Advice for Buying a Restaurant and Selling a Restaurant

5 Reasons Franchise Resales Should be Outsourced to a Specialist

Posted by Robin Gagnon on Mar 7, 2019 10:07:38 AM

Franchise restaurants, as well as all franchisors, experience a natural phenomenon known as turnover.  As part of the natural life cycle of the brand, some units will become available for sale.  The typical reasons for selling are common to virtually every brand.  For some, it’s burnout or a different expectation for the actual life of the franchisees versus what he or she expected.  For others, it’s a partnership issue which could include a divorce or marital split or simply two partners that no longer have the same goals.  For others, it may be the evolution toward retirement and life after work. In any case, a franchise resale occurs when the current owner of a unit, for one reason or another, opts to sell the store before his original franchise term is over.5 Reasons to not handle Franchise Resales

Does that mean something is “broken” in the brand?  No. In fact, it is healthy and appropriate to see a rate of around 5% to 7% in franchise restaurant resales for a mature concept. There are even higher rates quoted in the industry.  The International Franchise Association suggests on their site, franchise.org that the number could be as high as ten percent.  No matter the rate, the important thing for franchise brands to know, when they are facing resales, is that this task is best left to a specialist.  Here are the top five reasons why We Sell Restaurants would tell you to seek outside help for franchise restaurant resales.

When the franchise restaurant resales surface, it’s important to choose a path that results in a good outcome for both the franchisor and the franchisee. Here’s why we believe there are five reasons you never, ever want to handle your franchise restaurant resales.

Reason 1:  Your Development Team has a Totally Different Focus

Those selling new franchises have a totally different skillset and focus than those buying new development opportunities. The financing requirements are different. The cost structure to buy and staff is different than for building from scratch. Most brands that go down this path segregate their team between new sales and franchise resales for a reason.  Resales are very time consuming, with many moving parts.  It’s outside the normal business practice and process, thus costing more effort and training with your team.  

Reason 2:  The Customer is Different for Resales versus new Sales

The customer buying a franchise restaurant is very different from those willing to build from the ground up.  The Franchise Resale customer has a much lower risk tolerance and a much higher need for security and ability to conduct due diligence on the numbers. He or she will need much more hand holding and materials from the seller.  Asking your development team to simultaneously handle new franchise sales and franchise resales is putting them at a disadvantage.

Reason 3:  Ask Your Lawyer.

Your Legal Team will tell you to never handle Franchise Restaurant Resales.  In the process of re-selling units, there will be a need for a valuation.  Do your team members have the expertise to provide that valuation?  The difference in even a few thousand dollars could easily benefit one person over the other.  Where does your loyalty lie?  Is it with the established franchisor who has been a loyal customer for many years or the new guy that you want to be sure doesn’t overpay or become over-extended?    

Item 19 or Financial Disclosures made in the FDD are not applicable to franchise resales so someone without the expertise and benefit of a strong financial background in your development team could expose your brand to major liability in the process of disclosing numbers.  Who is sourcing those numbers and what’s your liability for sharing them?  If they turn out to be flawed or there is a legal issue, will the buyer go after the individual unit owner or you, as a franchise brand?

Are you charging a fee for your services?  Before Franchise Resales are handled internally, as your legal counsel for an opinion.  We believe he will tell you to steer clear of these transactions and bring in an independent third party for franchise resales.  

Reason 4:  Franchise Leads are Expensive

It is no surprise that there is great competition for those seeking to buy a restaurant franchise or any type of brand.  By outsourcing this important role, your lead Acquisition can focus on new stores without the expense going to Franchise resales

The requirement to generate leads is a costly proposition.  Those leads and the advertising is very different for the two different customers, one seeking an established business, versus one seeking a proven opportunity.  Let an outside resource commit their dollars to resales while you focus the dollars on one lead funnel with one set of costs.

Reason 5:  You Aren’t licensed

Another reason for a brand to avoid franchise resales is the requirement for licensing.  Reach an agreement with a firm like We Sell Restaurants with the proper licensing in all the states where it is required.  The last thing you want to do is open yourself up both regulatory issues with the sixteen or so states that require a license.  In some states it is a misdemeanor to practice business brokerage without a license.  In others, like Florida for example, it’s a felony.

