Advice for Buying a Restaurant and Selling a Restaurant

Interested in knowing which restaurant franchises are inking new deals and expanding across the country?  We are too!  We Sell Restaurants goes through all the online announcements and press releases to bring you the latest restaurant franchises expanding nationwide.  We’re tracking it all from units ranging from one to one hundred.  Here's what we saw in the latest press releases and announcements.  

Despite what we restaurant brokers believe is a tenuous business model, health food concepts continue to expand.  Each month we see new juice concepts and health food concepts adding units.  The newest deal announced is with former NBA player Kris Humphries., He is building six units as the latest multi-unit owner developer for the healthy food franchise, Crisp & Green.  He’s expected to put six restaurants under this brand in the Minnesota Minneapolis Twin Cities market. The first one is already under construction. 

In the totally not healthy food category, the Brass Tap, a craft beer bar franchise, is expanding by five units in California.  The developer is Rick Sousa, a principle of Dust Bowl Brewing Company. He’s a veteran of the industry and plans to open his Modesto store by December of 2019.

Pizza was the single category to post comp store increases last year so it’s not surprising to see restaurant franchises adding units to the mix.  Mountain Mike’s Pizza has inked a deal for more than 40 new units in Southern California.  Between these two deals, Southern California has beer and pizza covered.  A current franchisee, Robby Basati, with five existing stores will be developing 40 new Mountain Mikes Pizza restaurant franchises.

Not to be left out of the mix, Hungry Howie’s another pizza chain, has five new restaurant franchises in development with Deem Investments.  These stores will open in Arkansas.  Hungry Howie’s is currently operating in 22 states nationwide but have been juicing up development nationwide.  They appear to be working hard to expand their footprint.

California has been a tough state to deal with in development of new restaurant franchises, but it looks like that’s beginning to change.  Perhaps the demand for new concepts is now at the tipping point to outweigh the difficulties to develop stores in this market.  Those issues include:  onerous regulations, extreme impact fees and high rents that far outpace the nation. These barriers to entry are not stopping new restaurant franchises from diving in at new levels.  Between the Mountain Mike’s 40 store deal, five for Brass Tacks and the newest from Yang’s Braised Chicken, California development is dominating this list with nearly 50 units on the table.

Many brands develop in the U.S. first for strong proof of concept and then expand internationally.  In an approach that turns this model inside out, Yang’s Braised Chicken has over 6,000 units around the world and is now turning their development to the U.S.  They opened their first unit in this country in 2017 and just announced a multi-unit deal with Xiang Wang for three units in Orange County California. Again, California makes the list!

Also, on the West Coast, Café Yumm announced a three-store deal with franchisee Rebecca Blewett.  The chain, headquartered in Oregon has 20 locations currently.

Turning from the West Coast to the southeast, Louisiana-based The Lost Cajun is heading to the western North Carolina area.  A new deal has been announced to develop six additional restaurants in the traditionally mountainous part of the state over the next four years.  Another veteran operator is launching in that market.  Steve Galloway owns five Dunkin’ Donuts and has been a developer for concepts including:  Taco Bell, KFC, Pizza Hut and Subway.

Overall, we’re seeing trending in sales, leasing and franchise restaurants that agree with the economic trends nationwide.  There is an increased level of risk taking and launch in new concepts. This is fueled by a strong economy, a more business friendly regulator climate and lenders with plenty of money to fund new deals.

Want to see the restaurant franchises in our inventory?  Check out our listings online.

Leasing a restaurant?  Here are five clauses you need to include.  Without them, you may see yourself on the hook for much longer than you planned if you ever sell the store.  Trust us.  As restaurant brokers, we have transferred dozens of restaurant leases.  Our best advice to you is to avoid these blunders now so you can transfer the store with no issues later.   

The most common error in negotiating a restaurant lease is the failure to plan for an exit strategy. No one enters business expecting to fail but it can happen.  Partners get sick or walk out of partnerships. Couples divorce, or liquor licenses get pulled.

On the flip side, businesses sell. You get an offer you can’t refuse. The guy developing a new brand in your market wants your location and your location only. Your partner wants out and you want in and the only solution is to sell your restaurant.

There are countless reasons why a business owner will need to get out of the restaurant lease. We recommend you have an exit strategy at the time you negotiate the initial terms.  Generally, this will not be found in the first draft of the landlord’s restaurant lease and you need to fight for these terms.  Avoid these blunders by including clauses that handle the most common transfer terms.  If they aren’t there, you or your restaurant broker need to fight for them.   

Blunder One – Failing to consider the transferability of the restaurant lease

Restaurant lease transfer is the single most contentious issue in the sale of a business and kills more deals than anything else.  Your only power in this negotiation is at the outset of the restaurant lease, not when you’re ready to sell. Make sure the terms of the restaurant lease spell out how it will transfer it to another party.

