Advice for Buying a Restaurant and Selling a Restaurant

Best Restaurant Social Media Campaign Ever! IHOP goes to IHOB and We Sell Restaurants says...

Posted by Robin Gagnon on Jun 15, 2018 4:33:15 PM

What’s in a name?  For a company like ours, aptly named, “We Sell Restaurants,” we’re pretty confident that a good name is key to not only describing what you’re about but also gaining traction in the market. 

In the news that nearly crashed the internet this week, a familiar brand decided to change their name and their brand focus is one fell swoop.  For the last 60 years, people have known the name IHOP or International House of Pancakes.  On June 4th, they announced that they were “flipping [their] name to IHOb,” much to the consternation of the internet.

In advance of the announcement, jokes abounded about what the b would stand for. IHOP’s own twitter feed drummed up the action with a poll from their followers.  Guesses ranged from butternut squash to barnacles. Many people guessed breakfast, along with other logical choices like bacon and brunch.DfGbx9SVAAA86ag

The social media team at IHOP(B) did an amazing job teasing out the answer.  Their first tweet announced a change was in the work and then primed the social media pump.  From encouraging the speculation on social media, playing coy about guesses, and changing words that start with a p to start with a b, they managed to stage a brilliant online campaign.  They engaged in Twitter exchanges with others (Check out our favorite - the Wendy’s Twitter account) and overall hyped in a way we’ve never seen, as the name change had clearly been in the works for some time.

What did they get for this daring effort?  How about hours of online press, a social media firestorm and more mentions stacked up in a two week period than they probably had in the last year.  It wasn’t just social media getting into the action, traditional media was engaged as well and a quick search of articles finds three pages of online results for articles written in the past 48 hours.  Look at us – we’re writing about them too!  

Some are asking, is it a publicity stunt or is it real?  We don’t know but what we do know is that the tactic got everyone on board from other brands to schools and universities to corporations.  Here’s just a sample of some of the tweets that fueled the storm this week.

Burger King came out on Twitter claiming to be the king of pancakes.  When asked if they’d let IHOP sell burgers on their block, Wendy’s replied “Not really afraid of the burgers from a place that decided pancakes were too hard.”

Whataburger tweeted “as much as we love our pancakes, we’d never change our name to Whatapancake.” Hot Pockets simply tweeted “bot bockets”. Other non-food corporate twitter accounts joined in.  Netflix tweeted “brb, changing my name to Netflib.”

When the dust settles, it will likely be the best social media campaign ever.  Will it sell more pancakes?  The restaurant brokers suspect they will, at least for the foreseeable future. Will they really be IHOB – International House of Burgers?  We don’t see it.  Let’s stay tuned and see what’s in a name for this brand.

Topics: buying a restaurant, selling a restaurant

We Sell Restaurants Team Featured in Rivermoore Business Beat

Posted by Robin Gagnon on Jun 11, 2018 9:39:35 AM

The Rivermore Business Beat - Life in the Park Magazine posted this article about Restaurant brokers Steve and Cyndi Weinbaum of We Sell Restaurants in their June 2018 edition.

In 2015, Steve Weinbaum decided he’d had enough of the “corporate grind” and wanted to find a new career path that he would enjoy.  So, he started selling restaurants. Literally.

Weinbaum, joined We Sell Restaurants, a business brokerage practice focused on the restaurant industry. The company specializes in selling restaurants, restaurant space for lease and leads the country in independently owned and franchise restaurant resales. Before long, he was joined by his wife, Cyndi where they created a husband and wife team in the firm.  Cyndi Steve

Steve and Cyndi both have retail and financial backgrounds. They met and married while at Macy’s corporate headquarters in Atlanta where Steve was on the marketing side and Cyndi was in buying. When Macy’s relocated their corporate offices to Atlanta, Steve transitioned to the gift card and payment industry while Cyndi pursued a residential real estate career. Eventually, their Macy’s days led to a connection with Robin Gagnon of We Sell Restaurants. Eric and Robin Gagnon, also a husband and wife team, started the firm in 2001 and have grown it to a nationwide company working in 45 states.