That’s not the only reason.  If you have an unhappy buyer or seller, you just opened the door for a lawsuit if they don’t like the outcome of the deal and you’re practicing without a license. 

If you are running a successful franchise program, our advice is to stick with what you do best.  Avoid the issues with franchise resales by contacting an independent third-party specialist like ours.  We build programs to eliminate the risks for the franchise and integrate to their practices for resales. 

Consider these five reasons to avoid internal resales and understand why they should never be part of your focus.

Looking for a franchise resales specialist?  Contact We Sell Restaurants or visit www.wesellrestaurants.com for more information.

Topics: Restaurants for Sale, Selling a Restaurant

The We Sell Restaurants Checklist for Selling Your Restaurant

Posted by Robin Gagnon on Jan 21, 2019 2:47:18 PM

Selling your Restaurant may mean putting some materials together first.  Here’s a checklist of what most Restaurant Brokers will need to make sure you put your best foot forward!  There are limited buyers for the best restaurants for sale so be sure they get the best impression of your business.

It’s all in the name.  Selling your restaurant won’t happen without both the legal name of the selling entity and the business name (including the store number if it’s a franchise location).  Make sure your Restaurant Broker also knows what type of structure you operate your business under, whether it’s an LLC, C-corporation or Sole Proprietorship.  Expect an experienced broker to check the status of your legal entity with the Secretary of State before listing.  A corporation that’s defunct will keep a transaction from moving forward.

If you are selling your restaurant franchise, you have some extra items to pull together including:Checklist-1

  • Remaining number of years on the franchise agreement
  • Royalty percentage
  • Marketing Fee percentage
  • Transfer fee amount
  • Franchise training time period and understanding of whether this occurs before or after closing.
  • Date of any required refresh or remodel of the store and estimated cost.
  • Copy of the franchise agreement.

Do you have to tell your brand you are selling?  Most franchise agreements state that you provide a “right of first refusal” and notification to the brand prior to listing.  In reality, most owners skip this step until and unless it’s placed in contract. You should be clear on the process for transfer and understand who in the corporate office will assist in approving the new buyer.

Make sure the restaurant broker knows how to reach you including your cellphone, email address and any other information to provide up to the minute results on listing activity.

For the store itself, be prepared to provide information on employees (the number of full time and part time), a sample schedule and rates of pay.  For the business, buyers and restaurant brokers want to know the operating hours, how long it’s been established and how long you, as the seller have owned it.  They will also need to know the number of seats both inside the business as well as patio seating. 

Infrastructure is key to selling your restaurant and a key component of what you are transferring.  Make sure you understand the size of your hood and grease trap along with the age and condition of any heavy equipment like the HVAC system, coolers or freezers.

 Selling a restaurant may seem intrusive in some regards.  Buyers definitely want to know your reason for the sale.  Be prepared with a response on why you are selling your restaurant whether it’s burnout, retirement, relocation or simply a change in lifestyle.   

When it comes to the lease, buyers want to see a physical copy.  Either scan your original or ask your landlord for an electronic copy.  They will want to understand the escalations as well as any option years.  When quoting the rent, make sure you include Rent plus CAMS, taxes and insurance.  Your restaurant broker will also need contact information for your landlord as well.

It is critical that you provide up to date financial information when selling your restaurant.  Buyers are looking at the cash flow to make a purchase decision.  For lending, that means two years of tax returns plus the current year profit and loss statement.

Decide up front, when selling your restaurant, exactly what will transfer.  Will your famous cookie recipe be included or not?  What about the picture of your family over the fireplace?  If something is not included, pull it from the restaurant so you don’t have to explain that choice to buyers.

Lastly, do some local research and figure out key economic factors that make this a winning location or opportunity for someone one. 

Selling your restaurant is easy if you follow this simple checklist and provide your restaurant broker all the information he or she needs.  You can download our restaurant selling checklist at this link or contact us to sell your restaurant at this one.

 

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Topics: Selling a Restaurant

Restaurant Brokerage Firm We Sell Restaurants Expands to New Markets

Posted by Robin Gagnon on Jan 17, 2019 5:49:53 PM

Franchise Development Agreements signed to Expand Presence in Colorado & Wyoming

We Sell Restaurants, the nation’s leading restaurant brokerage franchise brand, announced today the expansion of its operations with new franchisees in Colorado and Wyoming.  This growth in the West is announced just a month after signing two other franchise development agreements for Charlotte North Carolina and Naples Florida.