Blunder Two – Letting the landlord load up experience clauses

You may enter into a restaurant lease with a landlord with lots of experience, but always think in terms of selling the store at a later date. Plenty of successful individuals enter the restaurant industry without experience, but that doesn’t preclude their eventual success. Landlords often will try to sneak language into the restaurant lease that requires five years of restaurant experience, even for franchise operators and it can severely limit the pool of buyers for your business.  Do the reverse and ask for an automatic approval if they are approved as a franchisee.

Blunder Three – Not getting the costs up front

Determine up front what the amount of the transfer charge or assignment fee will be.  Never agree to vague language like “reasonable” attorney fees.  What’s reasonable to you is totally unreasonable to someone else.  Define this term.  Identify the amount you’ll pay in a transfer so you know what it is and insure that it’s minimal ($500 to $1000 is appropriate).  We have seen transfer fees go to exorbitant levels ($10,000) in recent years.

Blunder Four – Leaving a transfer time undefined

Landlords will never move at the speed of business.  Just when you are ready to sell, they are working on other projects and a restaurant lease transfer is their lowest priority.  Try to force a specific time frame into the language, such as “transfer shall occur within thirty days of submission of a formal request.” Landlords are famous for dragging out deals. When you’re negotiating the original restaurant lease, you’re in the driver’s seat. When you want to transfer it later, you’re no longer a priority.

Blunder Five – Failing to protect the confidentiality of your business

Landlords have a lot of information on you including store sales, your earnings and much more.  Never sign a restaurant lease unless the landlord is held to the strictest confidentiality.  He or she often receives the purchase agreement and you don’t want them disclosing what your store eventually sells for.  Make sure landlord should be held to confidentiality on the terms of any future sale of your restaurant. 

That’s it.  Include these terms and avoid five blunders that will cost you time and money when you get ready to transfer your restaurant lease.

The latest numbers are in, courtesy of Net Financials and their survey of restaurant sales in Atlanta for the second quarter of 2018.  What’s the word?  The numbers are good with a continuing positive trend.  Even better news is that Atlanta showed increases beating the national trend.  According to Robert Wagner, founder of NetFinancials, Atlanta results from April to June showed gains of 2.0% over last year.  This more than doubled the national performance, as measured by Black Box Intelligence, which was up just .8%.

The quarterly survey posted by the group survey 105 independent Atlanta restaurants and indicates that nearly two-thirds (61%) were positive for the quarter.  Keep in mind that these results only relate to independent operators while national data includes independent and franchise concepts. 

On a year to date basis, 2018 Atlanta restaurant sales were up 1.1% over 2017.  What is this saying about the industry? For this major market and around the country, we are seeing restaurants battle for market share.  Growth in units from 2014 to 2016 led to many hitting a wall in 2017 where the entire industry was flat.  More units, all selling food, same size customer base equates to weaker market share by concept.

In the opinion of this restaurant broker, many concepts are simply overbuilt, with too many units, particularly among the fast-casual category.  With everyone fighting for their share of the family food dollar, what’s the fix?  Here’s one solution.  It’s well known that a rising tide does in fact raise all boats.  The trajectory of the U.S. economy and overall growth in GDP means an overall expansion in the economy.  At the same time, more people are working, and wages are climbing.  That should all us to see better positive comp store growth in sales nationwide for 2018.  We believe unit growth will also level off. 

The primary reason for flattening of this dimension is simply the lack of available restaurant space for lease.  There can’t be that many more units opening because restaurant space for lease is limited.  Occupancy rates nationwide are at near all-time highs and space is at a premium.  We have landlords offering to buy out long term tenants with below-market lease rates to move new concepts willing to pay more, into the location. We’re also looking at the demise of the shopping mall, a former location for many food concepts.  There has not been a single new enclosed mall built America since 2006, over a decade ago.  Those restaurants operating in mall locations are looking to move those out, increasing demand for alternate lease locations. One outcome of the limited inventory is the amount of “sold but not built” units on the books of many franchisors.

The results vary by market but Atlanta landlords, along with Austin, Dallas, Houston and other major cities seem very proud of their locations and are quoting rent per square foot at numbers that would have shocked us a few years ago.

With occupancy costs growing faster than sales growth, restaurants are struggling to make up earnings, especially with labor costs increasing.  Overall, if you ask operators, we view the trend as “cautiously optimistic.”  The National Restaurant Association tracks the health and outlook of the restaurant industry through their Restaurant Performance Index or RPI.  Their latest numbers (released July 31), show June was at 101.9, up 1.4 percent from May and the highest in six months. 

