Advice for Buying a Restaurant and Selling a Restaurant

Who’s buying a Restaurant?  The Demographics of Selling Restaurants Part 1

Posted by Robin Gagnon on Aug 8, 2016 8:30:00 AM

A white paper published by BizBuySell recently covered the demographics of those buying a business.  It was fascinating reading with some of their key findings (quoted directly from page 2 of the report below).

  • businessmen-152572_1280.png Business ownership runs in families: 55 percent of sellers have a parent or grandparent that owned a small business.
  • 49 percent of sellers plan to exit their small businesses in the next five years, but only 29 percent are currently prepared for the sale process.
  • Younger buyers are more ethnically diverse than their elders: 49 percent of 18 to 29 year-old buyers identify as a minority, compared to 19 percent of buyers in their 50s or older.
  • The number one motivation for purchasing a small business is the chance to be your own boss, cited by 63 percent of all buyers.
  • 12 percent of sellers and almost 10 percent of buyers are veterans.

As restaurant brokers, we wanted to analyze their findings and compare them to our database.  Here’s what we found.

Business ownership runs in Families.  We find that in addition to the BizBuySell finding that 55 percent of sellers have a parent or grandparent that owned a small business; many multi-generational groups are buying together.  At this time, we have deals in contract for a father and son team, an uncle and nephew team, an entire family group (Aunt, Uncle, Cousin, and Son) and many husband and wife groups.  Their white paper study states that 55% of sellers have a parent or grandchild that owned a small business.  We find that nearly 50% of our buyers are coming together with family members to buy a restaurant.

Sellers are Unprepared.   The BizBuySell white paper on demographics says that 49 percent of sellers plan to exit their small businesses in the next five years, but only 29 percent are currently prepared for the sale process.  As restaurant brokers dealing with countless small business owners, we are dealing with those who want to sell now, today.  For the majority (more than 50%), they are not prepared for the process.  What does preparation for selling mean?  For the most part, it means a strong set of financials that can be verified, backup documentation requested by the bank for lending and all the money is “on the books”.

Younger buyers are more ethnically diverse than their elders. The White paper on the demographics of business buyers found that 49% of those 18-29 identify as a minority.  Is there a shift to buy businesses by Millennials who are in a minority?  As restaurant brokers, we actually believe this trend is more aligned with the fact that more Millennials are unable to find a job in the market and are in fact, buying a job than taking the traditional corporate route to work. Many second generation Americans still see such pride of ownership in running a business and have experienced the positive earnings results that they are taking this route rather than waiting out an economy that frankly, may never have a job for them.  It may be that Millennials that identify as minorities are simply faster to move from the corporate lane to ownership.

Number one reason to buy – Be Your Own Boss!  Okay, there’s not a lot we can say about this finding.  It was the reason cited by 63% of those surveyed for the white paper and for the restaurant brokers, it is either the number one or number two reason to buy for the majority of our clients.  This is one finding we totally agree with.

12 percent of sellers and almost 10 percent of buyers are Veterans. What’s interesting about this finding for the Restaurant Brokers is that our numbers are probably as high as 20% for both Buyers and Sellers.  We most often learn this about the buyers as we are getting to know them and helping them find a restaurant to buy but visiting a restaurant for sale gives you a good sense of who’s been through basic training and understands process and methodology.  They almost always run a tighter ship, have more buttoned up financials and a strong pulse on their business.

These are just the key findings of this report but there are many more findings we will describe and compare over our next few blog articles as we dive into who’s buying and selling a restaurant today.

Topics: Buying a Restaurant