Advice for Buying a Restaurant and Selling a Restaurant

Why Restaurant Buyers Don’t Pay for “Potential”

Posted by Robin Gagnon on Aug 12, 2019 10:36:34 AM

It seems every day in selling restaurants, an owner describes the “potential” the business has for more volume or more profit.

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For those selling a restaurant, this potential or opportunity for the future is seen as a reason that a buyer should invest and rightly so, as the future prospects makes the listing more attractive to buyers.  It can also encourage a restaurant buyer to identify this as a better long-term opportunity.

When it comes to pricing the business for sale, however, Restaurant Brokers must price according to common lending practices and standard valuation methods.  That means that “Blue Sky” or potential for the future is not something buyers are willing to pay for and lending can be provided for.  A buyer will only pay for the past performance and a bank will only lend on past results.

Here’s why buyers will not pay for the “potential” in your business.

Lending is trickier.  Most lenders avoid any open and operating businesses built on a pro forma. This is the Latin words for “to form.”   It is standard practice to develop a pro forma in a startup situation where there are no existing metrics to rely upon for sales and earnings.  The commonly accepted definition of a pro forma is, “assumed or forecasted information presented in advance of the actual or formal.  The objective of a pro forma business plan is to give a fair idea of the revenue, expenses and earnings in anticipation of the actual occurrence

If a business is not open, it’s easy to formulate underlying data points and put them into a business plan to forecast the pro forma earnings.  The only problem with this method is that pro forma financial statements estimate how the actual statements will look if the underlying assumptions hold true.

For open and operating businesses, the underlying assumptions have already been put to the test.  Now we have actual statements and actual performance.  The underlying assumptions may be revealed as flawed or inaccurate.  If a restaurant owner built a pro forma based on sales of $6000 per week and the actual performance is only $4500 in sales per week, that fact is now known and therefore, must materially adjust the pro forma. 

The second reason that “potential” cannot be factored into the selling price of a restaurant is that all the risk, effort and financial commitment to meet the business potential belongs to the buyer, not the seller.

In our earlier example, there is “potential” is to increase the number of customers each day and improve the volume to the original forecasted point.  That, however, may require any of the following conditions be met:

  • Investment in Advertisement
  • Investment in Marketing 
  • Change of Concept
  • Improvement in Service
  • Change in the ingress/egress to the business
  • New Residential or Commercial Development 
  • Improved Signage
  • And the list continues

For an open and operating business, that means the buyer must invest some level of energy, effort and/or financial resources to improve the current performance of the business.  That investment and effort is on the part of the buyer, not the seller.  Therefore, the “up-side” or “potential” is still unknown, can’t be quantified and thus, can’t be sold on the front end of the listing.

The next time you consider selling your restaurant and offer up “potential” as a reason to buy, just remember, it cannot factor into the listing price. It is a definite selling point and makes a business more attractive but is not part of the valuation model.

Topics: Selling a Restaurant

We Sell Restaurants Recently Sold Terra Thai of Boulder, Colorado

Posted by Robin Gagnon on Aug 6, 2019 10:30:00 AM

We Sell Restaurants closes on another restaurant for sale transaction; the sale of Terra Thai in Boulder, Colorado

We Sell Restaurants is pleased to announce the sale of Terra Thai located at 1211 Broadway in Boulder Colorado. Usman Chughtai of Thornton, Colorado acquired the company from Karuna Wiwattanakantang. The transaction was handled by Franchise Partner and Certified Restaurant Broker, Jeff Marcus of We Sell Restaurants.terra thai

Terra Thai is a Restaurant on the hill of Boulder Colorado and one of the few that is close to the University of Colorado. This iconic concept is highly recommended by Yelp users who say, they have a “great selection of original hard-to-find Thai dishes.” This small jewel was sold from start to finish in just 49 days by We Sell Restaurants far outpacing the national average for days on market before selling a restaurant.

The seller, Karuna, said of his experience with Jeff Marcus, “It went quick and Jeff was very helpful, accommodating both seller and buyer.  It saved us time in negotiation and paperwork. Everything was clear and with his experience in (the) restaurant business, he knew my concerns and helped get the price right for both parties.”