“It’s a lot of fun because you meet buyers and sellers who are looking to get in or out of the industry for different reasons,” Steve said. “I had a guy who worked at a yogurt shop for five years as an operations manager and had the chance to buy one for the first time. You feel like you’re helping people realize their dream, which is both fun and rewarding.”

Steve and Cyndi help buyers realize the American dream of business ownership. They broker deals between parties looking to buy and sell a restaurant. Sellers need their services to figure out the value. Buyers need their advice to make the right decision.

In a typical transaction they begin with the seller who is interested in their services, speak with the restaurant or franchise owner to figure out their financial details, do a valuation and come up with an asking price. The listing is then marketed nationwide to a database of more than 75,000 buyers seeking a restaurant for sale, all while keeping the exact name and address a secret.

For buyers, Steve and Cyndi do the initial work to qualify them for the purchase, assist with lending options and provide overall guidance and support. Prospective buyers must sign a confidentiality agreement and the name of the restaurant is not listed on the site, only locations and details. Once the buyer has been qualified, the restaurant’s identity is revealed.

This career switch has worked out well for the Weinbaum family. They’ve found a way to provide for their blended family and lifestyle while enjoying the flexibility of being in business for themselves. They enjoy helping other realize the dream of small business ownership. They’ve also proven to make a great team. Steve admits he’s not a details-oriented person; that’s more of Cyndi’s strong suit, so she handles a lot of the numbers and writes many of the contracts. Meanwhile, Steve’s background in sales and finance comes in handy when working with sellers and lenders.

“We are a great team. We complement each other with our strengths and skill sets,” Steve said.

Steve can be reached at (770) 714 – 4552 or email at steve@wesellrestaurants.com.

Cyndi can be reached at (770) 851 – 5194 or email at cyndi@wesellrestaurants.com

 

Topics: buying a restaurant, selling a restaurant

May 2018 top 10 Restaurants for Sale at We Sell Restaurants

Posted by Robin Gagnon on Jun 4, 2018 11:50:05 AM


Topics: buying a restaurant

Why Buy a Restaurant when you can buy a Restaurant Broker Franchise?

Posted by Robin Gagnon on May 31, 2018 8:24:36 AM

Interested in a rewarding career in a high-demand field? Those looking at buying a restaurant should consider the restaurant brokerage industry.  We Sell Restaurants is changing the way restaurants are bought and sold. Here are the top five things you need to know about our Franchise for Sale  opportunity.

Anyone interested in purchasing a franchise for sale will not want to rule out becoming a We Sell Restaurants franchisee. The option makes sense for several reasons! Here are the top five.

Strawberry Recipes (2)Reason One -- Size Matters.

There are more than one million restaurant locations within the United States alone and that number has been growing every single year.  Let's put that into perspective.  The restaurant industry contributes a staggering $799 billion dollars to the U.S. economy – a figure that is equal to four percent of the gross domestic product (GDP) of the United States and larger than 90% of world's economies. 

The restaurant industry will create 1.7 million new jobs by 2026 and represents 10 percent of the U.S. workforce.  Forget the long ago years of dining together around the kitchen table.  Today, nearly half of all the food dollars spent by families are spent in restaurants and that keeps building.  It's not just new locations but also turnover in locations that matter for restaurant brokerage.  As units open, they also close or change hands.  That requires the services of a restaurant broker. 

As the restaurant industry continues to grow, so do the number of restaurants being sold. In this case, size matters.

Reason Two - Baby Boomers.

The wealthiest generation born in the U.S. are the Baby Boomers, and they will be between 54 and 72 years old this year – retirement age!  They are also the largest generation in history and 10,000 will turn 65 every single day until 2030.  Baby Boomers are ready to sell their successful restaurants and hit the beach! These Baby Boomers (and everyone else) who wish to sell their restaurants want to get the most out of their investment, and they want to get it done quickly. They aren’t going to call just any broker to get this done – they are going to put their trust in a brand and authority who know the industry inside and out.