The RPI looks at three factors, Current Situation, Current Sales, and Expectations.  The current situation was at 101.9 in June for the fifth consecutive month. This index measures 100 as a neutral level.  Index values above 100 indicates that key industry indicators are in a period of expansion, while index values below 100 represent a period of contraction.

The Restaurant operators’ outlook found thirty-eight percent of operators expect to have higher sales in six months. Six percent expect their sales to be lower.  That’s in line with national performance of restaurants which has turned in the fourth straight quarter of positive sales.

The table provided by NetFinancials for the comparison sales data is shown below

Sample Size:

The data provided by NetFinancials was drawn from a sample consisting of 105 non-franchise restaurants were drawn from the metro Atlanta market. Total survey sales volume was $168 million for year-to-date 2018. The survey includes restaurants in Atlanta’s fast-casual, casual and fine-dining segments open at least 18 months

NetFinancials, Inc. provides a full range of tax and accounting services for restaurant companies. Email: lori.johnson@netfinancials.com. www.netfinancials.com Direct: 404-874-7003. The NetFinancials quarterly Atlanta restaurant sales survey is provided as a public service to the restaurant industry. Copyright NetFinancials, Inc.

It’s true.  Selling restaurants is tied directly to basic math and not even tough math at that.  It’s the basics of addition, subtraction and multiplication you learned in fifth grade (at least that’s when this restaurant broker learned it – I’m totally not sure not sure about this common core math they’re teaching now).   

Selling restaurants by the numbers means starting with the profit and loss statement.  That’s why restaurant brokers like ours at We Sell Restaurants will request the latest financial data.  At this point you may be asking, what about sales?  Sales are actually immaterial to the valuation but may impact lending if they are trending negatively for multiple years.  Despite anyone trying to tell you otherwise, understand that sales are not a measure of earnings, they are simply a denominator (remember that fifth grade math again?) in evaluating all expenses as a rate to sales.

Subtraction

Once the profit and loss statement is on the table, the simple math begins.  We begin by subtracting certain expense from the P&L which increases the profit.  Why would we do this as restaurant brokers?  Because selling restaurants by the numbers means we need a clean earnings number without interest, taxes, depreciation and amortization.  That’s commonly known as EBITDA in the in the financial community.  We remove these items or subtract them to state a true earnings calculation for a new buyer. 

Here’s why.  After all, he or she will not have your debt structure so removing your interest makes sense when you consider it from this perspective.  He or she will have a different taxable basis for the purchase which means your depreciation and amortization is also immaterial.  After all, depreciation and amortization are non-cash estimates of a write off of your usable equipment and or intellectual property to allow for repurchase.  They decrease income on your P&L but are never really cash out of pocket to either you or the buyer. 

Addition

After we do our subtraction, we begin our addition when selling restaurants by the numbers.  We add back the earnings of a single person managing the business on a day to day basis.  That may be a restaurant seller or it may be a manager.  The key here, in selling restaurants by the numbers is that we can ONLY add back one full time salary.  That means a number of scenarios have to be considered.

Before adding back this salary.  A few examples are outlined below to show how this works to recast earnings on this basis or use our basic addition or subtraction skills.

Example 1:  Absentee owner making $50,000 in salary and a Manager in place making $35,000. 

This example of selling restaurants by the numbers creates an addition to earnings of $85,000.  Why is that?  We assume the new owner will come in and take over the roles, responsibilities, and thus the pay to operate the store personally.  The absentee amount is added back because that will also go to a new owner.

Example 2:  A husband and wife work in the store and make a combined amount of $75,000. 

In this case, we can only add back ONE salary.  A new owner cannot take over the roles of two people.  He or she will have to hire someone to do the work of the second operator.

Example 3:  An owner todays works full time in the business and takes no salary.

There is no add back for owner salary.  The same scenario would exist for a single owner/operator.  He could choose to deflect bottom line earnings on the books to salary but the amount of money remains the same.

Multiplication

Now our math expands to multiplication.  This is when we take the previously calculated number of the bottom line P&L minus interest, taxes, depreciation and amortization plus the appropriate owner earnings addback and then we multiple this by a market variable for this restaurant. Now we’ve used all our basic math skills of addition, subtraction and multiplication. 

In selling restaurants by the numbers, everyone immediately asks for the “multiple’ as if it were the answer key to today’s pop quiz in math class.  The answer is not straightforward and it is not a “one size fits all” scenario.  If the business on the market is a franchise or has six figure earnings, the multiplier goes up. If it’s an ice cream store being sold in February, the multiple could go down.  A strong restaurant broker will have access to comps, market level multiples and information to arrive at the right number.

That’s it.  Basic math gets you the answers you need for selling restaurants by the numbers.  Want to know what your restaurant is worth?  Reach out to us online at this link or click below.