A rise in franchise development is driven by the brand’s ongoing growth strategy and overall success in the industry.  This achievement, coupled with their proprietary software platform for business brokerage, the Broker’s Operations and Sales System or BOSS, has drawn experienced restaurant operators as well as those outside the industry, to join the growing company.

The expansion in Colorado and entry to Wyoming will be spearheaded by new franchisees Jeff and Tawnie Marcus.  They have signed an agreement to launch their location in Northern Colorado with Boulder as a base and extend their operations into Wyoming. The practice will launch in early February 2019.

The Marcus team has an unmatched passion for the restaurant industry and have owned and operated nearly a dozen restaurants since 1991. Their concepts ranged from breakfast and lunch and family diners to full service restaurants with complete bars, nightclubs and more. As owners of a family diner, they were awarded Marketers of the Year in 2007 for the National Independent Restaurant Association and were named "Best Casual" Restaurant every year from 2006 thru 2011.

jt smaller“We chose We Sell Restaurants since it complements our experience and knowledge.  We’ve owned, and operated restaurants and also worked alongside restaurants in the online ordering and delivery aspect. We can’t think of a better way to stay engaged in the industry than as a Restaurant Broker for a premiere firm.  We Sell Restaurants has solid systems, training and flexibility. We are also highly confident in the well-rounded background and cross-industry experience of the founders. We see Northern Colorado as a thriving and dynamic restaurant industry currently underserved from a niche, exclusively restaurant, business broker perspective.”

With more restaurants for sale across 42 states than any other firm in the country, We Sell Restaurants is the restaurant brokerage leader in America.  The company is currently seeking single and multi-unit operators to join in the brand’s rapid expansion. For more information about franchise opportunities, visit wsrfranchise.com or call 1 888-814-8226.

About We Sell Restaurants

Launched in Atlanta, Georgia, We Sell Restaurants has spread nationwide and sells restaurants in over 40 states.  We Sell Restaurants is the nation’s leading business brokerage firm focused solely on the restaurant industry.  Founded in 2001, We Sell Restaurants has been providing professional specialized services for the industry with a strong focus on franchise resales for almost 20 years.  We Sell Restaurants offers the only Certified Restaurant Broker training in the nation, resulting in experienced, knowledgeable brokers with unmatched closing ratios. For more information, please visit www.wesellrestaurants.com

Topics: Selling a Restaurant

5 Reasons January is the best month to Sell a Restaurant

Posted by Robin Gagnon on Dec 20, 2018 10:52:40 AM

Exactly why is January the best month to sell a restaurant?  For the nearly twenty years that We Sell Restaurants has been marketing businesses, the first of the year signals an uptick in buyer interest.  That means December is the best time to list your restaurant for sale.  Here’s why, in this Restaurant Broker’s opinion.

Reason 1 – It’s the Economy….

The economy, despite a recently announced rise in interest rates is still pumping out the strongest GDP (Gross Domestic Product) in years.  The real GDP growth in second quarter was 4.2 percent, something unseen in a5 Reasons January is the best month to Sell a Restaurant (1) decade.  With this economic news, combined with a strong labor market and record unemployment, those working a job feel comfortable taking a risk.  If they step outside their current corporate comfort zone and paycheck to buy a restaurant, the market is always good enough to return.  That gives them more security to take the chance on a new venture. That’s reason one that January will be a great month to sell a restaurant.  Buyers will be home over Christmas vacation studying opportunities that look more interesting than returning to work.  

Reason 2 – Restaurants are Worth more

Year end numbers are in and 2018 was much better for most restaurant sellers than 2017.  For that reason, the value of the restaurant you want to sell has increased over the prior year.  This is based on national results published by Black Box Intelligence data.  “Same-store sales were up 1 percent in November, which became the sixth consecutive month of positive sales growth for the industry. Excluding a very small dip in same-store sales during May, every month since March has posted positive same-store sales growth. This represents a period of expansion not experienced by the industry in over three years.”  When sales go up, earnings go up, particularly after a tough 2017.  If you want to know what your restaurant is worth in today’s market, now’s the time to find out.