Baby boomers retiring create many restaurants to sell.  That's reason two to look at restaurant brokerage. 

Reason Three - Franchise Resales

The franchise industry began in the 50's and Millennials are poised to inherit the family business.  For most, staying in the restaurant industry isn't their choice or they want to trade into new concepts.  That creates turnover.  Turnover is what funds the pipeline of a restaurant broker.  These businesses changing hands at a faster rate than ever before is fueling the growth of the industry. 

Franchises want to work with other franchise brands. They see the expertise of a specialized brand as important to their decision making process and appreciate the systemic approach of a firm like We Sell Restaurants.  That's reason three.  As franchise resales grow, the market share of our brand expands within that niche.  

Reason Four - Specialization is Key

Those looking to buy or sell a restaurant iare not seeking out a generalist. They want someone who understands the industry and how to value the business.  They are seeking the authoritative resource with the experience, knowledge and customer base to get the job done.   A generalist who sells a little bit of everything is not the solution.  A trusted, national brand like We Sell Restaurants has the authority and is on the leading edge of the industry at all times.  That matters to buyers and sellers and should matter to you when choosing a brand to align with. 

That's reason four to consider this brand. 

Reason Five - Training is Critical

Selling a business is not a simple process.  It takes tremendous knowledge and training.  The We Sell Restaurants brand has sold more restaurants than anyone else, PERIOD.  Those who join the We Sell Restaurants franchise for sale go through extensive training.  We want the best who are able to perform at 100%. We provide the only Certified Restaurant Broker program in the U.S. The program is made up of five phases, with the final phase offering one-on-one Mastermind sessions with the founders for an unlimited length of time.

Getting best in class training is the last reason to consider the We Sell Restaurants franchise. 

Interested in learning more but wondering what a Restaurant Broker does?” When a seller decides that they would like sell their restaurant, they call a Restaurant Broker to handle the listing. The Restaurant Broker lists the restaurant for prospective buyers to view. There is tremendous effort and funding put into marketing the business.  When the buyers contact a Restaurant Broker in regards to the listing, he or she works in negotiations between the buyer and seller to get the listing sold.

Experience in the restaurant industry may be helpful, but is certainly not required to buy a We Sell Restaurants franchise for sale and to become a Restaurant Broker. We are confident that our Certified Restaurant Broker program is so effective in teaching the restaurant brokerage business, that we can turn anyone with the drive and passion for success into a top-earning Restaurant Broker. 

The income you can earn by purchasing a We Sell Restaurants franchise for sale and becoming a Restaurant Broker is determined by how much work you are willing to put into your career. Most Restaurant Brokers are able to work from home, as all you need is a computer with a good internet connection and a smartphone. As a Restaurant Broker, you can expect to spend about 40% of your work day on the phone with buyers, another 40% working with sellers, and the final 20% moving deals forward.

So what are you waiting for? Click here to learn more about purchasing a We Sell Restaurants franchise for sale today!

Topics: buying a restaurant

How to Buy a Restaurant with No Money Down

Posted by Robin Gagnon on May 21, 2018 12:33:35 PM

Falling in Love with the Dream and Buying the Reality. You want to buy a restaurant  but you don’t have money for the deal. Is there a solution? Read on for the tips and tricks from the restaurant brokers to make it happen.

First time restaurant buyers can look like seasoned professionals by following the tips in this article on buying a restaurant with no money down.  What are the steps?  What comes first?  How do you negotiate the deal.  Focus on the following first and then we’ll teach you how to shop for the right listings.

Step 1:  Get your financial house in order

If you are trying to buy a restaurant with no money down, make sure your credit is buttoned up and ready to go.  Pull a recent credit history from one of the many online sources – you are entitled to free copies.  Clean up any pending issues and make sure you have a good credit rating going into negotiations and be ready to show this to a potential seller.   If you want him to serve as your bank, you need to demonstrate that you’re credit worthy .How to Buy a Restaurant with No Money Down

Step 2:  Build a business plan

The only way a seller and a landlord will buy into your takeover is with a solid business plan.  The components of the business plan should include your knowledge, background and experience, your marketing plan, your overall strategies and tactics to build sales, along with financial projections.  If you need help building a business plan, check out our earlier blog post on this topic at this link.  Other sources of help with a business plan include SCORE, the nation’s largest network of volunteer, expert business mentors.  They have chapters all over the United States.

