Advice for Buying a Restaurant and Selling a Restaurant

We Sell Restaurants Outpacing Industy based on Bizbuysell Insight Report

Posted by Robin Gagnon on May 1, 2015 2:07:39 PM

Bizbuysell reports that Small Business Transactions are Up 6 Percent Over the Same Time Last Year.  Restaurant Brokers See Double Digits.

According to BizBuySell.com, the Internet's largest business-for-sale marketplace, "small business transactions continued at a strong pace in the first quarter of 2015, growing 6 percent from the first quarter of 2014. A total of 1,830 small businesses were reported sold in Q1, continuing a two-year trend of exceptionally robust activity in the business-for-sale market."  The firm cited "strong transaction activity and robust business fundamentals" as drivers in the uptick in activity.  We Sell Restaurants cite much stronger results. The nation’s largest restaurant brokerage firm says that by their count, transactions increased 22.2 %.

The BizBuySell full results are included in BizBuySell.com's Q1 2015 Insight Report, which aggregates statistics from business-for-sale transactions reported by participating business brokers nationwide.  The restaurant brokers at We Sell Restaurants participate in the survey results with their "solds" and "comps" are pulled into the data each time they update the listing marketplace.

The data from BizBuySell shows an increase in transactions for 2015 from 1726 to 1830 nationwide.  That is on the heels of a decrease over the first quarter for the prior year with 1897 businesses reported sold in 2013.  The survey data published by the group is shown in their graph below tracking each quarter since 2011.  

2015 Q1 Closed Small Business Transactions

Restaurants accounted for 376 transactions of the total deals reported by BizBuySell in the first quarter of 2015 or approximately 22% of the total sales.  That compares to 414 units sold in the same time period last year.  The national data shows a decline of 9.2% in the total number of restaurants sold nationwide.  

For the same period, the restaurant brokers at We Sell Restaurants saw unit activity increase 22.2%, reflecting the highest quarter of growth and highest number of units sold in the firm's history.  This is on top of double digit growth for each prior year.

2015 Q1 Small Business Sales by Sector

Restaurant Broker Robin Gagnon acknowledged the transactional activity for We Sell Restaurants saying, "We are seeing tremendous growth in franchise re-sell transactions.  This trend is fueled by societal changes including the turnover of legacy brands coming into ownership by Millenials who are ready to change these out for younger 'hipper’ concepts.  That's putting a lot of units into the marketplace and driving velocity on the newer brands for turnover."

“Baby boomers are both selling their restaurants and buying restaurants” says Eric Gagnon. “Many never went back into the workforce after the recession and are now looking for a new business of their own. We are seeing inventory with higher sales and earnings coming into the marketplace."

That is echoed in the Bizbuysell survey which stated, “A key reason buyers and sellers are entering the market in larger numbers is the improving health of small businesses in general. Financial indicators remained high in the first quarter of 2015, giving sellers hope that they can earn a high sales price and giving buyers optimism about the future of their potential acquisitions. The median revenue of small businesses sold in Q1 stood at $442,000, up from an even $400,000 at the same time last year. Median cash flow hit $104,000, which represents the highest median cash flow reported since BizBuySell.com started tracking this data in 2007.”

We Sell Restaurants reports similar results and though their transaction data is confidential, Robin Gagnon says, “Seller's Discretionary Earning (SDE) as a rate to sales is up over the prior year. This is driving pricing and multiples. It is not unusual to see multiple offer situations particularly when we offer groups of three or more stores."

What does the balance of 2015 hold?  "We've heard from our broker customers that they are seeing more qualified buyers capable of taking over the reins from sellers, specifically Baby Boomers ready to retire," Bob House, Group General Manager of BizBuySell.com and BizQuest.com, said, "Supply and demand fundamentals, combined with the improving financial performance of small businesses in general, should drive growth through the rest of the year."  

We Sell Restaurants President Eric Gagnon says, "We have more deals in the pipeline for 2015 than at any time in the company's 14-year history so we see no abatement in this trend.  In addition, we are seeing many more sales of two or three stores at a time versus a single unit opportunity.”  

We Sell Restaurants is the nation’s largest restaurant brokerage firm in terms of listing count, number of transactions and gross commission income. The firm is franchising their brand nationwide and allowing other brokers the benefit of their technology, business model and marketing efforts. Those interested in the We Sell Restaurants franchise can find more infomation at this link.

Topics: selling a restaurant