Advice for Buying a Restaurant and Selling a Restaurant

The 5 Things No One Told You to Ask about Selling Your Restaurant

Posted by Robin Gagnon on Aug 21, 2018 12:56:24 PM

Ready to sell your restaurant and looking for the right resource?  There are plenty of people out there selling businesses.  How do you know which one right for selling your restaurant?  Here are questions to use on broker including the 5 things one every told you to ask before.  

If the broker can’t address these to your satisfaction, odds are, he or she is the wrong fit. Starting with the wrong resource adds delays, time and money to the process.  Most sellers want to sell for the most money in the shortest time.  Ask these 5 things and you’ll know who can get the job done. As a seller, you should apply the process of due diligence on your broker long before they ever sell your restaurant.   

Your Guide to Seeds (1)

The simplest most basic question deals with experience.  Ask the broker exactly how many restaurants they have sold.  Seems easy but it constantly surprises me that sellers don’t require this information.  After all, it doesn’t’ matter how many daycare, dry cleaner, liquor store and car wash properties the broker has handled.  You are interested in how many restaurants he or she has sold.  Why?  A specialist has an inventory of buyers already focused on what you’re selling.  Why go fishing in the wrong pond?  Go where the fish are biting and the bait is your business.  That means a broker who sells lots of restaurants has buyers interested in the food service industry.

Figure out how successful they are at selling restaurants.  After all, it doesn’t matter how many restaurants they have listed.  You want to know how successfully they sell. For that, it comes down to one single metric.  Ask the broker for their closing percentage. No one told you before, but this is a statistic that any reputable broker tracks.  It is a clear measure of their success in selling a restaurant. It’s the count of restaurants sold divided by the count of restaurants listed. 

We were shocked to hear at a recent industry function that only one in three businesses listed by one major franchise brand will make it to the closing table.  Why would you list with someone with a batting average this low?  Anyone who wishes to sell your restaurant should be able to tell you, in addition to the days on market, an average time to closing, along with the percentage of transactions that sell. If they can’t, you’re dealing with a rookie.  While that may be okay in baseball and there are certainly stars among the start-ups, it’s a good plan to work with a seasoned professional who closes 80-90 percent of their deals.

No one may tell you to ask this question but it’s critical.  How many other brokers do you cooperate with and what groups do you belong to?  Industry groups often share listings with one broker working the “sell” side and another working the “buy” side.  Your chances of selling dramatically increase when the listing is exposed to more brokers. Remember, you want the greatest exposure.

Selling your restaurant is not a one-man sport.  What’s the team surrounding your broker and what’s his or her policy on co-brokerage? Is he or she is not a member of the professional organizations that share listings and work with buyers and sellers nationwide, you will decrease your potential to sell your restaurant.

it’s good business practice to ask your broker about their level of education, degrees, industry knowledge and any certifications. While it is not required to have advanced education to sell your restaurant, those with strong industry credentials have dedicated time, money and energy to their education. For many, this commitment to education and follow through puts them in the rank of top producers. 

Given a choice between someone with advanced education and someone without, why bet on the uninformed?  For the brokerage industry, a Certified Business Intermediary designation or CBI is the industry gold standard of knowledge and experience that’s been tested.  Less than 500 individuals worldwide hold this designation so a broker that has these credentials is already at the top of their game.

Lastly, ask a broker how they will be investing in your restaurant for sale?  Where will it be marketed?  Will there be upgraded placement?  Who will receive email blasts on the listing and how frequently?   What are your marketing channels for exposing the business to interested parties?  A marketing plan tells you they have a recommendation and road map for attracting buyers.  Without this, they are simply holding the listing until someone comes in the door looking.

There are clear measurements and ways to quantify the quality of a restaurant broker no one bothers to share.  Now you have them.  Take advantage of these questions to score someone who will get you the most money for your restaurant in the shortest time.

 

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Topics: Selling a Restaurant

Selling Restaurants by the Numbers – Great News – It is Basic Math

Posted by Robin Gagnon on Aug 6, 2018 11:33:35 AM

It’s true.  Selling restaurants is tied directly to basic math and not even tough math at that.  It’s the basics of addition, subtraction and multiplication you learned in fifth grade (at least that’s when this restaurant broker learned it – I’m totally not sure not sure about this common core math they’re teaching now).   

Selling restaurants by the numbers means starting with the profit and loss statement.  That’s why restaurant brokers like ours at We Sell Restaurants will request the latest financial data.  At this point you may be asking, what about sales?  Sales are actually immaterial to the valuation but may impact lending if they are trending negatively for multiple years.  Despite anyone trying to tell you otherwise, understand that sales are not a measure of earnings, they are simply a denominator (remember that fifth grade math again?) in evaluating all expenses as a rate to sales.

