One of the key basics when you sell a restaurant is the relationship that you have with your restaurant broker. It is of utmost importance to establish a trusting and open relationship that advocates complete honesty in all respects. It is extremely important to live by the “no surprises” policy to ensure that your restaurant broker knows about all of your liabilities and dirty laundry well in advance.
You may have situations that you are embarrassed to reveal because you think you are the only restaurant owner who has experienced these things. The situations could range from being slapped with a liquor license citation, back rent that is owed in the amount of $30,000, a tax lien for thousands of dollars, or a lawsuit from an employee.
The reality is that the restaurant broker has seen and heard it all before and nothing surprises them. In fact, the restaurant broker is equipped with the skills to help you work through these types of issues to help the deal reach the closing table. This is the reason you should never hide anything from the restaurant broker and maintain a relationship that is open and honest. The broker cannot help you with things that he or she doesn’t know about.
Second, establish the grounds for communications when it comes to how the broker will communicate with you. There are many different ways a broker can communicate with you so ask them what method they use for communicating when someone inquires about your listing. The broker may automatically send you an email where others will call you when there has been an inquiry. Other brokers are poor communicators and will not let you know anything at all.
Set the expectations for how you want your broker to communicate with you regardless of whether you want ongoing communication or a simple notification when there is a deal. Remember that brokers who specialize in the restaurant and bar industries are quite familiar with how the business works. This means they will not call you at eight o’clock in the morning since you work late and they will not call you during peak periods in the business such as the lunch or dinner hour. They may never call you at the restaurant to maintain confidentiality or if they do call, they will simply leave their first name to protect your privacy. It is important to communicate to your broker how you want to be contacted and when.
Third, it is important to make sure there are no misunderstandings with the listing agreement contract. This is a contract between you and the restaurant broker that defines exactly what you are selling and the parties that are authorized to sign so that the offer can make its way to the closing table.
Before signing the listing agreement make sure that you have secured all partner consent and you have signed a corporate resolution to sell. If you have partners in the business this move will protect you when offers are presented and one partner changes their mind or another is out of the country without email.
Make sure you obtain a corporate seal and signature on a document that states the corporate officers met and agree to sell the business by vote taken on this day. One of the partners should be provided with the authority to sign on behalf of the other partners in the business. If the partnership involves a husband and wife this step is usually not necessary. When there is more than one partner, the restaurant broker may request the resolution accompanied by a signature on the listing agreement. The broker will then keep a copy and include another copy in the appendix.
Fourth, it is important to establish an understanding of who is selling the restaurant and the listing agreement must be signed by the person who owns the business and holds the liquor license. The agreement requires a signature by the legal entity who owns the business assets and the legal name of the business that is being sold is used on the contract.
Fifth, you will need to verify the status of your corporation by accessing the Secretary of State website online for your state to ensure that the officers that are listed on the website are accurate and the complete filings are up to date. It is important to take this step early on to avoid conflicts later when the contract is drawn up.