Step 3:  Identify target Restaurants

Now that you have your financial house in order, let's start the search.  Begn by find restaurants that are not advertising cash flow.  These are turnaround opportunities sometimes called “asset sales.” For many of these restaurants for sale, the current seller may be disengaged, working in another business or out of capital to get this business to the next step.  It could be he just doesn't have the same skills you have in operations or marketing.  Identify these listing from ads with terms like, "Gorgeous build out.  Owner spent more than XXX to create. Seller will sacrifice…”  A franchise might be advertised at “just $99,000 though the build out and cost to launch exceeded $350,000.”  These are excellent targets for buying a restaurant with no money down as the seller is already demonstrating his willingness to cut his losses.  

Does an asset sale mean the business is failing?  In many cases, yes -- today.  If you’re going to buy a restaurant with no money down, you need to be ready to take on the risk to “flip the restaurant” and take it to the next level.  How do you decide if it’s the right one?  Investigate the business. Visit as a customer.  Check out the surrounding area. Pull the demographics on the trade area and figure out if the market is good and the concept is bad.  You can change the concept.  You can’t change the location.

Identify where the seller has missed the mark by reviewing his financial picture, checking out his marketing (or lack thereof) or understanding the quality of the assets.  Fit your business plan to this situation and see if your ideas have traction in this location. 

A quick note on asset sales.  They are not always independent restaurants.  Often a franchise restaurant for sale location will not be making money under the current ownership.  The seller is often absentee and has not embraced the franchise model.  This is an easy one for a turnaround situation.

One other key restaurant broker bit of advice on examining asset sales.  It is never a good idea to focus on cutting costs.  Most sellers have tried that path.  Look at any restaurant for sale to expand the top line.  Where can you grow sales?  If you take care of sales, almost all other elements of the financials come into acceptable ratios.  Take lease rates as an example.  If the current seller is doing $400,000 in sales on a space leasing for $6000 per month, his occupancy cost as a rate to sales is far too high.  Will the landlord negotiate this down?  Usually not.  Focus on what he is not doing that will drive top line sales to the right level (closer to $750,000 on this rent number) and if you can’t make it work, don’t tie up your credit and time in this restaurant.  The most common solutions are marketing and advertising.  Most sellers with restaurants that are under-performing are failing to reach out with strong ideas to drive traffic.  In addition, look at delivery.  The many sources of delivery today including, Uber Eats, Door Dash and many more that represent a strong opportunity for higher sales.

Final Step:  Negotiate a deal with no money down.

Once you have identified your target, approach the seller or the broker with a proposal for acquiring the business with no money down.  Demonstrate that by taking over today, you will remove the current seller’s liability for the lease or franchise.  – A seller who is currently not making money is often willing to walk away provided you address his obligations.  That includes the personal guarantee on the lease or the franchise agreement.  Sometimes he has equipment that has a remaining note.  See if you can take over his payments. The point of the negotiation is to remove the pressure of staffing and running the business today.  He needs to see you as his solution in order to sell you the restaurant with no money down.

Nothing down doesn't mean he'll never be paid.  Be creative in financing terms.  You can tempt the seller to accept your offer with an “earn out” or stake in the future production of the business, including a percentage of sales or percentage of profits.   You will need to do some strong work on presenting the deal and the “upside” to the seller but, hey, you’re buying for no money down, so put the effort into the negotiations. 

Demonstrate to the seller why this is a win for them and build an acceptable interest rate into your future payments.  You are taking a chance on buying a restaurant based on what the future holds.  You have to convince the seller to take the same chance on you! 

Like this article or want to talk more or see restaurants for sale?  Check us out online at this link.