Reason 3 – 401K plans are still worth more

Despite recent turmoil and sell-offs with issues around Fed Reserve hikes and more, the market is still good.  Even after the current sell-off, for instance, the S&P 500 through 12/10 close was up by nearly 15 percent since President Trump’s inauguration and more than 21 percent since Election Day 2016. This gives those in the market to buy a restaurant confidence that their nest egg is secure.  They can leave corporate America, leverage 20% down on a purchase and have money to return to if everything fails.  That’s the third reason January will still represent a high point in placing restaurants in contract.

Reason 4 – Lenders are Ready to Go

Lending is at a level unmatched in this Restaurant Broker’s history.  Multiple banks are making more than one offer on the same deal.  With rates inching up, based on the latest Federal Reserve hike, money is still cheap but more importantly, it is readily available. Someone in the market to sell a restaurant, no longer must worry about holding a note on the deal.  He or she can expect a payout, in most instances, at the closing table if the books and records are strong and sometimes, even when they aren’t. If you want to sell a restaurant today, be ready for the market to continue to be hot in January. Buyers only must bring between ten and twenty percent to the table to get a loan in today’s very favorable loan market.  The recent interest rate hike is meaningless overall in the hit to a payment but will make lenders even more anxious to close more deals and earn more interest on them.

Reason 5 – Because we said so....

We have been selling more restaurants than anyone else nationwide for nearly twenty years.  We have watched the cadence of the market through thick and thin, boom and bust. In all instances, we see buyers flock to the latest listings in January.  That creates a spike in our web traffic, more inquiries online and more deals placed in contract. 

Overall, if you’re in the market to sell a restaurant, now is the time to list the business, before January hits and buyers start looking at all the restaurants for sale.  Contact one of the Restaurant Brokers to learn more about the process or visit our listings online at this link.

Blog Byline Robin

Topics: Selling a Restaurant

We Sell Restaurants Signs Franchise Development Agreements with Experienced Operators to Drive Growth in New Markets

Posted by Robin Gagnon on Dec 4, 2018 7:34:18 AM

Leading Restaurant Brokerage Brand to Open Locations in Charlotte and Expand Presence in Florida

We Sell Restaurants, the nation’s leading restaurant brokerage franchise brand,  announced today the signing of two franchise development agreements that will expand its footprint in key target markets throughout the Southeast.  This surge in franchise development reflects the brand’s growth strategy and is fueled by the ongoing success We Sell Restaurants has experienced over the past several years. This success, coupled with the continuous improvements on their proprietary platform, the Broker’s Operations and Sales System or BOSS, has attracted experienced multi-unit and single unit restaurant operators as well as those outside the industry, to join the growing brand.

As part of this development, We Sell Restaurants is entering the Charlotte, North Carolina market spearheaded by new franchisee Justin Scotto and his company, Carolina Restaurant Brokerage, LLC.  Scotto has signed an agreement to launch three locations throughout the region, specifically targeting Charlotte North Carolina, Rock Hill South Carolina and extending into the Carolinas over the coming years.  His operations are slated to begin in January of 2019.  Justin has extensive experience in the restaurant industry. He previously acted as a multi-unit developer of the FirehoJustin Scotto Photo 1use Subs franchise brand where he developed and operated as many as twelve units. As a Firehouse Subs multi-unit owner, Scotto served for seven years on the Firehouse Subs Board of Directors where he represented the views of franchisees nationwide. 

“As a multi-unit developer of a fast casual brand for the past 16 years I’ve gained a wealth of knowledge in the restaurant industry. This experience will help me relate to future buyers and sellers. I’m looking forward to transferring this knowledge to the We Sell Restaurants brand. I reviewed other similar brands, but We Sell Restaurants proved to be the best fit for me because of their commitment and success towards getting the job done for buyers and sellers in the restaurant brokerage market. “

We Sell Restaurants also signed a franchise development agreement with David Whitcomb, President of DDT Holdings, Inc. who will brinDave Whitcomb photog a new location to Naples, Florida in January of 2019.  Whitcomb has more than a decade of experience in the full service and quick service segments.  He has owned and operated his own restaurant, served as a Culinary Director for multiple locations, and has degrees in Food Service Management and Culinary Arts.    

