The restaurant brokers have seen an increasing number of turnovers in the industry as Baby Boomer restaurant owners retire and others jump at the opportunity to cash out and pursue other careers. For franchise restaurant owners, the market is particularly favorable for a successful exit from the industry. Now is a great time to Re-Sell Your Franchise Restaurant and pursue new dreams in 2023—here's why:
- Buyers want to reduce risk. Quick-service restaurants (QSR) fared well through the pandemic thanks to broader franchisor support in individual stores, drive-through windows for contactless service, and dining apps for delivery and pickup options. As a result, this restaurant model stayed afloat, and even thrived, despite reduced capacity, staff shortages, and other hinderances that arose during the pandemic.
- Buyers want existing cash flow. Franchise restaurants are an attractive options for buyers looking to expand a portfolio or become a profitable restaurant owner because these concepts often have better records and existing sales that other independent restaurants for sale may lack.
Now that you know why it's a good time to consider an exit strategy from your franchise restaurant, let's take a look at 5 steps you can take to re-sell your franchise restaurant in 2023.
Step 1 - Research Who Can Re-Sell Your Franchise Restaurant
As with any restaurant transaction, using a qualified restaurant broker is your best bet. A good restaurant broker will know how to price and market your franchise restaurant appropriately. Moreover, they will have the resources to pre-qualify buyers, accounting for more serious offers and leading to a smoother transaction overall. Your restaurant broker should have experience in restaurant sales, particularly franchise restaurant sales. This specialized knowledge and experience qualifies them to guide you to through these 5 steps to re-sell your franchise restaurant.
Step 2 - Evaluation
For most profitable Franchise Restaurants, the re-sell value will be more valuable than an independent concept for many reasons. Not only is the multiple applied higher, but the new buyer is investing in a larger brand with an existing customer base, corporate support, and proven concept. Whether your franchise restaurant is currently profitable or not, be prepared to provide your P&L statement and any other chart of accounts that the restaurant broker may ask for in order to appropriately value your business.
Step 3 - List
Once you and the restaurant broker settle on the right listing price, it's time to market and re-sell your franchise restaurant. This step is where you will provide items such as photos, equipment lists, lease information, and more to create an attractive listing package. Ask your restaurant broker ahead of time how they will market your franchise restaurant—how many people will be notified of this listing? Where are you listing it? Most importantly, ask your restaurant broker what they will do to keep the re-sell confidential. For example, We Sell Restaurants requires inquiring buyers to sign a Confidentiality Agreement before releasing details on the business, including the name & address. This is also part of the validation process, which takes us to Step 4.
Step 4 - Validate
After your franchise restaurant is listed for sale and effectively marketed, buyers will begin inquiring. The validation step is important because it determines whether a buyer is qualified to buy the business. The last thing you want is to waste valuable money and time talking to buyers who either can't afford the business or who aren't serious about taking over its operations. The franchisor will often have net worth and liquidity requirements that any new owner must meet before the transfer can take place. The validation step is where your restaurant broker will confirm that an interested buyer meets these financial requirements before sharing the detailed package you prepared in Step 3. Once a buyer is prequalified, has visited the store, met you (the seller) and made an accepted offer, then you will move on to Step 5—the Transfer.
Step 5- Transfer
After you are presented with a qualified buyer and accept an offer, the transfer process begins. For a smooth transaction, it is critical for the restaurant broker and the franchisor brand to keep each other informed. The transfer itself will include furniture, fixtures, and equipment, all customer/client lists, lease, and business phone number, and any social media accounts. Keep in mind that the buyer's offer will be contingent upon Due Diligence, landlord approval, and franchise consent. The franchisor will also need to confirm that the buyer has received and signed the FDD (Franchise Disclosure Document). Your restaurant broker should guide you through a closing checklist, which is critical for a smooth transfer as it will help keep the deal on track.
Re-Sell Your Franchise Restaurant
Whether you are ready to cash out now or not, outlining your exit strategy is a critical part of your success as a restaurant franchisee. To see how much you could re-sell your franchise restaurant for on the market today, claim your free restaurant valuation from a Certified Restaurant Broker®.
Robin Gagnon, Certified Restaurant Broker®, MBA, CBI, CFE is the co-founder of We Sell Restaurants and industry expert in restaurant sales and valuation. Named by Nation’s Restaurant News as one of the “Most Influential Suppliers and Vendors” to the restaurant industry, her articles and expertise appear nationwide in QSR Magazine, Franchising World, Forbes, Yahoo Finance, and BizBuySell. She is the co-author of Appetite for Acquisition, an award-winning book on buying restaurants.