Jeff Marcus is a Certified Restaurant Broker and the Franchise Partner for We Sell Restaurants in the state of Colorado and Wyoming. Jeff is a licensed by the Colorado Real Estate Commission as a Broker. Jeff has nearly 30 years of restaurant experience. Starting at an early age of 13 working in Chinese, Pizza, and high-end tablecloth concepts, Jeff has done it all and trained in every position in the industry.

Eric Gagnon, President of We Sell Restaurants, said of the transaction, “One of our newest Franchise Partners, Jeff Marcus, has shown significant sales results in a short period of time. We are looking forward to seeing his continued success in the future.”

More than 450 restaurants for sale can be found directly online at wesellrestaurants.com. We Sell Restaurants is the country's leading restaurant brokerage focused on those buying, selling or leasing a restaurant.

We Sell Restaurants is the nation’s largest restaurant brokerage firm, specializing in restaurants for sale, restaurants for lease and franchise restaurant resales.  Found online at wesellrestaurants.com, We Sell Restaurants offers services in 45 states nationwide.

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Topics: Selling a Restaurant

Ken Eisenband of We Sell Restaurants Presents Seminar Selling Restaurants

Posted by Robin Gagnon on Jul 25, 2019 1:02:12 PM

Ken Eisenband, We Sell Restaurants Franchise Partner for Broward and Palm Beach county, recently presented a seminar titled, “Selling Restaurants 101” to the Business Brokers of Florida (BBF).

Ken's educational seminar was focused on helping other brokers understand the key metrics and items on the restaurant financial statement as they perform valuations or assist others in selling or buying a restaurant. He focused on key points such as, “what is the broker Selling?” along with a primer on the variables found on restaurant financial statements. He reviewed common ratios for cost of goods sold, labor costs and rent along with other expenses. The most important number, in his words, “Rent – you cannot fix a bad rent deal.”

KenEisenband reminded the group that other items on the profit and loss are controllable.  Food is in his words, “easily fixed by a new owner” and other expenses are “easily re-budgeted.”  Even labor, in Ken’s opinion is “easy to fix over time with new staffing, new pay structure or new scheduling parameters.”  Rent, however is a fixed cost that cannot be changed.

Ken also cautioned brokers on the practice of selling a restaurant that is doing a “cash business” stating that the owners have “lied to the IRS, lied to the Florida Department of Revenue, lied to their accountant, BUT, expect the buyer to trust everything they are told.”  Ken’s enlightening and entertaining presentation was attended by business brokers from across the state who are members of Business Brokers of Florida. 

The Business Brokers of Florida is a nonprofit association for business brokerage companies and their agents in the state.  The BBF association is the largest state business broker association in the country, and the second largest association of business brokers in the world.

The Business Brokers of Florida membership is restricted to those with experience in the industry or who attend specific training and have demonstrated knowledge in the industry.  They must establish this expertise when applying for membership.  Any member of the BBF is also held to a strict code of ethics, ensuring that buyers and sellers receive principled treatment in any transaction. 

Other members of the BBF include those supporting transactions such as attorneys, accountants, financial planners, appraisers and various financial institutions specializing in business loans. The association has more than 1,400 members and over 4,000 listings in their database. The Business Brokers of Florida currently has five districts within the state of Florida.

Ken Eisenband is the multi-unit Franchise Partner for Broward County and Palm Beach County Florida, the southern part of the Sunshine state. Ken leads two offices for We Sell Restaurants with distinction and directs a team of Restaurant Brokers as a multi-unit owner. Ken is a member of the Business Brokers of Florida Association where for numerous years, he received the prestigious Dealmaker Award as one of the top 5 transaction agents in the state of Florida as well as receiving the Million Dollar Club award.

Additionally, Ken is licensed by the Florida Real Estate Commission as a Broker and has also completed training leading to his designation as a Certified Restaurant Broker. Ken graduated with Honors from The School of Hospitality at Michigan State University in 1983 and has thirty years of experience in the restaurant industry.

For a look online at Ken's restaurant for sale listings, visit this link

Topics: Selling a Restaurant

Recently Sold Howard's Famous Corned Beef and Deli

Posted by Robin Gagnon on Jul 10, 2019 12:55:22 PM

We Sell Restaurants closes on another restaurant for sale transaction; the sale of the Howard's Famous Corned Beef and Deli in Boca Raton, Florida

We Sell Restaurants is pleased to announce the sale of Howard's Famous Corned Beef and Deli located at 3571 N. Federal Highway in Boca Raton, Florida. Sal Angrisani of Greenacers, Florida acquired the company from Howard Rich.  The transaction was handled by Ken Eisenband, Franchise Partner with We Sell Restaurants for Palm Beach and Broward Counties.  The location was sold after just 122 days on market. 

