or through various other low-impact money-making methods.
Are These All Passive Methods?
Not in the strictest sense because they all require that you do a lot of things before or during your retirement. For example, building a successful restaurant business and then handing it over to a management team will take a lot of work, plus you will have to work with the team for a year or more to make sure they know how to keep your business running successfully.
Owning a partial share in several businesses means you need a lot of money, which means doing a lot of hard beforehand in order to afford to buy partial shares in several restaurants. If you have that sort of money, you may wonder why you shouldn't just live off of that, but having an income is sometimes better when you remember that retirement funds and savings can run out over time.
Finally, franchising a business is very difficult and takes a lot of work to build the franchise and then sell it. Even if your plan is to sell to just one person, reaching the goals you need in order to sell and negotiate a good ongoing price is very difficult.
There may be some passive income at a later stage, but for the most part, there is a lot of work that goes into a restaurant-related retirement plan.