“I chose We Sell Restaurants since it complements my experience and knowledge.  I’ve owned, and operated restaurants and I can’t think of a better way to stay engaged in the industry than as a Restaurant Broker for a premiere firm.  We Sell Restaurants has solid systems, training and flexibility. I am also highly confident in the well-rounded background and cross-industry experience of the founders. I see Naples as a thriving and dynamic restaurant industry currently underserved from a niche, exclusively restaurant, business broker perspective.”

Coupled with its ongoing management system innovation, We Sell Restaurants credits its strong alignment with the franchise industry and its resale focus with the brand’s ongoing strong performance. Franchisees of the We Sell Restaurants system strongly outperform their peers in the industry based on annual survey results published by Business Brokerage Press and BizBuySell.  The financial performance of their franchisees in their Item 19 disclosure at this link demonstrate strong six figure earnings in the first full year of operations.  For nearly 18 years, We Sell Restaurants has been the most innovative, technologically advanced and successful restaurant brokerage brand in the nation where they adhere to their mission to “Sell More Restaurants than Anyone Else. Period.”

With more restaurants for sale across 39 states than any other firm in the country, We Sell Restaurants is the restaurant brokerage leader in America.  The company is currently seeking single and multi-unit operators to join in the brand’s rapid expansion. For more information about franchise opportunities, visit wsrfranchise.com or call 1 888-814-8226.

About We Sell Restaurants

Launched in Atlanta, Georgia, We Sell Restaurants has spread nationwide and sells restaurants in nearly 40 states.  We Sell Restaurants is the nation’s leading business brokerage firm focused solely on the restaurant industry.  Founded in 2001, We Sell Restaurants has been providing professional specialized services for the industry with a strong focus on franchise resales for almost 20 years.  We Sell Restaurants offers the only Certified Restaurant Broker training in the nation, resulting in experienced, knowledgeable brokers with unmatched closing ratios. For more information, please visit www.wesellrestaurants.com

Contact:
Robin Gagnon
We Sell Restaurants
404-800-6700
robin@wesellrestaurants.com

 

 

Topics: Selling a Restaurant

Franchise Resales - We Sell Restaurants Covers the Steps from Start to Finish

Posted by Robin Gagnon on Nov 30, 2018 4:05:06 PM

Design Process

Topics: Selling a Restaurant

How likely are you recommend We Sell Restaurants to a friend ?

Posted by Robin Gagnon on Oct 17, 2018 5:16:17 PM

If you're in the market for buying or selling a restaurant, a simple metric may tell you what you need to know about the services of our company, We Sell Restaurants.  Established for more than 17 years, we focus on selling more restaurants than anyone else nationwide.  How do we accomplish that goal?  We strive to create a customer service experience that turns clients into raving fans.   

For two years, we have tracked our Net Promoter Score.  A net promoter score is a measure of the response to the simple question, “how likely are you to recommend We sell Restaurants to a friend or colleague?” The responses are used to calculate our Net Promoter Score or NPS. 

According to Harvard Business School, the NPS is a customer loyalty metric that measures customers' willingness to not only return for another purchase or service but also make a recommendation to their friends, family or colleagues. 

The Actual NPS Calculation

The calculation is simple and standard whether it's used in the business brokerage industry, retail or technical support.  Respondents simply answer the question on a scale of 0 - 10.  The same question is asked each time with simply a substitution of the brand name.  For our brand, we ask everyone who participates in a closing as either a buyer or seller, "How likely is it that you would recommend We Sell Restaurants to a friend or colleague?"
 
The responses are grouped based on the methodology as shown below.

Answer 9 - 10 and you're what's known as a Promoter.  That makes you a loyal enthusiast who will keep buying and refer others, fueling growth for our brand.

Answer 7 - 8 and the methodology categorizes you as a Passive. These are satisfied but unenthusiastic customers who are vulnerable to competitive offerings.

If you answer anywhere lower than this, in the range of 0 - 6, you're known as a Detractor.  Detractors are unhappy customers who can damage any brand and impede growth through negative word-of-mouth.

The math is simple.