Owning and operating a successful restaurant business epitomizes the American dream for most.  Selling your restaurant and attempting to transfer the lease can be a nightmare however.  Here are the seven secrets in the process for transferring a restaurant lease the landlord will never share.  Those buying or selling a restaurant should get familiar with these tips before drafting a contract to buy or sell a restaurant.  Here's Seven secrets about restaurant leases the landlord will never bother to share. 

Secret 1:  Include a Contingency for the Restaurant Lease Assignment

Any contract to sell should include a contingency for lease assignment.  Why is there a need for a restaurant lease assignment contingency?  Some landlords will take advantage of an assignment situation to raise rates, remove option years or otherwise increase costs of a restaurant buyer.  That could dramatically change the numbers on the transaction. 

The buyer should have a contingency to allow for transfer of the existing terms and any option years at the same rates.  After all, if you’re buying a restaurant based on rent of $5500 a month and the rent goes up to $6500 a month, that extra $12,000 comes directly out of earnings.  You’re buying a restaurant based on the past performance.  The lease is baked into those results. Review and understand the lease terms in the due diligence period and include a contingency for assignment of the same lease.

Secret 2:  Make Sure You Understand the Assignment and Sublet Clause

Before doing anything, you (or your restaurant broker), should review the Assignment and Subletting portion of your lease.  What does the lease state as the terms for a lease to be assigned or sublet?  The difference is a legal one, but a simple business explanation is this.  Assigning the lease, typically, moves the financial responsibility to the buyer.  A sublet means you become the intermediary and collect the rent.  Most leases do not allow any form of sublet and instead allow for an approval process to approve and assign the lease to the new tenant. Here's a secret the landlord won't share.  You can have auto-approval clauses and caps on costs and all kinds of good stuff that limit a landlord's ability to charge you fees and keep you on the lease but the landlord will hold that secret close to the vest.  Instead, his attorney will bully through an assignment that is not in your favor.  Be informed to avoid taking on liabilities you don't need.  Read the assignment and sublet clause. 

The best leases are those that contemplate a change of ownership up front.  In those cases, there’s essentially an ‘auto-approve’ clause.  It may be written like this:  “Seller may assign the lease without the consent of the landlord in the following instances.  The buyer can demonstrate a net worth of $1,000,000 or more with 5 years of relevant restaurant ownership/management experience and approval by the franchise brand.”  Language like this means your landlord cannot deny approval when these conditions are met, saving you the effort of an approval and providing your restaurant broker up front, the financial and experience requirements of any would-be buyer.

If your lease does not say something similar to this, look for the language that spells out exactly what must take place.  In particular pay attention to specific timelines or dates associated.  A good restaurant broker negotiating a lease up front may not get auto-approve language but hopefully he or she has negotiated for you to have a specific timeline for approval, a fixed cost and at the minimum, language stating that approval may not be unreasonably withheld.

If there was no attempt to predetermine conditions for assignment or approval and/or open ended amounts for lease transfer fees, get ready for a rough ride.  Landlords will take advantage of every opportunity to drag their feet and charge you money.

Secret 3:  Notify the Landlord

Once you understand the conditions for transfer, notify the landlord in writing (email is fine, unless the lease says otherwise), and make sure the request for transfer is confirmed.  That starts the clock on the transfer transaction.  Track every interaction.  Save every email and hold onto all forms of payments provided to him.  Meanwhile, make sure you lease is current (if you’re selling your restaurant), as landlords will typically withhold assignment if you are behind in your lease payments.

The secret is this.  Official notification is never a phone call and rarely an email.  You need to put it in writing and confirm the landlord received it.   

Secret 4:  Use the Landlord Forms

Request that the landlord provide you with their standard documents and forms to be completed prior to transfer.  If they don’t have a standard application document with all of the following built it, be prepared as a restaurant buyer to provide at the minimum:  detailed personal financial statement, consent to credit check and resume or background and experience of the proposed tenant.  Usually the landlord has their own package requirements which can be quite lengthy.

It is not unusual for a landlord to request someone leasing a restaurant to complete a multi-page application, provide copies of bank statements to confirm sources of revenue stated on the financial statement and tax returns for multiple years. They often want a detailed business plan or at least a menu.    If the tenant has a weak financial position, a seller should be prepared to stay on the personal guarantee for the restaurant lease.  If you piecemeal the documents and fail to use their forms, be aware that the landlord will use this as an excuse to delay or deny the restaurant lease transfer. 

Secret 5:  Submit the landlord forms along with the lease assignment fee

All materials should be submitted along with the check for the lease assignment fee.  This is not the time to get cute and limit your responses or try and give only partial information.  If the restaurant lease is to transfer, you must provide the full and complete package including all forms, all signatures (including those of spouses) and tax returns. Do not send without a check.  They won’t process it.  This is like dealing with the government and they will kick back the application if it is not complete.

