We recently wrote a very popular blog post describing 5 Ways to tell that you’re not ready to buy a restaurant. It occurs to us that sellers fit the same pattern. The Restaurant Brokers encounter dozens of sellers who have receive our email blast or hear from a friend about all the restaurants we’re selling so they reach out. Are you really ready to sell your restaurant? If you think you're ready to list but fit one of these scenarios, your mind may be saying yes while your heart is still saying no.
#1 You Aren’t Keeping Your Books Up to Date
You may think you’re ready to sell but without books and records, the market will absolutely shut you down. If you’re an old school operator who doesn’t keep a P&L up to date (at least quarterly) or can’t produce a tax return to match your POS system, you’re not ready to sell. Today’s buyers are more sophisticated than ever and they want all the information they can get on a business before they write an offer. The old days of pulling some numbers together after someone expresses interest are gone. In today’s competitive environment, we need to see the books before we ever list the business.
#2 Your Wife, Family, Partner (fill in the blank) Needs to Be Convinced it’s the Right Time to Sell Even Though You’re Ready.
Selling a restaurant is a team sport if significant others are involved in the business or you’re part of a partnership. Getting everyone on board to sell is no easy task and the last thing you want to do is engage a broker, find a buyer and bring an offer to the table only to have it turned down by a minority investor or business partner. Get on the same page before you ever list your restaurant for sale if you are serious about moving on. This may involve bringing in a life coach or outside resource so everyone can figure out ‘What’s next” once the business sells but this upfront work can save a lot of emotional turmoil and hurt feelings if the entire team doesn’t buy in before you go to market.
#3 You Have Outstanding Issues with your Franchise, SBA Lender or Landlord
You are not ready to sell if you’re in a fight with someone that can hold up the approval on the deal. If you don’t like your franchise and they don’t like you; that’s okay and it can be worked around but let your broker know up front. If you’re behind on your royalty payments or facing a default on your lease or your loan, the broker must know this before he begins working with buyers. Often the landlord or franchise is just as ready as you are to move on to another party and they will help facilitate the deal. On the other hand, if you have a damaged relationship, they can keep a new buyer holding until they lose interest or walk away. Settle whatever’s outstanding or get them on the same page that you’re moving on as soon as you find a buyer and then you will be ready to sell your restaurant. Make sure your broker is in the loop on any issues. A knowledgeable restaurant broker will be able to work directly with the franchise, bank or landlord to negotiate whatever's needed to get the business sold.
#4 You Have an Issue with Your Liquor License or Other Legal Matter
For restaurants that serve alcohol, the profits from this part of the business may greatly exceed earnings from food sales alone. If you have any actions pending that could jeopardize that liquor license, you are not ready to sell. The issue must be resolved before placing in on the market. It isn’t just the liquor license that needs to be handled. Sellers must disclose through terminology in a purchase contract knowns as “Reps and Warranties” that the business is free and clear of any legal issues that could affect the operation. If you are in the midst of an ADA compliance action, a zoning change, a sexual harassment suit – whatever dirty laundry may be out there, our advice is to get your Restaurant Broker on board. He or she can refer you to an attorney to handle the situation. With a resolution in place, you can move forward with selling your restaurant but not before.
#5 You Aren’t Ready to Let Go
All the other reasons that tell us you’re not ready to sell are very logical but the last reason is entirely subjective and only you know the answer. If you can’t imagine life without checking in on your favorite customers in the back booth or buying your regulara a drink once a month, you just may not be ready to sell. We have listed businesses and received full price offers only to have sellers back down or refuse the offer. Spend some time examining your motivation to sell, your plans for the future and your intention to move on before you list. If you are emotionally connected to the business in a way that makes it difficult to see beyond and feel like you should sell because of pressure from family, take a vacation and give it some thought before signing the listing agreement. For many Americans, small business are not just what we do but who we are. If you’re not ready to give it up, don’t feel pressured to do so. Wait until your heart and soul are ready to move on.
Are you ready to sell your restaurant? If so, click the link and we’ll help you out. If one of the five items on this list apply to you, work through the issue and then give us a call.
Here’s a look at sellers who were ready to go and their many restaurant for sale listings online.