Subtract the percentage of Detractors from the percentage of Promoters to yield the Net Promoter Score, which can range from a low of -100 (if every customer is a Detractor) to a high of 100 (if every customer is a Promoter).

 

How does We Sell Restaurants Stack Up? We're at 56.

NPS for Blog

That puts our score in the top 50-75% of all companies using the metric.  Scores higher than 0 are typically considered to be good and scores above 50 are considered to be excellent.

We also ask our customers to write to tell us why they gave the scores.  Here are some of the latest remarks:

"Scott Ruby helped us with the sale of our Little Caesars -- could not have asked for a better broker -- above and beyond expectations -- rare to find and very appreciated -- thank you!!"

"I had interviewed several brokers. When I spoke to David Duce and instantly felt he was an advocate for me not just a mediator of a transaction. He treated me the way I would treat a seller."

"Robin and her staff were very professional to work with."

"The agent was AWESOME!!!! Super knowledgeable, aggressive, helpful, and friendly. I wish I had other things to use him for."

Topics: Buying a Restaurant, Selling a Restaurant

5 Surefire Ways to Keep from Selling Your Restaurant

Posted by Robin Gagnon on Oct 9, 2018 1:28:14 PM

Ignore the Broker’s Advice for Listing Price

The first piece of advice to ignore if you want to keep from selling your restaurant is to ignore the broker’s advice for the listing price.  A Certified Restaurant Broker has the experience, the knowledge, comparative analysis and sales to support the listing price he is providing to you. 

This important reliance on comparable sales and lending approvals tells him what the business will sell or lend for in today’s market.  Join this with years of experience and he or she is most often, setting the correct pricing.

5 Surefire Ways to Keep from Selling Your Restaurant

As the seller, you’re relying on what you “need” or “want” for the business. Buyers are not interested in what you need from the sale or what you want for the business.  They are interested in obtaining a business in line with current market conditions for similar businesses with comparable earnings.

When you tell him or her that even though it should be listed at $225,000, you want to list at $270,000, you’re setting up a scenario that will keep from selling your restaurant.  This is the first rule to put in place if you want to delay a sale and set yourself up for disappointment.

Forget about Operations Once Your Business is Listed

Taking your eye off the ball is never a good idea, especially when selling your restaurant.  Just because it’s listed with a Restaurant Broker doesn’t mean the deal is done.  Typically, you have months of waiting before the closing takes place.  It’s not the time to slack off, in fact, it’s time to up your game.  You will have buyers visiting as secret shoppers and determining if they want to move forward. 

We coach buyers to understand that they are always buying a work in progress and any improvements will lead to a better bottom line for them.  However, if last years’ service record was impeccable and you’re shorting people on night shift to save a few pennies, it will show.  That leads to buyer questions.  Buyer questions lead to negotiated deal terms and ultimately, impacts the value of your business.  Keep the operations at the same level as prior to listing your restaurant for sale to get the best offers.

Forget About Driving Sales; They Don’t Matter that Much, do They?

Another surefire way to torpedo a sale and keep from selling your restaurant is to start posting negative sales comps.  Positive sales are a requirement, not a suggestion.  Above all, stop the bleeding somehow, if you start heading into negative sales territory. 

As restaurant brokers, we work with lenders who want explanations or deny loans because of sales trending.  Strong restaurant brokers can help a seller craft the right message about why the trend is dropping and help save a deal.

A better option is to never put yourself in this box unless you’re not that interested in selling your restaurant. Figure out a way, whether through promotions, advertising, delivery, catering or somehow, to get your sales posted in positive territory until the restaurant is sold.

Stop Paying your Taxes

Here’s another favorite if you want to be certain to stop all the momentum for selling your restaurant.  Begin ignoring the tax man and the payments for payroll or sales tax.  If you think these items are not going to surface before the closing, you are dead wrong.  All attorneys preparing closing documents should be doing a UCC (Uniform Commercial Code) lien searches.  That will usually uncover any unpaid debts and liens.  Since taxing authorities are usually the first to file, these liens will show up. 