Then you wait.  And wait. And wait.  And follow up multiple times to find out where you are in the process.  You must be determined, persistent and border on annoying with calls and emails at least once every week.  It is the truly the “squeaky wheel” who gets the landlord to respond on approval. Here's the secret.  Restaurant lease transfers are not a priority. They would much rather draft new leases and earn big commissions on those rather than dealing with a space that already has a tenant paying rent.

Secret 6:   Review the lease assignment

After this, you are typically provided with a draft lease assignment.  At this point, it is important to understand the new obligations and guarantee of the buyers versus any requirement of the person selling the restaurant to remain on the lease.  If you’re being asked to stay on, it’s time to start negotiating.  Here's a secret you need to know.  Everything is negotiable. If you don't ask, on the other hand, you definitely won't get changes.  That’s an entire other blog article.

Secret 7:  Follow the Directions to Execute the Lease

Now is not the time to drop the ball.  You need to find out how many signatures are required and execute the lease assignment.  Typically, a landlord will not allow a docusign version of the lease but wants what is termed ‘wet’ or pen signatures on hard copies.  Generally, a minimum of three copies are required.  Everything goes to the landlord and they will countersign and return originals. They also want money, whether it's the rent payment, an assignment fee or legal fees before they will countersign.  Send it to the landlord without the check and it will not be returned with a signature. 

Now you have the seven secrets to transfer a restaurant lease.  It’s laborious, time consuming and often frustrating. Ultimately, the landlord controls the game and by knowing these secrets, you have a better chance of transferring a restaurant lease.

 Looking for the best restaurants for sale nationwide?  You're not alone.  Our buyers spent a lot of time looking at great businesses all over the country but these hit the top ten!  The results of the July 2018 list signal continued strong growth in the market and buyers willing to assume more risk.  Here's why.  

For the first time in a long time, the top ten restaurants for sale were dominated by buyers willing to invest in space and develop their own concepts.  Four out of the top ten or 40% were restaurant space for lease opportunities.  In the opinion of this restaurant broker, that means higher risks are being assumed and overall, more confidence in the marketplace as people invest in new concepts rather than established ones with cash flow.  That's a great signal for continued strong restaurant sales growth on top of recent economic news that the GDP growth rate for second quarter hit 4.1 percent.  

In addition to restaurant space for lease, buyers also logged a lot of looks at a food truck, another business that will be developed with a new concept. Here's the update on everything getting attention for the month. 

We measure the "best" for the month based on views, (both on We Sell Restaurants and all other national sites), phone call inquiries, signed confidentiality agreements and discussions with our expert restaurant brokers. 

The number one listing for the month was a restaurant space for sale in the Buckhead neighborhood of Atlanta, GA. An area with a high income bracket, Buckhead is "where new money parties and old money lives."  This led to strong activity on a fantastic location.  This nearly 2300 square foot space with a fully equipped kitchen has unlimited potential for any concept! With seating space for 80 guests inside and an extra 24 outside on the patio, which is used most of the year!            

These Three smoothie king units have shot up on our list this month, they weren’t even in contention last month and this month this is our second hottest listing!  And it’s easy to see why! These three fully open and operating locations are with one of our most popular business opportunities, and it’s a simple to operate concept! In a part of Georgia known for it’s beauty, fully equipped franchise locations are just sitting pretty, as they wait for their new owner! This listing, priced at $749,000 shows restaurant buyers are looking hard at higher priced listings, another sign of a strong marketplace. .

The second lease space to make the list was also in Georgia. This one features a 1500+ Square Foot second Generation Restaurant for lease with in-ground grease trap and hood system in Roswell.  What is second generation space?  It means this restaurant space for lease was previously operating and open. The great thing about opportunities like this is the existing infrastructure in place makes your build out way easier! This restaurant space for lease is in a heavily populated area with high traffic counts, and pure potential! Bring your offers.  This one won't last. 

A Boca Raton listing priced to sell made the top five, bringing Florida into the mix. This newly remodeled restaurant for sale in beautiful Broward County Florida is just minutes from the beach, how could it not be popular? With a money-making concept and a fully equipped kitchen near two universities, this restaurant has a recipe for success that’s hard to beat!

Much like the listing on the top of our list this month, this restaurant space for leasee has amazing potential! Just a short ride away from Metro Atlanta’s top attractions, and the build out is already done!  A fully equipped kitchen and front of the house means this space is turn-key ready, and just waiting for a new owner to step up to the plate.

