Entering the restaurant business, whether by buying an existing establishment or selling one you own, is an exciting journey filled with anticipation and big decisions. But how long does this process actually take? These are just some of reasons that you may be able to close quicker than you think when you are buying a restaurant. Here is our clarity and guidance based on years of experience in the industry.
For anyone buying a restaurant, you may be surprised to learn that it can be done rather efficiently. Of course, there are always reasons a deal may stall but with a committed buyer and seller, it can take as little as 60 days to own your restaurant. With the help of expert restaurant brokers, a speedy transition is possible through streamlined processes that have been perfected over time. Their toolbox will include checklists for getting all the items completed for the closing, assistance with resources like attorneys and business plan templates. They also have access to restaurant lenders that understand the business and are ready to lend money on the deal.
On the other side, you can also face delays with unreasonable or unaccommodating landlords, franchise training, or special circumstances like buying a restaurant to qualify for an E2 or investment visas. Delays can be inherent in the type of restaurant business you are buying, whether it is a franchise or independent restaurant, if there is a complex lending transaction or if a liquor license is involved. That’s why, if you’re dreaming of running your own restaurant, starting earlier than later can be advantageous. Waiting or delaying the decision might feel safe, but it could lead to missed opportunities and extended pre-ownership periods filled with anticipation.
Selling a restaurant, on the other hand, involves a different set of considerations. One key factor is timing. For instance, listing your restaurant during its busy season might seem counterintuitive, but it can actually be beneficial. This period tends to attract more buyers due to the "buzz" and activity, potentially leading to a quicker and more profitable sale. Conversely, waiting until the off-season to sell might prolong the process, as it could take anywhere from three to four months to close a deal under normal circumstances.
If you are selling a restaurant that will require the buyer to obtain lending, this can contribute to either a shorter or longer timeline. For example, an SBA deal will require that you have buttoned up financials ready to go and a requirement to keep these current. A lender needs up to date financials that are no older than 90 days as of the date of closing. If your CPA or accountant drags his feet and offers excuses why he can’t have these ready, that will be an impediment to getting a deal done efficiently.
On the other hand, if a seller is willing to offer his own form of financing in the form of a seller note, selling a restaurant can be done very quickly. After all, the parties can agree to the terms, an attorney can draft the terms of the note with protections for the seller and it’s one way to get quickly to the closing table. For more information on seller financing, read this article on Owner Financing Options.
For all deals with lending in today’s credit environment, it’s possible to face more time in processing. Higher interest rates have created a smaller credit “box” for approvals and deals may take more money down and get a harder look from the creditor prior to approval. Something that may have sailed through approvals with interest rates at 8% become more complex when there is cash flow required to satisfy the debt repayment at 11% interest rates. In these situations, those selling a restaurant may need to consider a partial seller note of 10% or so to “sweeten” the deal for the lender to help overcome these issues.
Franchise restaurants often take longer to sell due to the additional requirements imposed by franchisors. Nearly every brand, though there are rare exceptions, require that you train in advance of taking over the operations. Since training programs can range from two weeks to 12 weeks, this has a material impact on the timeline. In addition, the franchise will require that the candidate for the transfer location go through the full approval process, submit an application, attend a Discovery Day and be vetted in the same manner as a new franchisee. Each step adds to the timeline for closing and as such, it is inherent in the purchase of a franchise restaurant for sale, that you will face more time to seal the deal and take over operations.
Independent restaurants, often transition more swiftly. The absence of a franchise application process and training that is provided by the seller on your schedule, facilitates a quicker sale. If you are buying a restaurant that is an independent where the owner is the landlord, that’s the overall fastest path to closing. If the landlord is a local owner, again, this is a swifter approval process with less red tape.
Landlords are the single largest impediment to buying a restaurant and something we reference in our book, Appetite for Acquisition (see the chapter, “The Landlord is Not Your Friend”). Landlords have no incentive to assist those buying or selling a restaurant since they already have a tenant in place that is paying the rent. Unless your lease has specific language requiring an approval within a stated time period or an automatic approval for a new franchisees, expect landlords to be the single largest roadblock in selling your restaurant.
Buying a restaurant isn’t a solo journey. You need partners to help expedite the deal. This can take the form of a Certified Restaurant Broker®, an attorney, a lender, a liquor license facilitator, an insurance broker and more. The complexities of selling a restaurant require that you work with a brand that can put your business in front of the most buyers and complete the transaction in the shortest time.
Ultimately, buying or selling a restaurant is akin to preparing any great meal. It’s complex, requires patience, and rushing can lead to undesirable outcomes. With more than 20 years of experience and thousands of closings, our advice is simple: Embrace the journey, savor every moment, and trust that each step brings you closer to the dream you're seeking.
Whether you’re looking to buy your dream restaurant or planning to sell your current one, understanding these timelines and planning accordingly will equip you with the knowledge to navigate this process successfully. Interested in learning more about how to optimize the timing to buy or sell your restaurant? Contact We Sell Restaurants — we’re ready to help you make your next big move in the restaurant industry.
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. She has appeared on The TODAY Show as a restaurant expert and Entrepreneur Magazine has named her to their list of the “Top Influential Women in Franchising.”