5 Things you Should Ask any Restaurant Broker Before you List Your Bar

Posted by Eric Gagnon on Jun 10, 2010 1:06:00 PM


Not every broker is created equal.  Here is why a bar owner should seek specialized advice to sell a bar in a major market.  

An expert restaurant broker is key to your success when selling your bar or club.  He takes you from offer to closing day and handles everything in between.  He knows how to price and understands the marketplace.  He serves as a buffer between you and the buyer so the emotional toll of selling your bar never affects the business.  Lastly, he keeps you focused on what you do best – running a successful bar or club while he deals with the mindless details and endless questions that all lead to closing day and the sale of your bar in Atlanta.  That doesn’t mean all brokers are created equal.  Here are the five things you should find out from any restaurant broker before you sign a listing agreement. 

What’s my bar worth?  Ask any restaurant broker to explain in detailed terms “how do you value my bar for sale?”  What’s the multiple you’re using?  Why?  What’s a comparable sale in the market?  What method are you using – income valuation or assets?  If they can’t have an intelligent conversation with you on pricing, the value they establish for your listing will be incorrect and your bar will not sell.  If they ask you how much you want and agree to list at that price, run screaming.  They don’t know how to value your bar for sale and are relying on you to set pricing. A good restaurant broker will understand how to value a restaurant business appropriately. 

What have you sold?  Find out how many restaurants they have personally sold and the name of three sold in the past three months.  If they haven’t sold at least three restaurants and instantly tell you the name, you don’t want to use this firm. Look for a number in the hundreds for a specialized firm.  If they are truly focused on the sale of restaurants, this isn’t hard to achieve.  It’s easy enough to get listings if you take them at any price but getting your Atlanta bar sold is a different story.   

Specifically ask any restaurant broker whether he or she will “co-broker” or cooperate with other Brokers on your listing.    Carefully consider if a broker tells you he does not co-broker or does so on a limited basis.   Even the best business brokers can’t attract every single buyer through their marketing and advertising.  Co-brokerage means you have an entire army of agents out there looking for a buyer for your business. Other brokers are made aware of your listing (in general terms) and present your listing (blindly) to their buyers.  If another broker’s client has interest, they have to sign a confidentiality agreement prove their ability to purchase and at that point, your broker can  share information on qualified candidates to purchase the business.  It also requires that they share commission on the transaction with the cooperating broker.  For this reason, some brokers prefer not to co-broker.  They want 100% of the commission and the Seller’s need to sell takes second place.  That places their Sellers in a limiting position as the potential pool of buyers is immediately reduced. 

The next question should be, what do you need from me to get started?  A good broker is going to need some information in order to perform a valuation and do a good job for you.  He won’t be shy about requesting it.  He needs your tax returns for two years, P&L for three years along with your most current year to date numbers. He’ll want your lease and a list of furniture, fixtures and equipment.  He’ll also ask if you have a website so he can do some research before showing up.  If he doesn’t ask for any of this, don’t set an appointment, he or she doesn’t know what they are doing.

How much do you charge?  This is a very valid question for any firm.  Commissions are negotiated between the seller and the broker.  In general, you want to understand both the service and value delivered. How are you notified of activity on your listing?  How will you know if someone’s looking at the business?   Along with this ask whether they have a minimum commission.  Firms without a minimum commission often feel pressured to over-price your listing as they are compensated on a percentage basis.  This can damage a buyer since adequate price reductions don’t take place in line with market conditions.

Ask any potential restaurant broker these key questions to listen carefully to the answers to get your bar sold at the best price and in the shortest period of time.

Read more about what a good restaurant broker will do to get your restaurant or bar to the closing table here.

eric slug

Eric Gagnon, Certified Restaurant Broker®, CBI is the founder and president of We Sell Restaurants and co-author of Appetite for Acquisition, the definitive guide for anyone looking to enter the restaurant industry. He is a fellow of the International Business Brokers Association and serves as a board member for VetFran of the International Franchise Association and as a board member for the Southeast Franchise Forum. Eric is an industry expert in restaurant sale and valuation with 20 years of experience brokering restaurants for sale.

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Topics: Restaurant Brokers

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