 

Blog Byline Robin

 

Topics: buying a restaurant

IBBA presents Eric Gagnon with Outstanding Producer Award

Posted by Robin Gagnon on May 17, 2018 5:28:04 PM

 We Sell Restaurants President Eric Gagnon recognized as Outstanding Producer in 2017 by the International Business Brokers Association at their annual convention.

2017-Outstanding Producer-Award-Eric GagnonEric Gagnon of We Sell Restaurants is the recipient of the Outstanding Producer Award given out by the International Business Brokers Association (IBBA) during its annual conference in New Orleans on May 4. The Outstanding Producer Award is awarded to applicants who closed one or more business deals amounting to at least $1 million in total purchase price during the 2017 calendar year.

“As the only international association for business brokers, it’s important for the IBBA to recognize individuals like Eric who are worldwide leaders in this industry and who display the high standards of skill and excellence that the IBBA promotes,” said Warren Burkholder, IBBA Board Chair, "This award lets sellers and buyers know they are working with one of the industry's top performers."

The IBBA is the world’s premier organization operating exclusively for professionals and firms engaged in business brokerage. The Member Excellence Awards Gala that the IBBA 

Eric Gagnon

puts on during their annual conference gives winners the recognition they deserve for their achievements, while also giving their IBBA colleagues the opportunity to engage with them and learn from their experience.

Eric is the founder and President of We Sell Restaurants and wesellrestaurants.comEric is an industry expert in restaurant sales and valuation and holds the Certified Business Intermediary (CBI) designation from IBBA.  He has also been designated a Business Industry Expert by  Business Brokerage Press. 

Gagnon is the Past President of the Georgia Association of Business Brokers (GABB) and Lifetime Member of their Million Dollar Club. He is also the recipient of the Phoenix Award, presented to a select few who have received the Million Dollar Award for more than a decade.  Eric belongs to industry organizations including the International Business Brokers Association (IBBA) , Business Brokers of Florida (BBF), and the International Franchise Association (IFA) . Eric is also an active member of the Southeast Franchise Forum where he serves on the membership committee. Eric is licensed as a Broker in Georgia, Florida and South Carolina. He holds degrees from major universities in both the United States and Canada.

 

About the International Business Brokers Association

The IBBA provides business brokers with education, conferences, professional designations and networking opportunities. As an exclusive education opportunity, it offers coursework and seminars required to obtain its prestigious Certified Business Intermediary (CBI) certification.

The IBBA also strives to create professional relationships with successful business transaction advisors to increase the value of the IBBA to its members and to be a leader in the exchange of business referrals. Membership in the IBBA includes these excellent networking opportunities, as well as a complete package of other benefits and services. Formed in 1983, the IBBA has members around the world. For more information about the IBBA, visit the website at www.ibba.org.  

Topics: buying a restaurant, selling a restaurant

We Sell Restaurants Founders Earn CBI (Certified Business Intermediary) with IBBA

Posted by Robin Gagnon on May 14, 2018 3:23:48 PM

Eric and Robin Gagnon, the founders of We Sell Restaurants have each recently earned a designation in the industry as a Certified Business Intermediary or CBI.  The prestigious designation is held by less than 500 individuals worldwide. The two tested last week in New Orleans at the annual conference of the International Business Brokers Association.  Those holding this designation represent a unique community of professionals who have undergone significant coursework, possess relevant experience and have passed a test consisting of both industry knowledge and financial competency in recasting. 

Eric Robin Gagnon The CBI designation is earned through the International Business Brokers Association or IBBA.  The IBBA website states that, "the Certified Business Intermediary (CBI) is a prestigious designation exclusive to the IBBA that identifies an experienced and dedicated business broker. It is awarded to intermediaries who have proven professional excellence through verified education as well as exemplary commitment to our industry."  They go on to remark that the designation will, "indicate to potential clients that anyone who holds the CBI certification is a knowledgeable, invested, and dedicated brokerage professional. Successful completion of the certification process significantly distinguishes business brokers from their peers." 

