Fish and chips are once again in the running for Britain’s favourite takeaway. The traditional fish supper has faced some stiff opposition, from Chinese and Indian cuisine to burgers and fried chicken.
But with a surprisingly
This renewed popularity with customers makes chip shops a popular choice for those looking to run their own business.
HMRC estimates that proprietors can expect to achieve gross profits of around 50%. With a favourable location, effective portion control and reasonable pricing you could achieve even more.
21 st century chip shop
Of course, the industry has moved on from vinegar-soaked newspaper and worn
You could buy a tired chip shop and benefit from its position and customer base – but you’ll still need to invest to bring it up to modern standards to exploit its potential.
How much does it cost to buy a fish and chip shop?
The cost of buying or setting up a fish and chip shop business will depend on the region. Just like homes, prices tend to be highest in London and the south-east.
Within each region, the cost of buying a business will depend on its current turnover, its location and size – and whether it has potential to grow.
It will also depend on whether it has a seating or restaurant area. However, a seating area will mean higher costs because it needs extra space, furniture, crockery and toilet facilities – but it can also mean higher profits.
You’ll need some costly equipment. If you’re buying the business as going concern, this should be included. But seek
What finance do you need?
Most people will need to borrow to make their business plans reality.
Some finance methods are more cost-effective than others for various aspects of the business.
It may be possible to develop a ‘jigsaw’ finance plan, which will use more than one type of funding and even more than one lender.
You could use a commercial mortgage to buy the premises.
Commercial mortgages operate much like residential mortgages: you can spread the costs over several years. Terms of 25 years are common, and some lenders may offer as long as 40 years.
Different lenders have different rules, but a minimum deposit of around 25%-40% of the total property value may be required. This may be cash, although some lenders may be prepared to arrange deals with other assets as deposits, such as existing business property, or a charge on your home.
Mortgages of 100% of the purchase price can be arranged under some
The lender will require a detailed examination of your business and the risks involved
Unlike residential mortgages, interest rates for commercial mortgages are not standardised. The lending manager will offer an interest rate on an individual basis, set to reflect the level of risk your business
Lenders will look for: Overall potential, based on location – like a busy high street, or a site in the heart of a residential area. They will also look at the building itself, its condition and facilities.
With a secured loan you give the lender a ‘charge’ over some item or asset that provides security. This gives them legal authority to take and sell the asset if you can’t make the agreed repayments.
This entails more risk for
Security may include whatever is being purchased with the loan or other business assets you may own. It may even be possible to put your own home up as security.
Lenders will look for: Sufficient security. You can only borrow an amount less than the value of the security you provide. Loans are usually 50–70% of overall asset value. So you can’t get a £200,000 loan with security worth £100,000; the maximum you might be offered would be £70,000.
It may be possible to raise money for purposes such as refurbishment with an unsecured loan. Loans of up to £350,000 may be available in exceptional circumstances, although lending can start from £5,000.
An unsecured loan may not be sufficient to buy a business
Lenders will look for: Healthy business accounts, with good turnover and profits.
There’s another benefit: lower costs.
Asset finance can fund both new and used equipment. Buy an existing business and you may be able to use an asset finance solution to pay for the kitchen and other assets.
Asset finance solutions include
Asset finance is an obvious choice if you need to re-equip your new business.
But it can also help you buy the business itself through refinancing. This can release cash from
In effect, you’re selling the equipment to the lender and buying it back again, while continuing to use it.
Secured on the assets themselves, asset-backed lending can be very cost-effective. The lender takes on a lower risk because they can sell your equipment if you don’t keep up repayments.
The amount you can borrow is related to the value of your equipment. So the lender will probably need to inspect your equipment to value it for lending.
Obviously, the equipment value will determine how much cash you can borrow.
Asset refinance deals can be structured so that equipment value is used to raise necessary funds to buy the business itself.
Lenders will look for: Quality equipment that is less than five years old and has a high resale value.
Other factors lenders will consider
Lenders will also scrutinise turnover and profits under the current owners and the quality of accounts provided. They will consider location and local competition to ascertain potential.
And they will look at you and your experience. Any experience of running catering businesses – especially fish and chip shops – might strengthen your funding application and lower your borrowing costs because you’ll be seen as a lower risk.
Finding the funding you need
Arranging the finance you need to buy or set up a fish and chip shop can require some specialist help, particularly if you need to arrange a jigsaw finance plan, with different types of finance for different aspects of the business.
A commercial finance broker might have the contacts and expertise to put together a package of loans from various lenders, tailored to each aspect of your purchase.
This may save you money overall, but the broker may charge for their work.
An alternative is to consult
Their service is free to use. You can contact