Advice for Buying a Restaurant and Selling a Restaurant

Selling a Restaurant?  Avoid the Top 7 Mistakes Made by Restaurant Sellers

Posted by Robin Gagnon on Dec 12, 2016 3:40:25 PM

If you’re interested in selling your restaurant for the most amount of money in the shortest time, read this advice by the restaurant brokers.  These are the top seven mistakes we see made by sellers when listing their restaurant for sale.

dining-room-103464_1920.jpgFirst on the list of Restaurant Selling mistakes is hiring someone without experience.  Deciding that your friend Sarah the residential real estate agent who sold your home has the skills it takes to sell your restaurant will certainly lead to a less than desirable outcome. You need someone with the background, legal forms and experience to make the sale happen.  Don’t forget.  Mistake number one.  Don’t hire a rookie.

What’s second on the restaurant brokers list of mistakes in selling a restaurant?  Hire a specialist, not a generalist.   Let’s try this analogy.  Both your internist and your dentist went to medical school. Who would you prefer to see about follow up tests on your cholesterol?  It’s important to hire a specialist in your field.  A general business broker may sell a carwash today a day care tomorrow.  Those brokers specializing in selling restaurants have working knowledge information about the industry, contacts, and credibility when it comes to speaking to buyers.  Mistake number two:  Don’t hire a General Broker for a Specialized Job.

Mistake number three on our list of the seven to avoid is what we call the ‘Do it yourself” approach.  Anyone who watches the home improvement shows where an unlikely home owner starts trying to take down walls can appreciate this warning.  If you’re good at running a restaurant, stick with that.  The restaurant broker serves as a buffer to the questions, the issues and the validation that occurs during due diligence.  There is a lot of emotion associated with your own business and that makes it difficult to segregate when it comes time to negotiation. Let the professionals handle the sale of your business. Mistake number three:  Don’t do it yourself.

What’s the fourth most common mistake we see when selling a restaurant?  It’s asking too much for the business.  A professional knows how to price based on what the market is reporting, what lenders will finance and what your restaurant is actually worth.  It’s very difficult for a seller to come to those same conclusions and inevitably, they price too high to begin with and their listing grows stale without offers.  Mistake number four:  Don’t Price Too High.

The fifth most common mistake is actually the opposite of the last point.  You can actually underprice your restaurant if you are not working with a professional familiar with the market and the current and correct multiple or who understands the process of recasting add backs.  Personal expenses covered by the business on your behalf can be added back to the net income of the business to calculate benefit for the owner.  Examples may include something like health insurance or cell phone expense. Mistake number five:  Don’t Undervalue Your Restaurant.

Talk about a big mistake.  The next one that comes to mind could have far reaching consequences for your business.  This is mistake number six.  As a seller you get so excited about working with a buyer that you give out sensitive information before buyers are qualified.  All buyers are not created equal.  Your financial information should be treated securely.  Your financial documents include your EIN (Employer Identification Number).  This is the same as your social security number as an individual.  Mistake number six:  Don’t hand over Confidential Information before Qualifying Buyers.

The final in our list of the top seven mistakes made when selling your restaurant is failing to put legal protection in place. Just as you should qualify buyers (mistake number six), you also need to be sure and put a confidentiality agreement in place and have one signed before releasing any information.  Make sure there are consequences if the agreement is breached.  Mistake number seven:  Don’t share anything until the Confidentaility Agreemetn is in place.

That’s it!  Avoid those seven mistakes and you will have a much higher rate of success in selling your restaurant!  Do you have other questions?  Reach out and give us a call or request a free valuation of your restaurant at this link or click the button below.  

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Topics: Selling a Restaurant