Restaurant owners, experiencing burnout or ready to retire may wonder where to begin undertaking what seems like an overwhelming process. After all, those who excel at serving up great hospitality and delivering on the guest experience usually do not have experience with sticky issues like valuation and marketing a restaurant for sale. Considering these six questions gives you a starting point to develop an individualized plan for selling your restaurant.
For sellers, two things are critical. The first is time. How long will it take your restaurant to sell? The other item on your mind is money. How much will your business ultimately sell for? Even if your restaurant is a turnaround situation, there is an intrinsic value. Being ready to answer these questions can help you present your business in the best light, streamline the selling process, and keep potential buyers engaged
The restaurant brokers at We Sell Restaurants understand the crucial information that potential buyers are looking for when it comes to Selling a Restaurant. We have helped numerous restaurant owners successfully navigate the selling process and have gained a deep understanding of the key questions sellers need to be prepared to answer.
Here are six questions every restaurant owner should be able to answer before they sell their restaurant:
- Why are you selling?
This is often the first question potential buyers will ask. It's important to provide a clear and honest answer. Whether you are one of the 10,000 baby boomers seeking retirement every single day, moving on to a new venture, or selling due to health reasons, it is important to be transparent about your reasons for selling. This builds trust with potential buyers. While you are not obligated to go into detail about your reasons, you should talk about the key reason. Talk about the success you’ve experience or the next chapter you are pursuing in positive terms. on. Here are a few examples how you could answer this question: Retiring, personal reasons, moving, changing careers, or health issues.
- What is the financial health of the restaurant?
Buyers will want to know about the restaurant's financial performance. Be prepared to share financial statements, tax returns, and sales records. This will give buyers a clear picture of the restaurant's profitability and financial stability. In today’s turbulent market, you should have up to date financials on a monthly basis if at all possible.
If your restaurant is not making money - don't panic! Your business still holds intrinsic value. There are buyers who look intentionally for turnaround scenarios, and many more buyers who would rather buy an existing location with equipment in place than invest hundreds of thousands of dollars in a new buildout.
- What is included in the sale?
Be clear about what the buyer will receive with their purchase. This could include the physical property, equipment list, inventory, and any intellectual property such as recipes or branding. It is also important to clarify what is not included in the sale. Be prepared to answer questions such as, "Will the staff stay in place?" and "can I convert the concept to my own?" If you have items of sentimental value or equipment that is not working that is not critical to the business, take it out of the store before you begin showing it to interested buyers. You do not want to be arguing over repairing a non-essential piece of equipment or requested to leave behind a family portrait.
- What are the terms of the lease? If you own the real estate, are you charging market rental rates?
Many restaurants are leased but some do include real estate. If the restaurant space is leased, potential buyers will want to know the terms of the lease including the duration, renewal options, and any restrictions. Make sure you have on hand the fully executed copy of your lease along with any amendments. The last thing you want to do is get a buyer interested only to learn the lease has no remaining term or the option rates are much higher than the current payment.
If you own the real estate, do some research on market rates. Are you charging yourself market rent? Will you charge the new buyer some different number? Do you have a formal lease document? Be sure you are ready with all the details for leasing the property.
- What is the potential for growth?
Buyers are not just buying the restaurant as it is now; they are also buying any future potential. While this is not considered in the pricing and valuation of the store, it does create “selling points” for any buyers.
If you have plans for growth or expansion, be prepared to discuss how a new owner might be able to realize these opportunities. Describe areas where business could be improved that you have not implemented during your time as owner. Areas of improvement might include adopting a digital loyalty program, expanding marketing, establishing catering relationships, being an owner/operator, or paying closer attention to food costs. This is the place where it is okay to admit your shortfalls as they represent opportunity for a new buyer.
- How did you determine the asking price?
Buyers will want to know how you arrived at your asking price. To accurately calculate the value of your restaurant business, you must start with the profit and loss statement. There is a right and wrong way to price a restaurant and listing your business at the latter could create trouble down the road. Additionally, the valuation method employed should align with any requirements for lending. This will create a quicker and smoother process for lending to be approved for the purchase.
Luckily, this question is easy to answer when you have employed the expertise of a restaurant broker. This professional should know which valuation method makes the most sense for your restaurant business. The restaurant broker will also know how to recast, apply current marketing conditions, and meet requirements for lending approvals.
A Certified Restaurant Broker Helps You Answer These Questions
Answering these questions over and over again does not need to be on the shoulders on the seller. Instead, a Certified Restaurant Broker can collect your answers one time and build a confidential listing package for your restaurant. This listing package will include details including the valuation process, your reason for selling, what is included in the transfer, and more. Before your business even hits the market, your restaurant broker will walk you through each of these questions to help you answer them effectively for prospective buyers.
Selling a restaurant is a complex process, but being prepared to answer these questions can help make the process smoother and more successful. At We Sell Restaurants, we're here to guide you through every step of the selling process. Our experienced restaurant brokers can help you prepare for these questions and more, ensuring you're ready to make a successful sale and move on the next chapter of your life.
For a free, no obligation restaurant evaluation, contact a Certified Restaurant Broker Near You.
Robin Gagnon, Certified Restaurant Broker®, MBA, CBI, CFE, is the co-founder of We Sell Restaurants, a brand that has carved an unparalleled niche in the industry as the nation's leading and only business broker franchise focused on restaurants. Under Robin’s leadership, We Sell Restaurants has grown to 45 states where it dominates the restaurant for sale marketplace, including franchise resales, delivering on the founder’s vision to Sell More Restaurants Than Anyone Else. We Sell Restaurants was named one of the most influential suppliers and vendors in the country by Nation’s Restaurant News and has earned a position on INC 5000’s list of fastest growing privately held companies. Franchisees of We Sell Restaurants surveyed by Franchise Business Review placed it 25th in the nation in franchisee satisfaction.
Robin is the Chair of the Women’s Franchise Committee of IFA and is a member of the IFA Board of Directors. She is also an MBA and Certified Franchise Executive (CFE) and has her CBI (Certified Business Intermediary) designation from the International Business Brokers Association. She co-authored Appetite for Acquisition, a small business book award winner in 2012 and contributes frequently to industry press appearing in Forbes, QSR, Modern Restaurant Management, Franchise Update, and others. Entrepreneur has named her to their list of the “Top Influential Women in Franchising.”