Lifelong learners who are committed to the business brokerage and restaurant industry, the Gagnons had this to say about their latest certification.  "Teaching others how to buy a restaurant, sell a restaurant or just providing overall knowledge and data points are critical to our practice.  A designation like the CBI is just one more piece to our overall commitment to the highest caliber knowledge base we can draw upon to help our customers." 

The International Business Brokers Association (IBBA) is the largest international non-profit association operating exclusively for people and firms engaged in business brokerage and mergers and acquisitions. This association provides business brokers education, conferences, professional designations, and networking opportunities. Formed in 1983, the IBBA has members across the world.

The IBBA strives to create a professional relationship with successful business transaction advisors (i.e. CPAs, bankers, attorneys, and other related associations), to increase the image and value of the IBBA to its members and to be a leader in the exchange of business referrals. A membership in the IBBA provides “the most complete package of membership benefits and services and the best networking opportunities with the most influential group of business brokers.”

The IBBA concentrates on providing educational courses for the business broker profession. It awards the Certified Business Intermediary (CBI) certification as well as the courses and seminars required to obtain this certification.

CBI

Eric and Robin Gagnon have long histories in the business brokerage industry.  They launched the We Sell Restaurants brand in 2001 and currently work in approximately 45 states across the nation.   

Eric is the founder and President of We Sell Restaurants and wesellrestaurants.com.  He is the nation’s leading restaurant broker.  Eric is an industry expert in restaurant sales and valuation.  Eric, along with Robin is the co-author of Appetite for Acquisition  an award winning book on restaurant brokerage published in 2012 and named "Best of" by Small Business Book Awards.  Eric began his career in the financial services industry for Bank of America, Bank of New York and big five accounting firm, KPMG before launching the nation’s premiere restaurant brokerage firm and restaurant brokerage franchise.

Eric is the Past President of the Georgia Association of Business Brokers (GABB) and Lifetime Member of the Million Dollar Club. He is also the recipient of the Phoenix Award, presented to a select few who have received the Million Dollar Award for more than a decade.  He is a member of the International Business Brokers Association (IBBA), Business Brokers of Florida (BBF), and the International Franchise Association (IFA). Eric is also an active member of the for the Southeast Franchise Forum where he serves on the membership committee. Eric is licensed as a Broker in Georgia, Florida and South Carolina.   He holds degrees from major universities in both the United States and Canada. 

Robin is the Co-Founder of We Sell Restaurants and the firm's Chief Marketing Officer.  Robin is one of the most prolific restaurant brokers in the industry and is a franchise resale specialist. Robin's expert articles appear online and in print across the country. She co-authored Appetite for Acquisition,  the industry's leading book on buying restaurants that received the prestigious "Best of " award by Small Business Book Awards.  Robin is a member of the International Franchise Association and serves on the Women's Franchise Committee and the 2018 Conference Committee.  She is also the Chair of the Women's Franchise Network - Atlanta Chapter.    

Robin holds an undergraduate degree and an MBA where she graduated first in her class and was named "Outstanding MBA." Robin is an emeritus member of the ASU Business Advisory Council. She is also a founding member of the ASU Entrepreneurship Board. Robin is a licensed real estate salesperson in both Georgia and Florida and member of the Georgia Association of Business Brokers (GABB), the International Business Brokers Association (IBBA) and the Business Brokers of Florida (BBF).  She has been named a National Industry Expert by Business Brokerage Press in Franchise Resales.   Prior to joining We Sell Restaurants, Robin served as Vice President of Strategic Marketing for a $4 billion-dollar retailer and Director of Advertising and Director of Business Development for another Fortune 100 company. 

For more information on the services of We Sell Restaurants or its founders, visit their website at wesellrestaurants.com 

 

Topics: buying a restaurant, selling a restaurant

April Top Ten Restaurants for Sale

Posted by Robin Gagnon on May 11, 2018 4:27:26 PM

Topics: buying a restaurant

Restaurants Sales flat in 2017 - What does 2018 Look Like?

