When selling anything from a car, a boat, or a business, the most important and sometimes difficult part is knowing the value of what you want to sell. Selling a Restaurant, as with anything, has to go through a valuation process, taking into consideration gross sales, expenses, and establishing a sales price given the net profit or owner’s benefit. This may sound complicated, but to someone who does this on a daily basis, the unknowns and difficulties of establishing a value are minimized. Continue reading to learn our three steps to get started selling your restaurant on the market today.
An experienced restaurant broker is critical to your success as the seller because they will have the expertise to properly value your business on the market today. Moreover, they know where to look for and how to treat expenses, add-backs, and identify benefits a future buyer will want to see. For example:
Once the value and benefits have been established, you as the seller will also want to review your lease. The current rental rate and monthly payment including additional charges ( taxes, insurance, common area maintenance ) is a great place to start, but identifying the existing term, options periods and transfer fees are all important. The landlord is a crucial, and sometimes a determining factor in the sale and transfer of your business. Read your lease and provide a copy to your restaurant broker for review. The restaurant broker will point out any sections of the lease that will need to be addressed during the due diligence period.
Having a current list of all FF&E (furniture, fixtures, & equipment) that will transfer with the sale is important. Buyers will assume that everything transfers, so remember to keep the signed artwork you plan to take with you after selling does not need to be confused with the table and chairs. Having a clear understanding of the items and equipment to transfer, along with a discussion on the value of the inventory on the day of sale, will reduce your headaches at closing.
The above list of equipment should also have copies of any licenses, warranties and existing service agreements. This will be greatly appreciated by the buyer as often times these are after thoughts, but will be appreciated when questions arise.
The appearance of your restaurant will be important when a prospective buyer comes into see your space. Often times we look at something and fail to see small details. Working hard to provide a dinning experience day after day, does not always leave time to apply a critical eye to the space. Take time to step back and give the space, inside and out, an assessment. Does the exterior entry, sidewalk, and landscaping need touching up? This is the first impression as a buyer approaches your business. Next is the dining area clean and decorated adequately ? Does it appear as it did on the first day you opened ? Staging the space and having all areas of the restaurant clean and organized will give a welcoming and well managed impression to a buyer.
Another item, is to take thirty minutes and write a narrative, or share your story with your restaurant broker. List the new equipment and improvements you have made in the recent years. Share your online and social media presence, chances are an astute buyer will have already looked you up.
When a serious buyer is ready to make an offer, they will want to meet the seller and see the rest of the restaurant. Work with your restaurant broker to be available for these meetings and to answer any questions that may arise. There will also be a series of buyer & seller meetings that, naturally, require the attendance of the buyer and the seller. Stay in contact with your restaurant broker an be present for this critical part of the selling process.
The process of selling a restaurant can be very well orchestrated and culminate in a successful transfer of ownership, if the time is taken to know the value, recognize the benefits and the steps are explained. A restaurant broker can and will be the the most valuable person you can involve in your sale. Their job is simple: to represent and defend the value, promote, advertise and inform prospective buyers, while maintaining the confidentiality that is so important to protect your ongoing business.
As mentioned in the title of this article these are the “First Steps” but represent a great start to having an informed conversation with your broker. Gather together a few of your tax returns, some P&L’s and reach out to a restaurant broker, he or she will know the necessary steps to take and will guide you through each to achieve a successful sale.