One of our three listings that’s a repeat on this list from last month, this sandwich shop in Tamarac, Florida is in contract! It was so popular that excited new owners have already swooped in to make it their own! This little sandwich shop will bring joy to the new owners, whether they continue the concept or bring a new one in.

A first for us is a food truck on out top ten list! A profitable business, the owner is selling for family reasons, but understandably didn’t want the business to go to waste. Perfect for the Austin, Texas climate, this food truck even has a permanent location with no rent! This is an amazing opportunity and there’s no wonder that it’s so popular!

This fully-equipped restaurant space for lease was one of three on this list last month, and we’re surprised to see them all back this month! With as popular as this lease space has been, it’s amazing that nobody has snapped it up and put their own concept in place! It hasn’t been on the market for very long, but with all the attention it’s been getting, we don’t expect it will stay on the market for too much longer!

This next restaurant on our list has been popular with potential buyers, but that’s no surprise, since it’s been popular with guests for 23 years! The seller clearly knows the secrets to success, and he’s willing to share! This longstanding restaurant for sale comes with all the benefits of a well established restaurant, with none of the work to get it there, why would anyone decided they don’t want that?

 Rounding out our list this month is a fully equipped Indian restaurant in the greater Atlanta area. In a 2400 square foot space, this restaurant has room for 80 guest inside and room for a further 10 guests to sit outside and enjoy the beautiful weather. With a full recipe band and dedicated staff that will remain, any new buyer could be making money immediately. 

From restaurant space for lease with buyers willing to take a risk to high value listings.  It's been a banner year for restaurant sales and the trend does not appear to be slowing down.  Want to see more great restaurants for sale like these?  Visit our inventory of nearly 300 listings online at wesellrestaurants.com.

Want to fast track selling your restaurant but not sure where to start?  Read on for these tips from We Sell Restaurant to get what every seller wants from the transaction - the most money in the shortest period.  A fast sale means the services of a restaurant broker and for most sellers, at all costs, avoid trying to do it yourself.  Here’s why.

You’re Emotionally Invested.  You built your business from scratch and watched it grow and prosper.  This is more than a business to you.  It has taken care of your family’s needs for often, many years.  When selling, there will doubtless be moments of regret and emotional attachment even if you are selling for all the right reasons.

Buyers may be Insulting or Augmentative.  It’s human nature.  You’re on two sides of a deal.  A buyer may try to establish fault with your restaurant to justify their offer price.  If a restaurant buyer says something like, “I ate here last night, and service was terrible” when you know your wife was running the front of house, this deal is going nowhere fast.   Selling your restaurant through a third party means they filter this information and work on focus on representing the transaction minus the emotions.  This scenario is a lot different than if you try to sell your restaurant on your own.

Your talent is best used running a restaurant.  A professional restaurant broker’s talent lies in selling the restaurant.  You have taken your dream and managed to make it grow and prosper.  You are likely excellent at sales and operations or taking a turn in the kitchen. On the other hand, satisfying the demands of buyers may not be at the top of your skill set.

A restaurant buyer is going to be focused on the accounting details and bookkeeping records to help them with making an offer. The buyer could care less whether they show up during your busiest time such as dinner on Friday night.   As a result, you will find yourself doing more of what you are less good at and less of what you are very good at which is running the restaurant. 

Restaurant Brokers are Deal Makers.  Remember that just because you received an offer doesn’t mean your restaurant is sold.  Reaching an offer means the buyer and seller agree on is the easiest part of a transaction and is only the beginning of the process.  Buyers and sellers that reach consensus on a price are not difficult to put together.  The tough part is holding the transaction together until closing which is where a restaurant broker can be of tremendous help with seeing the deal through to completion. 

The restaurant broker’s work begins once the buyer and seller agree on an offer.  Shortly after, the buyer will begin to put every element of the transaction under a microscope when the reality begins to hit that he is in the deal for the long haul.  At this point there are numerous opportunities for the deal to collapse post contract which is why it is necessary to have a restaurant broker working with you.

 The restaurant broker is working at reassuring the buyer that the unpaid lien is not a disaster and can be resolved at closing.  He or she is also helping the seller locate two-year old tax returns with a stamp on them from the Internal Revenue Service and assisting the seller with the sales tax clearance letter from the state. 

 On the other side, the broker is working with the buyer when he discovers there is a list of items on the inspection results that need to be fixed and with the seller when he discovers the franchise wants a list of improvements before they will transfer.  The restaurant broker is taking the heat from all parties to the deal and keeping it in check to get them to the closing table.

 Brokers have Access to Contract Forms and Legal Resources

 Preparing a contract can have its own set of issues.  What’s included?  What’s not?  Who keeps the security deposit or pays for inventory or transfer fees?  The last thing you want to do is engage an attorney and have countless costs and fees with no guarantee it will close.  We Sell Restaurants and many other brokers, have forms and documents that can expedite this process at no fee to you.  Why would you want to take the risk of handling this on your own? This is clearly a way to fast track a deal for selling your restaurant.