Subtraction

Once the profit and loss statement is on the table, the simple math begins.  We begin by subtracting certain expense from the P&L which increases the profit.  Why would we do this as restaurant brokers?  Because selling restaurants by the numbers means we need a clean earnings number without interest, taxes, depreciation and amortization.  That’s commonly known as EBITDA in the in the financial community.  We remove these items or subtract them to state a true earnings calculation for a new buyer. 

Here’s why.  After all, he or she will not have your debt structure so removing your interest makes sense when you consider it from this perspective.  He or she will have a different taxable basis for the purchase which means your depreciation and amortization is also immaterial.  After all, depreciation and amortization are non-cash estimates of a write off of your usable equipment and or intellectual property to allow for repurchase.  They decrease income on your P&L but are never really cash out of pocket to either you or the buyer. selling restaurants by the numbers

Addition

After we do our subtraction, we begin our addition when selling restaurants by the numbers.  We add back the earnings of a single person managing the business on a day to day basis.  That may be a restaurant seller or it may be a manager.  The key here, in selling restaurants by the numbers is that we can ONLY add back one full time salary.  That means a number of scenarios have to be considered.

Before adding back this salary.  A few examples are outlined below to show how this works to recast earnings on this basis or use our basic addition or subtraction skills.

Example 1:  Absentee owner making $50,000 in salary and a Manager in place making $35,000. 

This example of selling restaurants by the numbers creates an addition to earnings of $85,000.  Why is that?  We assume the new owner will come in and take over the roles, responsibilities, and thus the pay to operate the store personally.  The absentee amount is added back because that will also go to a new owner.

Example 2:  A husband and wife work in the store and make a combined amount of $75,000. 

In this case, we can only add back ONE salary.  A new owner cannot take over the roles of two people.  He or she will have to hire someone to do the work of the second operator.

Example 3:  An owner todays works full time in the business and takes no salary.

There is no add back for owner salary.  The same scenario would exist for a single owner/operator.  He could choose to deflect bottom line earnings on the books to salary but the amount of money remains the same.

Multiplication

Now our math expands to multiplication.  This is when we take the previously calculated number of the bottom line P&L minus interest, taxes, depreciation and amortization plus the appropriate owner earnings addback and then we multiple this by a market variable for this restaurant. Now we’ve used all our basic math skills of addition, subtraction and multiplication. 

In selling restaurants by the numbers, everyone immediately asks for the “multiple’ as if it were the answer key to today’s pop quiz in math class.  The answer is not straightforward and it is not a “one size fits all” scenario.  If the business on the market is a franchise or has six figure earnings, the multiplier goes up. If it’s an ice cream store being sold in February, the multiple could go down.  A strong restaurant broker will have access to comps, market level multiples and information to arrive at the right number.

That’s it.  Basic math gets you the answers you need for selling restaurants by the numbers.  Want to know what your restaurant is worth?  Reach out to us online at this link or click below.

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Topics: Selling a Restaurant

Fast Track Selling Your Restaurant – Why a Restaurant Broker is a Good Idea

Posted by Robin Gagnon on Jul 30, 2018 9:50:48 AM

Want to fast track selling your restaurant but not sure where to start?  Read on for these tips from We Sell Restaurant to get what every seller wants from the transaction - the most money in the shortest period.  A fast sale means the services of a restaurant broker and for most sellers, at all costs, avoid trying to do it yourself.  Here’s why.Renewing Vows Social Media Graphic

You’re Emotionally Invested.  You built your business from scratch and watched it grow and prosper.  This is more than a business to you.  It has taken care of your family’s needs for often, many years.  When selling, there will doubtless be moments of regret and emotional attachment even if you are selling for all the right reasons.

Buyers may be Insulting or Augmentative.  It’s human nature.  You’re on two sides of a deal.  A buyer may try to establish fault with your restaurant to justify their offer price.  If a restaurant buyer says something like, “I ate here last night, and service was terrible” when you know your wife was running the front of house, this deal is going nowhere fast.   Selling your restaurant through a third party means they filter this information and work on focus on representing the transaction minus the emotions.  This scenario is a lot different than if you try to sell your restaurant on your own.

Your talent is best used running a restaurant.  A professional restaurant broker’s talent lies in selling the restaurant.  You have taken your dream and managed to make it grow and prosper.  You are likely excellent at sales and operations or taking a turn in the kitchen. On the other hand, satisfying the demands of buyers may not be at the top of your skill set.