Posted by Robin Gagnon on Apr 26, 2018 8:37:59 AM

What happened to restaurant sales in 2017?  Well the Restaurant Brokers at We Sell Restaurants are studying the latest data released by accounting firm BDO.  Here are some of the findings from their report and our analysis.  

For the first time in recent memory, restaurant same-store sales were flat in 2017 with no increase over the prior year.  According to the BDO article, "The year was marked by continued change in consumer preferences, but positive economic indicators and improved consumer confidence failed to convert to more comparable sales for restaurateurs.?

In a world of increasing costs, creeping rents, rising labor rates and other economic pressures on the business, this report on restaurant sales can seem a bit discouraging.  What happened in 2017? 

The big hit to the industry was in the fast casual category.  As it's a large percentage of the overall base, where fast casual goes, so goes the industry.  Their negative trend contributed heavily to the overall flat performance.  As reported by BDO, the fast casual segment was down 1.6 percent for the year.  In the opinion of these restaurant brokers, this is partly a reaction to the "me too" trend that affects the business each time winning concepts emerge.  For the past five years, the growth in the number of fast casual concepts, all fighting for a piece of the pie has led to many options for customers and an overall shrinking share.  You did not have to be a restaurant broker to see this one coming. When the best performer in the industry was  Chipotle who was comping negative 20 percent sales against the prior year, it's a signal that there are too many players all vying for the same customer.  We actually expect this trend to continue. 

Why was fast casual hit the hardest?  The economic news is good and consumers have more money in their pocket.  However, the inverse of what occurs when the economy is bad is now taking place.  Customers trade up to the next level of dining.  The other reason for the drop in 2017 is the slowness of fast casual to adopt to delivery trends.  Operators did not want to give up dollars to Grub Hub, Uber Eats, Door Dash and the other giants of delivery.  By holding back, they cost themselves sales.  They are now seeing that the topline sales increase may be worth the profit swap as those in the delivery funnels are getting the dollars from time challenged customer.  We anticipate more fast casual concepts will be tying their menus to this delivery wagon and it will rebound some sales for them. 

One sector did outperform the others.  Pizza  topped the list with a 2.9 percent increase in the year.  That was below their 2016 trend of plus 4.6 percent however.  We expect pizza to continue to perform but the options for delivery may continue to slow their performance against the overall market. 

Other sectors reported as follows in the BDO results: 

  • Quick serve posted a modest 0.8 percent increase through Q4 2017. The category was led by Carrols Restaurant Group (+5.2 percent), Taco Bell (+4.0 percent), and McDonald’s (+3.6 percent).
  •  Upscale casual and casual reported flat results for the year at -0.1 percent and 0.0 percent, respectively. Texas Roadhouse was the top performer in the casual category, reporting a 4.5 percent increase for the year, while Applebee’s (-5.3 percent) continued to struggle.

There is encouraging news for the future as some investments in 2017 will pay off this year. Restaurant owners spent money on technology, delivery partnerships, new concepts, menu upgrades, and experiences.  There's no instance success button for restaurant sales.  We anticipate that with continued strong consumer confidence, actual results in the market from the tax cuts, and greater emphasis on joining the delivery bandwagon, fast casual and the total industry will post better results in 2018.   

 

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Topics: buying a restaurant

As the Restaurant Brokers Predicted, 2018 Business Sales Climb to New Heights

Posted by Robin Gagnon on Apr 16, 2018 10:03:51 AM

The Restaurant Brokers have been bullish on restaurant sales since very early in 2017 and our predictions have been spot on with reports from the marketplace.  BizBuySell is confirming our findings, stating that the first quarter of 2018 brought "record-breaking sales prices and transactions"  for  business sales.

Orange Accent Photography Quote2018 Versus 2017 Results

Asking prices, count of restaurants on the market and selling prices all rose in the first quarter of 2018 versus 2017 acording to the latest tracking data released by BizBuySell.  In their report, "small businesses sold for the highest sale prices since they started tracking data in 2007."  That's a decade ago!  Selling prices were up 3.4 percent increase from last year at this same time.  Asking prices are up as well.  Their report says that the median asking price of sold businesses also hit a record high.  The number was $262,000, a 4.8 percent increase over 2017.