 Restaurant Brokers have Lending Contacts

 Getting the most money for your business means you frequently need a lender engaged.  The process of lending can be lengthy and confusing for the inexperienced while it’s a daily occurrence for a broker. He or she will have immediate contacts, processes for approvals and support for the forms and information requested by the bank and other parties. For our firm, we can fast track any loan application, gaining approval in generally, less than a week.

A Broker Understand the Franchise Approval Process

 The specialist in the transaction is the restaurant broker.  He or she will have contacts at the franchise level for approval of the new franchisee.  They often have the forms and requirements for approval ready to go as soon as the deal is in contract.  A seller can work with their own brand to make this happen but to fast track a deal, a knowledgeable resource can accomplish in hours, items that will take weeks to accomplish if you’re learning it for the first time. Want to get on the fast track for selling your restaurant?  Use the resources at your disposal.

When reading all the ways a Restaurant Broker can fast track selling your restaurant, it’s no wonder restaurant brokers frequently hear “This deal never would have happened without you.”  Ready to fast track selling your restaurant?  We can help.  Find more information at the link below.

Restaurant buyers and sellers have a common goal when transferring a business.  They need consent of a critical third party – the landlord.  Here are five myths, debunked one by one, on the role of a landlord. Understand that the primary impediment to buying or selling a restaurant, is most frequently, the guy getting a rent check each month. 

We Sell Restaurants is busting the myths and telling the cold, hard truth about leasing a restaurant.  Understand this before attempting to transfer or assign a restaurant lease.  

Myth #1:  Restaurant Lease Transfer is Easy

Assuming that you can call the landlord and tell him about the new tenant and all will be well is a naïve approach.  That lengthy agreement you signed way back when typically puts all the power in the landlord’s hands. This can include the cost to transfer, the time to transfer and obviously, the agreement to transfer or assign the existing lease. 

Want to hear some horror stories on this topic?  Don’t get us started.  We Sell Restaurants and our expert restaurant brokers can attest to dozens of instances where a landlord has sent a deal crashing to the ground.  Quite frequently, buyers and sellers are resorting to getting a strong attorney involved on the lease transfer process.

Myth #2:  The landlord application process or “package” is straightforward and simple when leasing a restaurant.

Landlords want paper and lots of it.  It’s not uncommon to see a request for a personal financial statement, consent to credit check, multiple years of tax returns, a check for the transfer fee, a business plan and much more.

Are they entitled to all that information?  Unfortunately, the answer is yes. They are performing their own financial due diligence.  They can request the experience basis of anyone applying for space in their center. 

One tip to overcome this issue is to provide everything.  Getting their package right the first time will cut down on the games landlords play in approving or failing to approve a new restaurant lease tenant.  Complete the document in it’s entirely.  Submit any required fees in the form of the lease transfer fee.  Submit it both electronically and in paper.  Track the delivery using a paid service with a receipt so you can verity when it was submitted.  The last thing you want to do is fail to get the restaurant lease approved because you didn’t get the paperwork right.

Myth #3:  Assignment of a Restaurant Lease relieves the current tenant of any Obligations on the Personal Guarantee   

Someone buying or selling a restaurant must fully understand their obligations when it comes to the personal guarantee or ongoing financial requirements of the lease.  A personal guarantee is almost always required by a landlord.  Frequently, they will attempt to retain the seller on the guarantee unless you have negotiated up front, the conditions under which you will be removed.  In most cases, absent any form of an agreement previously reached and outlined in the lease, landlords will always keep the old party on the restaurant lease.

Are there ways to minimize the guarantee?  Yes.  You, your attorney, or your restaurant broker can attempt to minimize the amount of the guarantee a seller remains liable for.  They can attempt to cap the guarantee, put a time frame on it or otherwise keep the liability limited to the new buyer. If the new buyer has superior financials to the seller, this is less of a concern as they will always go after the biggest fish first.  If a seller has the greatest assets, it’s best to negotiate this down first

If the landlord refuses to relieve you of the liability, you can circle back to the buyer for what’s commonly termed a ‘wrap-around’ or indemnification.  This legal agreement can allow a seller to pursue a restaurant buyer personally against some form of secured assets if he should default, leaving the landlord to pursue a seller that’s no longer operating in the space.