Howard's Famous Corned Beef and Deli is an outstanding location that’s been described as one of the most authentic delis in Boca Raton, Florida. The concept features signature corned beef that is cooked in-house as well as smoked salmon. They offer half pound sandwiches with their daily fresh breads. Howard's Famous Corned Beef and Deli also offers catering service and onsite beer and wine sales.

 

The seller, Howard Rich, said of his experience with Ken Eisenband, “I listed my restaurant for sale with Ken Eisenband and We Sell Restaurants. The process was very easy, and he brought in many prospects. Once we were in contract for sale, Ken was very organized and guided me through the entire process. I would definitely recommend Ken and We Sell Restaurants to anyone looking to sell their restaurant.”

Eric Gagnon, President of We Sell Restaurants said of the transaction, “Ken is an excellent Franchise Partner and one of the strongest players in the competitive business for sale marketplace in South Florida.  He is a consistent top producer for the brand and the state with excellent feedback from his clients.”

Ken Eisenband

Ken Eisenband is the multi-unit Franchise Partner for Broward County and Palm Beach County Florida, the southern part of the Sunshine state. Ken leads two offices for We Sell Restaurants with distinction and directs a team of Restaurant Brokers as a multi-unit owner. Ken is a member of the Business Brokers of Florida Association where for two consecutive years (2015 and 2016) he received the prestigious Dealmaker Award as one of the top 5 transaction agents in the state of Florida as well as receiving the Million Dollar Club award.

Ken graduated with Honors from The School of Hospitality at Michigan State University in 1983 and has thirty years of experience in the restaurant industry.  In 1996 Ken joined Ruby Tuesday’s finance team as an analyst working closely with the Real Estate department and Vice President of Operations on site selection and feasibility studies. Ken can be reached by phone at (561)-350-3365 or by email – ken@wesellrestaurants.com. His listings can be found online at wesellrestaurants.com.

We Sell Restaurants is the nation’s largest restaurant brokerage firm, specializing in restaurants for sale, restaurants for lease and franchise restaurant resales.  Found online at https://www.wesellrestaurants.com, We Sell Restaurants operates in 45 states nationwide assisting those buying or selling a restaurant.   

 

 

Topics: Selling a Restaurant

Attention Restaurant Sellers.  Don’t Sign the Listing Until You Mystery Shop the Broker.

Posted by Robin Gagnon on Jul 6, 2019 11:56:16 AM

Two years ago, We Sell Restaurants embarked on a journey to confirm that our customer service standards were being met.  We achieved this through Mystery Shopping our Restaurant Brokers. We now highly encourage any restaurant seller to do the same.  Here’s why.

Quarterly, our restaurant brokers are shopped by “secret” buyers.  They never know which buyer inquiry it is, and they never know how they are chosen. They simply receive one of many inquiries on a restaurant for sale. Our corporate standard for follow up is that each buyer will be “touched” three times within the first three business days.  Why three times?  It shows genuine interest without putting undue pressure on the customer.  If the first message or contact is ignored, it lets the restaurant buyer know you will be professionally persistent without being annoying. 

Dont Sign - Until you SHOP

What’s a touch?  The first, most critical touch is by phone.  There are auto email responses on buyer inquiries, so we penalize the scores of brokers that email the buyer.  If a buyer has inquired through a national website, odds are any broker will have an automated response that says something like, “Thank you for inquiring on my restaurant for sale….”  In addition, the online listing site will also send an automated response..

Imagine that a buyer inquires on three listings.  They will easily get a total of six auto response emails (three from the site and three from the broker), without having spoken to anyone. Buyers are getting inundated with email but are not receiving a personal touch in the form of a phone call and actual discussion with a broker.   

We hired a research firm to develop the scoring mechanism.  An email outreach results in a negative score.  Failure to achieve three touches results in a negative score.  If the outreach occurs over six days instead of three business days, full points cannot be achieved.    

