Exactly why is January the best month to sell a restaurant? For the nearly twenty years that We Sell Restaurants has been marketing businesses, the first of the year signals an uptick in buyer interest. That means December is the best time to list your restaurant for sale. Here’s why, in this Restaurant Broker’s opinion.
Reason 1 – It’s the Economy….
The economy, despite a recently announced rise in interest rates is still pumping out the strongest GDP (Gross Domestic Product) in years. The real GDP growth in second quarter was 4.2 percent, something unseen in a decade. With this economic news, combined with a strong labor market and record unemployment, those working a job feel comfortable taking a risk. If they step outside their current corporate comfort zone and paycheck to buy a restaurant, the market is always good enough to return. That gives them more security to take the chance on a new venture. That’s reason one that January will be a great month to sell a restaurant. Buyers will be home over Christmas vacation studying opportunities that look more interesting than returning to work.
Reason 2 – Restaurants are Worth more
Year end numbers are in and 2018 was much better for most restaurant sellers than 2017. For that reason, the value of the restaurant you want to sell has increased over the prior year. This is based on national results published by Black Box Intelligence data. “Same-store sales were up 1 percent in November, which became the sixth consecutive month of positive sales growth for the industry. Excluding a very small dip in same-store sales during May, every month since March has posted positive same-store sales growth. This represents a period of expansion not experienced by the industry in over three years.” When sales go up, earnings go up, particularly after a tough 2017. If you want to know what your restaurant is worth in today’s market, now’s the time to find out.
Reason 3 – 401K plans are still worth more
Despite recent turmoil and sell-offs with issues around Fed Reserve hikes and more, the market is still good. Even after the current sell-off, for instance, the S&P 500 through 12/10 close was up by nearly 15 percent since President Trump’s inauguration and more than 21 percent since Election Day 2016. This gives those in the market to buy a restaurant confidence that their nest egg is secure. They can leave corporate America, leverage 20% down on a purchase and have money to return to if everything fails. That’s the third reason January will still represent a high point in placing restaurants in contract.
Reason 4 – Lenders are Ready to Go
Lending is at a level unmatched in this Restaurant Broker’s history. Multiple banks are making more than one offer on the same deal. With rates inching up, based on the latest Federal Reserve hike, money is still cheap but more importantly, it is readily available. Someone in the market to sell a restaurant, no longer must worry about holding a note on the deal. He or she can expect a payout, in most instances, at the closing table if the books and records are strong and sometimes, even when they aren’t. If you want to sell a restaurant today, be ready for the market to continue to be hot in January. Buyers only must bring between ten and twenty percent to the table to get a loan in today’s very favorable loan market. The recent interest rate hike is meaningless overall in the hit to a payment but will make lenders even more anxious to close more deals and earn more interest on them.
Reason 5 – Because we said so....
We have been selling more restaurants than anyone else nationwide for nearly twenty years. We have watched the cadence of the market through thick and thin, boom and bust. In all instances, we see buyers flock to the latest listings in January. That creates a spike in our web traffic, more inquiries online and more deals placed in contract.
Overall, if you’re in the market to sell a restaurant, now is the time to list the business, before January hits and buyers start looking at all the restaurants for sale. Contact one of the Restaurant Brokers to learn more about the process or visit our listings online at this link.