A restaurant buyer is going to be focused on the accounting details and bookkeeping records to help them with making an offer. The buyer could care less whether they show up during your busiest time such as dinner on Friday night.   As a result, you will find yourself doing more of what you are less good at and less of what you are very good at which is running the restaurant. 

Restaurant Brokers are Deal Makers.  Remember that just because you received an offer doesn’t mean your restaurant is soldReaching an offer means the buyer and seller agree on is the easiest part of a transaction and is only the beginning of the process.  Buyers and sellers that reach consensus on a price are not difficult to put together.  The tough part is holding the transaction together until closing which is where a restaurant broker can be of tremendous help with seeing the deal through to completion. 

The restaurant broker’s work begins once the buyer and seller agree on an offer.  Shortly after, the buyer will begin to put every element of the transaction under a microscope when the reality begins to hit that he is in the deal for the long haul.  At this point there are numerous opportunities for the deal to collapse post contract which is why it is necessary to have a restaurant broker working with you.

 The restaurant broker is working at reassuring the buyer that the unpaid lien is not a disaster and can be resolved at closing.  He or she is also helping the seller locate two-year old tax returns with a stamp on them from the Internal Revenue Service and assisting the seller with the sales tax clearance letter from the state. 

 On the other side, the broker is working with the buyer when he discovers there is a list of items on the inspection results that need to be fixed and with the seller when he discovers the franchise wants a list of improvements before they will transfer.  The restaurant broker is taking the heat from all parties to the deal and keeping it in check to get them to the closing table.

 Brokers have Access to Contract Forms and Legal Resources

 Preparing a contract can have its own set of issues.  What’s included?  What’s not?  Who keeps the security deposit or pays for inventory or transfer fees?  The last thing you want to do is engage an attorney and have countless costs and fees with no guarantee it will close.  We Sell Restaurants and many other brokers, have forms and documents that can expedite this process at no fee to you.  Why would you want to take the risk of handling this on your own? This is clearly a way to fast track a deal for selling your restaurant.

 Restaurant Brokers have Lending Contacts

 Getting the most money for your business means you frequently need a lender engaged.  The process of lending can be lengthy and confusing for the inexperienced while it’s a daily occurrence for a broker. He or she will have immediate contacts, processes for approvals and support for the forms and information requested by the bank and other parties. For our firm, we can fast track any loan application, gaining approval in generally, less than a week.

A Broker Understand the Franchise Approval Process

 The specialist in the transaction is the restaurant broker.  He or she will have contacts at the franchise level for approval of the new franchisee.  They often have the forms and requirements for approval ready to go as soon as the deal is in contract.  A seller can work with their own brand to make this happen but to fast track a deal, a knowledgeable resource can accomplish in hours, items that will take weeks to accomplish if you’re learning it for the first time. Want to get on the fast track for selling your restaurant?  Use the resources at your disposal.

When reading all the ways a Restaurant Broker can fast track selling your restaurant, it’s no wonder restaurant brokers frequently hear “This deal never would have happened without you.”  Ready to fast track selling your restaurant?  We can help.  Find more information at the link below.

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Topics: 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

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

A Restaurant Broker Asks, "Do I Draft a Quarterback or Receiver?"

Posted by Dominique Maddox on Apr 20, 2018 7:48:00 AM

Should I draft a Quarterback or Receiver to sell my business? This restaurant broker has an opinion on the topic.  What's yours?

It's the time of year when football fans are glued to the TV listening to sports commentators talk about NFL prospects waiting to be drafted. This highly speculative event is where players realize their lifetime dreams of being drafted into the "league." Team owners a lot of money each year for their scouting department to evaluate the talent of potential players. They make this investment with one goal in mind. Which player can help their organization WIN? The right draft pick can help a team WIN and increase the value of an organization.

Pink Hobbies Facebook Post

The NFL draft puts a dollar value on each player position and the market value for each position is different. The team with the number #1 pick wants to get the most production and value for their pick. This is very similar to a seller that wants to sell their restaurant. They are choosing from a lineup of players (or brokers). Their challenge is to find the one who can help them WIN and increase the value of the transaction.

Quarterbacks are a highly specialized positions that can change the fortunes of a team. This position requires owners to pay a premium salaries. Kirk Cousins just signed a 3-year, $84 million dollar averaging $28 million a year and it’s ALL guaranteed! The highest paid Receiver only makes $17 million a year. Why would an owner pay a Quarterback 165% more than the top Receiver?

 

The answer is very easy. It’s called Value. That can be defined as “the regard that something is held to deserve; the importance, worth, or usefulness of something.” A Specialized Restaurant Broker is like a Quarterback. They bring more value than a generalized agent that is a "jack of all trade" selling anything from a day care center to a beauty salon.  Making the wrong choice to sell your restaurant would be like drafting a Receiver that would not help you WIN.