Overall, it’s simple.  Each broker is held to a standard for buyer contact by phone three times within the first three business days of their inquiry.  We compare each office and each broker to others as well as their last quarterly “shop.”  Lastly, we compare the income of the brokers with the highest Mystery Shopping scores to the income of restaurant brokers with the lowest scores.  What we found got their attention.  The brokers with the highest Mystery Shopping scores had the highest income and most sales.  Every. Single. Time.  The brokers with the lowest Mystery shopping scores correlated directly to the lowest income.  Every. Single. Time. 

What does this mean?  Restaurant brokers is a full contact sport.  You must touch and communicate with buyers in order to sell a listing. When we figure out how to sell restaurants with total automation and through email, then brokers are no longer needed.

So why must Restaurant Sellers perform this exercise for themselves?  After a year of quarterly shops, we decided to shop our competitors in year two.  That’s right.  In every single market, nationwide, we knew our performance, but what about the person we’re competing with for the listing.  What did we find? 

Brokers have forgotten to use the telephone.  They don’t realize it has a function other than to send and receive email.  In markets nationwide, in dozens of mystery shopping scenarios with competitors, our “buyers” did not receive one single phone call from other brokers. It is almost unbelievable, but the results are clear and scientific.  We gave them an email address, a phone number that rang to an area code in their market and an inquiry.  We did not get a single response outside of email. 

I recently sat through a software presentation built for business brokers and the entire focus was to build a chain of emails to respond to the buyer.  That’s fine for marketing and brand recognition but for sales, a personal phone call is still required. 

If another broker offers to sell your business for less, consider what that means.  If they do not call buyers and try to put deals together, it doesn’t matter how much they market or what else they do.  Emails do not sell restaurants.  Brokers do.  Don’t sign my listing agreement or anyone else’s until you make a buyer inquiry and see what happens.

When I call you three times in three days, I deserve the listing. 

Robin Blog Update

Topics: Selling a Restaurant

5 Deadly Mistakes to Avoid in Selling Your Restaurant

Posted by Robin Gagnon on Jun 18, 2019 8:55:00 AM

Selling your restaurant is not easy.  Here are five deadly mistakes to avoid for greater success.  We Sell Restaurants has been selling restaurants for twenty years.  Our best advice follows.

5 deadly mistakes

Deadly Mistake 1:  Choosing a Broker based on the cheapest rate

It’s human nature to look for the most cost effective means to accomplish anything.  That may mean seeking a low cost provider when selling your restaurant.  Why is this a mistake?  The person who is charging the lease amount of money often has the lowest investment in marketing, the least number of buyers in their database and the lowest potential for selling your restaurant.  You would not engage with a POS provider who gave you a 1% lower rate if in fact, your credit card machine wouldn’t operate during peak hours.  Why would you engage with a business broker based on the lowest cost?

The other issues with selling your restaurant with the cheapest resource is that you may be dealing with a novice in the in industry.  There are many costs that come into play when selling your restaurant. Many of these can easily cause items to “leak” from the cash you take away from the closing table.  Negotiating the security deposit which landlords are notoriously slow to hand back is one element.  If your broker does not secure your interest in this property up front, you could potentially save $4,000 in commission and give up $7,000 in security deposit.  The same is true for inventory or cash on hand in the safe or tills.  Those items must be negotiated and the “newbie” who does it for less may simply not negotiate the devil in the details that adds up to thousands of dollars in lost cash for you on the settlement statement.

One of the costliest mistakes that someone who is the “cheapest” may make on your behalf is simply negotiating a weak letter of intent or LOI without the proper structure of a full Asset Purchase Agreement.  This not only leads to the issues cited above with loss to the seller of reimbursable expenses but often leads to a seller engaging with an attorney which can result in thousands of dollars in fees before a deal is even done.  The adage to avoid being “penny wise and pound foolish” comes into play when selling your restaurant.  The “cheap” choice can be very costly.

Deadly Mistake 2:  Pricing above market

The second costly mistake for sellers is going out above the recommended pricing level.  It seems harmless as you simply list “higher” and see what comes in the door.  Today’s consumers for buying a restaurant are more informed, have great financial skills and are savvier than ever before.  If the restaurant for sale is priced above market, you’ll lose countless days while it garners no interest before you adjust the pricing to the reasonable level.