Any liens will have to be paid out of the closing or settled in some manner before you can sell your restaurant.  The fact that the liens exist also raises serious doubts in the mind of any buyer.  Can you be trusted if you don’t pay your taxes?  What other bills might surface?  Even if a buyer wouldn’t be liable for any unpaid bills, this tactic introduces doubt.  This breeds distrust which leads to deals falling apart.

Pay your bills and pay your taxes if you are selling your restaurant.  Avoid making payments and you’ve set up a surefire way to drum up to lose a deal on top of wasted penalties and interest.  

Be Less Than Honest, About Anything

There’s really nothing you can tell a restaurant broker that he hasn’t heard before.  What they can’t help with is what they do not know.  If a pipe breaks and you close the restaurant for two weeks while it’s in contract, that’s a very material matter that should be disclosed.  If your wife caught you with the night manager in a compromising position, it’s embarrassing and should be no one’s business but your own.  However, if a buyer is likely to hear about it, the broker should know.  Any situation can be managed if the broker is in the loop.  Be less than honest or hide something and it will certainly surface.  That’s another surefire way to keep from selling your restaurant.

There are, unfortunately, many ways to sabotage the sale of your restaurant.  Avoid these for a successful transfer.  Need help selling your restaurant?  Reach out to us at the link below.

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Topics: Selling a Restaurant

Casting Call -- Flip Your Restaurants - Contact We Sell Restaurants Today!

Posted by Robin Gagnon on Oct 3, 2018 1:49:59 PM

A major cable TV network has reached out to We Sell Restaurants seeking restaurants ready for an overhaul.  Are you buying a restaurant or selling a restaurant that's ready for prime time?  This could be the time to get noticed on national TV and have someone else pick up the bill. 

It appears this is a “makeover” or “before and after” type show that will take an existing concept and make a pretty significant change.  We're thinking this is Bar Rescue for restaurants.  Their flyer asks restaurant owners facing these situations to get in touch.   

  • Is your restaurant barely getting by?
  • Are you talented and have mad skills but struggling to bring it all together? 
  • Do you want to rehab your concept and reinvent your restaurant?.

Autumn Open House Photo Social Media Graphic

What do you think?  They want to film for roughly two weeks this fall, and they will invest between $25,000 and $100,000 depending on the size of your restaurant. On the plus side, this seems like a great opportunity for mom and pop restaurants for sale looking for a new design.  We're not sure what the final program will look like, but they are certainly investing in the concept.

What’s the downside?  We don’t know who the talent for the show is yet.  The mysterious flyer leaves that part out of the deal.  What if you’re a long running seafood restaurant in a small rural area and they want to change you into a big city style steakhouse?

Is it work the risk?  We say, go for it!  What’s the risk to have a conversation, send in some photos and see what develops.

What if you’re buying a new restaurant with the help of We Sell Restaurants?  This could be a win for you as well.  You get the experience and assistance of big players who want to make this look as good as possible to air on national TV.  If you’re launching a new concept, this could be the ideal situation to create buzz for your new restaurant and find yourself with a huge PR win out of the gate.

Interested in knowing more?  We are too!  We hope one of our many restaurant buyers or sellers end up on this show and we’ll be cheering for you every step of the way.  Contact the restaurant brokers and we'll put you through the network producing hit shows like these. 

  • Ayesha's Home Kitchen
  • Cajun Aces
  • Cake Boss.

Buying a restaurant and having someone else pick up the bill for the redesign and re-branding sounds like a great idea to us. What do you think?  

If you want us to connect you reach out to this email address and we'll pass along your interest. 

 

Topics: Selling a Restaurant

5 Worst Things to Leave out of a Contract for Selling a Restaurant

Posted by Robin Gagnon on Sep 28, 2018 4:22:57 PM

If you are selling a restaurant there are some items that absolutely must be included in the language of any contract and agreed to by the parties up front.  These  items can mean the difference in getting to the closing table and seeing a deal crash and burn.

The starting point is the price.  Once that’s agreed to, it should be easier, right?  Unfortunately, not.  The brokers at We Sell Restaurants make sure all the following items are covered to keep deals both in contract and moving to the closing table.  That’s why 90 percent of our contracts ultimately close and fund versus an industry standard of less than one in three.

These are the deal breakers that show up at the last minute to wreck a contract. Don’t let it happen to you.  No matter who drafts the agreement, these are the must include, can’t forget, better remember, make sure you have, items that should be part of any agreement.

