Advice for Buying a Restaurant and Selling a Restaurant

Marketplace Confidence, Low Interest Rates Driving Increased Business Transactions

Posted by Robin Gagnon on May 28, 2015 6:45:07 AM

The 1st Quarter 2015 Market Pulse Survey Report published by the International Business Brokers Association (IBBA), M&A Source and the Pepperdine Private Capital Market Project is out.  They report that "business transaction activity increased across all market sectors in the first quarter of 2015, driven by consumer and market confidence and low interest rates."

This data aligns with an earlier BizBuySell industry report showing 1st quarter of 2015 transaction levels ahead of last year. 

The latest data covers both businesses sold in Main Street markets (values under $2 million) and lower middle markets (values $2 million to $50 million).  The restaurant brokers are seeing even strong results in their "Main Street" transactions with an increase in transactions of 22% in the first quater of 2015. 

"Confidence is up across the board, and we're seeing that reflected in both buyers and sellers markets," said Robert K. Adams, Partner, Advanced Business Brokerage & Adams & Chebalo, LLC and member of IBBA / M&A Source.  Eric Gagnon of We Sell Restaurants says, "Confidence is high but we see this reflected in the credit market.  There is strong lending available for restaurants and in particular, franchise restaurants, that are driving the We Sell Restaurant activity levels."

Other key findings from the latest study include that nearly 6 out of 10 (59%) of Main StreEric_and_Robin_Crop_April_2013_Headshotet brokers characterize current buying conditions as a "Buyer's Market" versus a "Seller's Market."  On this point, Restaurant Broker Robin Gagnon of We Sell Restaurants says, "It is difficult to characterize the entire marketplace as advantaged toward either buyers or sellers.  We see each indidual deal and the circumstances dictate the deal terms.  With a willingness to get a deal to the table by both parties, there is a natural give and take on both sides."

According to the survey, "Business services led the Main Street market, appearing in the number one (or tied for first) spot for the most businesses sold in each sector. Consumer goods and personal services also held leading positions."   The earlier BizBuySell data found roughly 22% of all transactions in the first quarter were restaurants. 

The survey found that "Retirement ranks as the number one reason to sell across all Main Street sectors."  That finding is at odds with the restaurant brokerage industry according to Eric Gagnon, President of We Sell Restaurants.  "The hospitality industry is highly transactional one.  We see more units changing hands as people move into and out of the business in much shorter periods of time than is indicated by retirement. The resaons for the sale are often tied to lifestyle issues but retirement does not top the list."

Brokers surveyed also found a growth in new clients and optimism for new client engagements at "near its peak since the survey began for all market sectors."  Chief Marketing Officer for We Sell Restaurants, Robin Gagnon concurs saying, "We have seen traffic from new buyers at double digit increases for the entire fourth quarter of 2014 and the first quarter of 2015.  Buyers are actively pursuing opportunities in the marketplace and our lead generation efforts have definitely paid off

The Q1 2015 survey was completed by 231 business brokers and M&A advisors, representing 39 states. More than half of the respondents (57 percent) had at least 10 years of experience in the M&A industry. Participating advisors reported closing 143 Main Street market transactions and 20 lower middle market transactions in Q1 2015. The report can be found here: http://bschool.pepperdine.edu/about/people/faculty/appliedresearch/research/pcmsurvey/ 

Topics: buying a rstaurant