Deadly Mistake 3: Taking Your eye off the Ball

A third deadly mistake when selling your restaurant is assuming that the buyer will pick up the slack and taking your eye off the ball. There’s never a more important time to stay fully engaged in the business and make sure it’s running at its full potential.

Buyers won’t purchase the future potential.  They are purchasing the current performance.  Be careful that you don’t become complacent or start generating sales drops once you’re listed, since after all, you’re out the door before long.  When selling your restaurant, the bank, the buyer and the broker are looking for comparable store sales to stay at or above last year.  Failing to do so is a deadly mistake that will impact your eventual selling price.

Deadly Mistake 4:  Saying “no” to a deal

This is perhaps the worst of the deadliest mistakes when selling your restaurant.  There are always three options when presented with an offer.  Yes, is one option and it’s generally not the first response.  No is the second option which is a deadly mistake.  The last option is the appropriate one – a counter.  When a buyer is engaged enough to make an offer, no matter what the offer, it’s time to swallow your pride and come back with a counteroffer.  The most important part of the negotiation is to keep the would be buyer engaged.  A flat out “no” leads to a buyer that must then, negotiate against himself and most will simply bow out.

Sellers that refuse to counter and simply respond “no” are acting out of emotion.  These are the same sellers that return to We Sell Restaurants later and say, “Can you call that guy and see if he’s still interested.”  We get one bite at the apple in negotiations.  If you simply say no and go back later to negotiation, you are in a severely weakened position.  No matter what the offer is; it’s a good strategy to look for some positive in it and counter the buyer.

Deadly Mistake 5:  Going to market without good financial data

The last deadly mistake is going to market without good financial data.  When buyers are interested, time is money.  If you don’t have your past year books and records in order or if you don’t have the ability to provide electronic documents, get ready to lose deals.

You must have your financial house in order and be ready for due diligence.  Time kills deals and introduces doubt.  While we are waiting on due diligence materials, the buyers are getting cold feet by the minute.  Don’t make this deadly mistake.  Have your records ready to go.

In twenty years of selling restaurants just like yours, these are the five most deadly mistakes we’ve seen.  Don’t fall victim to them.  Prepare up front and contact a broker today for success in selling your restaurant.

Want our free downloadable checklist on selling your restaurant?  Click the link below.

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Topics: Selling a Restaurant

Robin Gagnon of We Sell Restaurants Achieves CFE (Certified Franchise Executive) Designation

Posted by Robin Gagnon on Jun 14, 2019 9:34:00 AM

Robin Gagnon, co-founder of We Sell Restaurants has completed the study and testing to attain her Certified Franchise Executive (CFE) designation offered through the International Franchise Association. 

A passionate leader in the franchise community, Robin joins those worldwide who demonstrate strong credibility in their franchising expertise by study and testing for the designation.  She serves on the Executive Board of the Women's Franchise Network - Atlanta and is the past leader of that team.  She is also on the a member of the Women's Franchise Committee at the national level of the International Franchise Association.

Robin GagnonThe mission of the Institute of Certified Franchise Executives™ (ICFE) is to enhance the professionalism of franchising by certifying the highest standards of quality training and education. Among franchise leaders, the CFE designation has become widely known and recognized as a mark of distinction.

Why this, Why Now?  Gagnon says, “I undertook the study to become a CFE as a lifelong student dedicated to professional development.  It’s the same reason I achieved my Certified Business Intermediary or CBI status in business brokerage.  The process of learning does not end with graduation from a university, in my case, with an MBA.  It requires constant affirmation and commitment to study to stay current.  As a business broker with many franchise clients as well as a franchisor of our brand, We Sell Restaurants, it’s critical to understand the industry on every level, including the legal and finance sides, as well as the marketing and sales.  The CFE designation tells others in the industry that I am serious about franchising and I understand all the nuances.”

What was the course of study? “3500 credit hours were required which included a combination of experience, classroom study and online classwork.  The curriculum ranged from marketing to legal and financial considerations of franchising, as well as ultimately, testing.” 

What was your favorite part?  “The interaction with peers at classes attended during the International Franchise Association (IFA) conferences was the best part of the program.  I made valuable contacts and learned from others in all levels of franchising.  I was paired with everyone from leaders of 1,000 unit brands to start-up franchisors. There was an immeasurable amount of talent in each course and everyone was generous in sharing their talent and experience.”