There were a total of 2,678 businesses sold in the first quarter of 2018. This represents a 13.1 percent increase from this time last year and the most businesses reported as sold in a quarter since BizBuySell began collecting this data. What about restaurant sales?  Restaurants represented 21% of all businesses sold.  From our internal data, as the largest restaurant brokerage firm nationwide, we can confirm that transactions, asking prices and selling prices are all up from last year.  Restaurant transactions were up 7.65 nationwide in the first quarter. 

Drivers of these Results

What's driving the change?  It's the Trump effect and specifically, the tax bill.  Small business owners are listing businesses they previously held back on because they know the tax consequences are less when it sells in 2018.  Simultaneously, small business confidence is at an all time high.  The tax bill has made a number of buyers and seller realize that their efforts will put more money in their pocket so small business ownership is looking good to them.  

The strong stock market has also contributed to the boom in restaurant sales.  Many buyers rely on 401K savings and fund acquisitions through rollover products.  Now that their savings have seen a 20% to 25% bump in the last year, they are feeling flush with cash and ready to invest in themselves. 

Will it Continue?  Only if the Tax Bill Remains Unchanged

What do the trends look like?  Here's the quarter by quarter graph released by BizBuySell showing the sale price versus asking price since 2014.  You'll see that the first quarter of 2018 has the highest point on the graph.  The restaurant brokers fully expect this trend to last for the year with one caveat.  Should the Democrats take back control of the House or Senate, putting them in a position to reverse the tax package, as they have pledged, expect these numbers to tumble significantly.  

2018 Q1 Small Business Sale Price vs Asking Price

For now, the tax package has not only spurred tremendous growth in sales, it is also paying for itself, a little discussed fact released by the Congressional Business Office or CBO last week.  Last June, the CBO said GDP growth for 2018 would be just 2%. Now it figures growth will be 3.3% — a significant upward revision. It also boosted its forecast for 2019 from a meager 1.5% to a respectable 2.4%. The CBO now expects GDP to be $6.1 trillion bigger by 2027 than it did before the tax cuts. The CBO report also makes clear that this faster-growing economy will offset most of the costs of the Trump tax cuts.   BizBuySell surveyed business owners and and nearly half of them (more than 48 percent) believe the tax changes benefit small businesses.  Less than a quarter (24 percent) found it harmful. 

Business Confidence Rules

The restaurant brokers aren't the only ones discussing business confidence.  The NFIB or National Federation of Independent Business group surveyed its members in February.  In their  Small Business Economic Trends Survey, they reveal that "small business owners are showing unprecedented confidence in the economy."  These results are spilling over to unemployment numbers which has fallen to 4.1 percent, the lowest since the dotcom boom back in 2000.  That is also affecting small business owners and of those surveyed by BizBuySell, 60 percent plan to hire more staff and 57 percent plan to raise compensation.  

 All of this economic growth is pushing those interested in small business ownership to seek opportunities like our restaurants for sale, especially since the businesses themselves are performing better. 

Cash Flow Trends

Restaurants for sale like the ones we represent are priced based on cash flow.  The businesses sold in the first quarter of the year reproted higher earnings.  That is the trigger for rising valuation and ultimately, higher selling prices.  The median cash flow of businesses sold in Q1 increased to $120,000, a 2.3 percent increase over the same time last year.  This is still a minor raise that would not dramatically affect pricing but we expect to see this trend continue up as well.  Businesses selling in 2018 are reflective of 2017 earnings.  As trends strengthen this year, this will be factored into the valuation of transactions later in the year.  

Are more sellers putting their businesses on the market?  Yes.  The report found an increase of 6.9 percent in businesses listed.  The restaurant brokers continue to believe the time has never been bettter for selling.  Between small business confidence, the number of buyers in the market and continued favorable lending trends, 2018 is the year to sell your restaurant.

Blog Byline Robin

 

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Topics: buying a restaurant, selling a restaurant