Myth #4:  Landlords Have a Duty and Financial Incentive to Transfer a Lease

It’s best to know up from this fact about restaurant leases.  Landlords have absolutely zero incentive to cooperate or assist in a transfer.  The money for a landlord is made by leasing a new restaurant space.  In the case of a transfer, he or she, has a tenant in place.  They are paying rent and they have a personal guarantee.  Ergo, there is absolutely no financial incentive to do anything as it relates to an assignment.  For that reason, landlords drag their feet, refuse to move and overall act like the biggest impediment to ta transfer on a restaurant space for sale.

Myth #5:  Landlords execute restaurant lease transfers in a timely manner.   

The last myth to understand is that a landlord does not move quickly.  The landlord cannot, will not, and typically refuses to move on anything other than their own time frame. This is related to the prior myth about financial incentives.  They want their representatives leasing new restaurant space and their legal teams drafting new leases, not dealing with those already in place.  Without a financial incentive to act, they work in their own time.

That leaves countless restaurant buyers and sellers stranded while they wait on this transaction to occur.  What are the pressure points you can bring to bear?  First, leverage your relationship with the local representative if you have a good one.  Secondly, ask a franchise leasing department to intervene on your behalf.  Lastly, go up the chain of command.  As a restaurant broker, I frequently resort to a google search of the VP or Senior VP for the area to escalate a claim to move.  This sometimes works and in some cases, angers the assignment team so much, they will just slow walk it more. 

If you have been patiently waiting and making professional requests for follow up with no response, it may be time to involve an attorney.  Get them to review the lease and ask the landlord why they are failing to meet the lease language that in most cases states, they “may not unreasonably withhold consent.”

That’s it.  Better to be armed and ready with information than taken advantage of by the landlord.  Need help in getting your restaurant lease transferred?  Reach out to the Restaurant Brokers at We Sell Restaurants and we can help.  If you choose to negotiate on your own, you're now in a better position since we just revealed to you the five biggest myths about leasing a restaurant.

Are you a Foodie Family with some serious chops!  A new TV show is being cast for ABC called Family Food Fight.  They are searching for families of three or more to go head-to-head in high pressure cooking challenges inspired by real home cooking and family food traditions. 

Put those aprons on and tell the kids to get moving!  It's time to apply.  You can compete to be America's #1 Food Family and win $100,000!  Guess what you can do with all that money?  That's right!  Buy a Restaurant! 

The casting director for this project has worked with the We Sell Restaurants team in the past.  His work includes shows like Fox's Hell's Kitchen and Kitchen Nightmares, ABC's, The Taste and Bravo TV's Top Chef.  Is it time your family made it on the screen?  His email to us says, 

" I'm seeking a variety of "foodie" families to compete on the show. "Foodie" in this sense means many things, but mostly that the families I'm looking for have members who all regularly cook, enjoy to do it, and can all hold their own in the kitchen. Beyond that, we're considering families of all kinds, whether they specialize in a certain style of cuisine (Italian, Moroccan, Southern, Southwestern, etc.) or technique/restrictive diet (BBQ, Vegan, Molecular Gastronomy, etc.)."

What are the requirements?  Here they are.  

• Families from every culture, creed and background from anywhere nationwide are welcome. .
• You must be U.S. Citizens with at least 4 family members over the age of 18.
• You can't be professional cooks or have worked in food preparation in the past seven years. 

The official press release from ABC asks, "Can Your Family Handle the Heat?"  Based on Australia’s hit format and hosted by restaurateur, food maven and New York Times best-selling cookbook author Ayesha Curry, “Family Food Fight” will feature eight families from across the country sharing a common kitchen and a common goal: to claim the title of America’s No. 1 Food Family and take home a $100,000 cash prize. Family teams will pull out their best culinary moves in the kitchen, serving up authentic family dishes and drama. Tapping into each family’s uniquely diverse cultural heritage, along with their countless culinary influences, “Family Food Fight” will take homestyle cooking to a new level as family recipes rich in tradition and shared over generations are put on display.

Want to pop into an open casting call?  The dates and times are below:

OPEN CASTING CALLS:

Los Angeles, California
Sunday, July 29, 2018
12 p.m. – 4 p.m.

Chicago, Illinois
Saturday, August 11, 2018
12 p.m. – 4 p.m.

New York, New York
Saturday, August 18, 2018
12 p.m. – 4 p.m.

Families must fill out the pre-registration paperwork in advance of the open call by visiting familyfoodfightcasting.com. They strongly encourage all family members to attend open call auditions; however, if somebody is unavailable, there is a contingency for that.  Don’t forget to bring your signature dish!

ONLINE SUBMISSIONS:
If you are unable to attend an open call, families can upload a video submission (via the pre-registration form at familyfoodfightcasting.com). Completed applications and video submissions must be received by August 17, 2018, to be considered. If selected, producers will reach out with additional information.

Keep the team at We Sell Restaurants posted if your family makes it to the show.  We'll be pulling for you!