How does someone get the combination of experience and credit hours to attain their CFE? “The IFA does an excellent job of providing educational opportunities including everything from Wednesday “Webinars” to classroom courses.  Experience credits are granted for attendance at local events like the SEFF Southeast Franchise Forum or the Women’s Franchise Network of Atlanta (WFN) and of course, the IFA convention each year.  Through a combination of attendance at events, study online and coursework at conference, you can earn your CFE in one to two years.”   

How will you use your CFE?  As a franchisor and co-founder of We Sell Restaurants, we are already using the knowledge from my CFE studies to implement best practices and build a brand for the future.  As a business broker focused on franchise resales, my clients, including major brands and single units, know they are getting representation from someone committed to the ideals of the CFE. These include professional development, peer networking, industry recognition, professional standing, and commitment to franchising.”

Do you recommend others interested in franchising commit to their CFE?  “Absolutely. It requires a strong commitment of time and money but it pays off.”

Is there a graduation ceremony?  “There is!  I will walk the stage at the next International Franchise Association conference in February next year.”

For more information on Robin’s franchise listings, visit this link online.

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Robin Gagnon bio

Topics: Buying a Restaurant, Selling a Restaurant

5 Signs You’re Ready to Sell Your Restaurant

Posted by Robin Gagnon on Apr 8, 2019 12:45:31 PM

If you’re working in a restaurant and have put in hours and hours and are still wondering when the excitement starts… maybe restaurants are not the thing for you. If you have owned a restaurant for years and years and are ready to retire or any of the above hits home, this post is for you.

You may intellectually know that selling your restaurant, or any business really, is frightening and full of unknowns. Your friends and relatives may tell you “You’ve put so much work into it! Just wait until it turns around!” Meanwhile, the idea keeps returning to you day after day, as you put your keys in the door and turn the lights on in the kitchen.   

Are you the person who gets the sense you would be happier in a different career?  Are you passionate about the restaurant industry but just not as a restaurant owner? Did you find yourself way in over your head once you bought your restaurant? It could be time for a change in your life and you just may be ready to sell your restaurant.  

In working with hundreds of entrepreneurs each year, we see common signs that now is the time to go ahead, take a deep breath and sell a restaurant like yours.  If you’re experiencing these signs, it may be time to stop procrastinating and sell your restaurant that seems to be holding you back.

5 signs you are ready to sell your restaurant

Sign Number 1:  You’re Not happy Anymore

When you first bought your restaurant, you were beyond excited. You had a pep in your step every day and woke up before the alarm clock even went off. Now the realities are hitting home; you get calls after hours, you are begrudgingly sliding out of bed and dread going into your restaurant in the morning. You love the people and what you put out, you just don’t have the zeal you once did. This is sign number one that you may be ready to sell your restaurant.

Sign Number 2: Your Restaurant is Not Performing Like You Thought

Signing the papers for the deed of your eatery, you had dreams of wads of cash and a packed dining room every night. The truth is, restaurant owners don’t always see profits quickly. If you thought you could get in, get rich, and get out – you definitely were surprised when you found how much time it takes to turn red into black in the restaurant industry. This could be the second sign that maybe you should sell your restaurant.

Sign Number 3:  Late Nights Mean Missed Family Dinners

You originally got into the restaurant business to build a nest egg, or a legacy, for your family. However, more and more, you are finding that you are missing family dinners in favor of dinner rushes. Showing up late to sporting events because the food delivery wasn’t on time. Missing your anniversary because your calendar is full of inspections, deliveries, payroll, scheduling and more. If your restaurant is getting in the way of your family, this may be a sign you are ready to sell your restaurant.

Sign Number 4:  You Aren’t as Comfortable with Risk Any Longer

When you started your business, you may have been young, with few responsibilities.  You were fine with the ups and downs of the business as your needs were minimal. Now you have a mortgage, two kids and a wife and feel the need for steady income. 

That makes sense and is often a reason to sell a restaurant like yours.  While you’ll never earn as much for someone else as you will working for yourself, you’ll also never have the potential to lose as much either. If the amount of risk on your plate keeps you up at night, give us a call.  We have buyers ready to go that have measured the risk and find it perfect for where their life is at the moment.