Certified Restaurant Brokers quarterback the sales transaction from the beginning to the end. They communicate with the seller, buyer, bank lenders, landlords, CPA’s, Franchise, closing attorney, and sometimes vendors. Restaurant Brokers are valuation specialists and understand the cash flow and add backs of a restaurant situation. They understand the deal making process and know when an audible may have to be called to get the deal closed.

I played football at Morehouse College in Atlanta, Georgia and I did not get drafted to the NFL. On the other hand, I have restaurant sellers draft me every day to quarterback the sales transaction of their restaurants. I’m honored to represent these sellers and give them an opportunity to pursue their new life ambitions.

When it’s time for you to sell your restaurant make sure you draft the right person to represent you. It's not fantasy football and the right pick is critical.  The right draft pick can be the difference between selling your business for the most money in the shortest period of time or waiting while the clock runs out on the field. Get the guy that can score a touchdown each and every time!

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Topics: Selling 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

Selling Your Restaurant? Better Start Your Spring Cleaning

Posted by Eric Gagnon on Apr 9, 2018 12:57:13 PM

 

Dark Blue and Red World Press Freedom Day Social Media Post-1Spring is in the air. We all feel driven to clean out closets, tidy up spaces and do a general touch up. Thinking of Selling your restaurant? Apply the same thought process.

Most of us take a hard look at our homes and we will try to make it look as good as we can for the upcoming months. Why not do the same for your restaurant? If you’re thinking of selling your restaurant, here are some of the major areas to focus on from the restaurant brokers. These are the major areas and ideas for your Spring cleaning.

 

Dining room, Patio, Kitchen

When it comes to selling your restaurant, you need to look up, down, and all around. When is the last time you really cleaned your dining room floor? I don’t mean just mopping it. What about steam cleaning, rebuffing, re-waxing or even replacing a tired surface. You may not look down, but your customers do.

A continuation of the dining room floor are the base boards. When selling your restaurant, no detail is too small. Take a moment and wipe down the baseboards?

For a larger project, consider touching up paint on walls, a fresh coat of paint maybe even a new color? HGTV is filled with stories of a “before” and “after.” Many of these are just fresh paint colors that can have a huge impact.

Don’t forget to look up. That A/C leak from last year that stained a few of your ceiling tiles is a constant reminder of failed equipment. Don’t let a restaurant buyer focus on these negative items if you’re selling your restaurant. Look up, fix the ceiling tiles and, how about those ceiling fans? Please don’t tell me the last time you dusted them was last Spring.

Look at your décor. Change out old faded artwork or posters. You can do better. New pictures, new TV screens, new table covers; all are easy and simple (low cost) ways to bring Spring in the air.

Your kitchen is the engine every buyer wants to see. When is the last time you pulled out your kitchen equipment and steam cleaned the entire space and equipment? Have you gone to your storage area and disposed of any items no longer in use? Consider updating to newer technologies or upgraded equipment for the upcoming busy season. New equipment may cost now but make a huge difference to your bottom line this year if the food cooks faster or the temperature is stable.

Patios are often a huge plus for restaurants but to require upkeep. That area if visible from the road could also be the first look in your establishment for many customers. Make sure you have a picture-perfect patio area. Adding water or fire elements to your patio could also make a very positive impact on your business. Your patio, seen from the road, can be a billboard for you.

Menu Spring Cleaning

When selling a restaurant, the focus is on profitability. When is the last time you took a hard look at your menu? Adding and/or deleting items, pricing adjustment, seasonal specials, promotions, LTO’s. Be very strategic here. An outside consultant or food vendor can help with this. This is a big part of your business. If you can bring up your loss leaders or trade non-selling items on your menu for more profitable and sellable items what are you waiting for? Status quo is very easy and comfortable but if your sales are not going up, you are losing marketing share.

Staff Spring Cleaning

When selling your restaurant, you want the best possible crew. Do you need to provide additional training to the current team? Should you roll out a new incentive package for the team to participate in? You can host team building activity to set the tone and expectations for the busy season ahead. Whichever you decide to do here do not overlook or skip staff spring cleaning.

You spend a tremendous of time in your restaurant and sometimes it is very difficult to step out be candidly honest with yourself about the appearance. When selling your restaurant, that first impression may seal or sink the deal.

A quick Spring cleaning can go a long way. Any changes small or big will be noticed by your team and your customers. That new paint smell or new air freshener in your bathrooms will soon become the smell of new customers and new profits.

Topics: Selling a Restaurant