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The Equipment List –

For those selling a restaurant, you may have forgotten those times your beleaguered restaurant broker begged you, called you, texted you and hounded you for an accurate equipment list.  What he ended up with may not bear a strong resemblance to what is in the store today.  Why does it matter?  When it comes to an asset purchase agreement, the buyer will hold you to the equipment list attached to the contract. 

The equipment list reflects the assets transferring from the seller to the buyer and it must be accurate, or you will be held to account for it when selling a restaurant.

You don’t have two slicers any longer?  Better not put two on the equipment list or the buyer is within his rights to request the second one on the day of closing.  The Ice Maker is leased, not owned?  Better be prepared to pay off the lease on this piece of equipment.  If you have personal items in the store, they absolutely do not belong on the list of assets if you’re not prepared to part with them on closing day.  Bottom line.  If you’re selling a restaurant, get the equipment list right or it will bite you on closing day.

Assignment Fees, Transfer Fees, Attorney Fees –

Landlords often charge assignment fees to transfer a lease to a new party.  These can range from $500 to a percentage of the purchase price, an astonishingly large number.  Who should pay – the buyer or the seller?  If this is not defined in the purchase agreement, it can derail a deal.  A landlord will often not proceed on an assignment until the fee is paid.  This results in delays. Delays result in deals not happening. Don’t let this happen to you.  Make sure your agreement for selling a restaurant includes exactly who pays.  Be clear in the language that the seller will pay 50% and the buyer will pay 50% or the buyer will pay the assignment fee not to exceed $1500 but above all, put in language that addresses this issue.

The same is true for any other fees associated with the deal. This is where our ‘no surprises” rule comes into play. Neither the buyer or seller should find out anything at closing that weren’t aware of early in the transaction.  That means that attorney fees must be defined within the agreement.   The same thing is true for transfer fees if you’re buying or selling a franchise restaurant.  Who is responsible?  What is the amount?  When must they be paid?

Deposits

Every restaurant has some form of a deposit, ranging from a lease security deposit to a utility deposit to the power company.  Landlords will typically never release these deposits but assign them over as part of the lease to the buyer.  Is it the buyer’s asset?  It should not be unless this is determined up front.  Make sure any agreement for selling a restaurant includes a clear determination of who owns those deposits. 

The most common language says something like this, ‘Any and all amounts currently on deposit for the benefit of the Business for utility services, leases, insurance, etc., are and shall remain the sole property of Seller and are not included as part of this transaction.”  If you are selling a restaurant and the agreement doesn’t say something like this, a buyer may challenge you that these are in fact, assets of the business that should convey to the buyer.  That’s thousands of dollars you can miss out on.  Avoid this by inserting language up front that deals with this.

Inventory -- 

In most cases, restaurant inventory is performed by physical count the night before closing and the amount is paid to the seller on top of the purchase price.  Note that I said, in most cases.  If you fail to include this in the purchase agreement, this will generate a lot of ill will that could lead to a buyer without enough funds to close.

Inventory is not a small amount.  We estimate at We Sell Restaurants, that inventory on hand is approximately one percent of sales.  For a sandwich shop generating $500,000 in sales, that means there can be around $5000 of inventory to be accounted for in the closing. 

An agreement between parties buying and selling a restaurant should specifically address how the inventory will be handled.  If it’s to be included, it should have specific language around this function as in, “Seller agrees to leave $3000 of fresh and usable inventory on hand to be determined by physical count.”

Any understanding related to inventory should spell out:

  • Which Inventory is to be included
  • How it will be counted
  • Status of inventory – i.e. fresh, usable, unopened inventory

Escrow -  

The handling of the escrow is the final item that must be understood by all parties when a purchase agreement is written for selling a restaurant.  Under what conditions will the deposit be refunded? What contingencies that fail will trigger a return of escrow?  Who will hold the deposit?  Is there a separate written escrow agreement? 

Having a clear understanding around the escrow deposit is another item that keeps deals on target to close instead of failing apart when selling a restaurant.

Want more help selling a restaurant?  Contact us at this link for a free, no obligation valuation.

Blog Byline Robin

Topics: Selling a Restaurant