Sign Number 5:  The “What Ifs” Keep You Up at Night

You lay awake often wondering what would’ve happen if you sold your restaurant earlier or never bought one in the first place. It isn’t quite the lucrative money-maker you thought, and you are bogged down by the “what ifs” – “What if I bought that tech start up instead?” or “What if I decided to go back to college instead of running this restaurant?”  Your head is filling with things and none of them are your restaurant – this is a sign that it is time to sell a restaurant like yours.   

Whether it’s that you’re not happy anymore, you want to forego the long nights in favor of something more family-friendly, your restaurant is not performing like it once was, or if the possibilities are keeping you up – Relax. It may just be time to sell your restaurant.  

Review your motivations, your yearnings and your thoughts over the past few months.  If you’re exhibiting all these signs, it could be that you are indeed, ready to sell.  

We Sell Restaurants is the number one restaurant brokerage firm in the country! We would be happy to sit down and talk to you about the possibilities of selling your restaurant.

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Topics: Selling a Restaurant

The Five Best Ways to Sell a Restaurant

Posted by Robin Gagnon on Mar 26, 2019 8:14:40 AM

Thinking of selling your restaurant and unsure where to start?  Here are the five best ways to sell your restaurant that will have you ready to go in no time.

First and foremost.  Get your books in order.

Accounting is no one’s favorite task.  If necessary, bring in help to get the books ready to go.  Restaurants are sold on a multiple of cash flow.  No matter how much you are doing in sales and no matter how great the business looks, the books and records are the key to getting the most money in the shortest amount of time.  

Best Ways to Sell a Restaurant

Secondly:  Interview Brokers

The number two item on the list of the best ways to sell a restaurant is to interview restaurant brokers.   Have a series of questions ready to ask them to include things like:

  1. How many restaurants (no overall businesses) have you sold?
  2. How do you market my restaurant for sale?
  3. What is your background and experience?
  4. Do you have financial training, an MBA or other degree that demonstrates you understand valuation?
  5. Are you a Certified Business Intermediary? This designation is given to less than 500 people worldwide who pass extensive testing by the International Business Brokers Association. 

Finding a knowledgeable resource is one of the five best ways to sell a restaurant.

Third:  Inspect the Physical Space

Third on the list of best ways to sell a restaurant is to view the store with a critical eye.  If you usually enter the front door, go in the back.  If you usually come through the front, enter through the kitchen. Look around the space.  Look up and look down.  Are there ceiling tiles that are dingy and have grease clinging to them in the kitchen?  Does the bathroom need a paint job? 

You’re not selling a house and all pricing decisions should be based on cash flow, but buyers are critical when the store has obvious physical flaws.  Take a month or so and get the store in order before putting it on the market with peeling floor tiles and cooler doors that don’t close.

Fourth:  Put together an equipment list

If you’re selling your restaurant, you are selling the furniture, fixtures and equipment.  Buyers must know what they are getting.  These are the physical assets that transfer in the location.  It is time consuming and a pain, but a list of equipment is necessary.  If you want a starting point, ask your broker if he has a list to get you going.  We routinely provide these as a starting point.    

A few tips on generating your equipment list.  First, never include equipment that isn’t working.  Pull it out of the space. You’re not using it today to generate the earnings so the buyer won’t need it but if you leave broken equipment in place, they will expect it to be replaced or repaired prior to close. Also remove anything personal that won’t transfer in the sale.  If the Antlers over the fireplace are from the first deer you ever bagged and you refuse to transfer them, pull them down before you list it.  Once a buyer sees these items, he will expect them to convey in the sale.

Lastly:  Confirm what you Owe

The best way to sell a restaurant is to understand where you’ll be when the dust settles, and the money is paid.  You need to know what you owe any partners, any banks, lenders or others going into the transaction.  The last thing you want to do is get a deal in place and realize you don’t have the funds to close.  If you owe more than the restaurant is worth, this is not a deal killer.  A strong restaurant broker can work with you on negotiating settlements and give you tips to get you out of a tough situation. Just be up front and know what the problems are before they come knocking. 

These are the best ways to sell a restaurant.  If you want to speak to a restaurant broker for more details, reach out to We Sell Restaurants or click the link below.  Our experts can help.

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Topics: 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