Who can forget the iconic scenes from Silence of the Lambs with Clarice and the evil doctor going back and forth in exchanges of “Quid Pro Quo?” What does it mean? It is a Latin phrase used in English meaning, “a favor or advantage granted or expected in return for something.”
How does it apply to buying a restaurant? Restaurant buyers should anticipate that in order to get something (like information on the listing), you must often give something. The “something” or “pro quo” is often a confidentiality agreement and proof of funds. This demonstrates to the broker and his client (the seller) that you are serious about the purchase.
At We Sell Restaurants, it works like this. The first example of Quid Pro Quo comes when a buyer requests the name and address (Quid). We provide that information once they have registered as a buyer and acknowledged confidentiality (Pro Quo).
In step two of the path to ownership, a restaurant buyer often requests financial data from the seller. This is highly confidential data so a restaurant buyer should expect the process of Quid Pro Quo to once again, come into play. Most brokers release highly confidential information once proof of funds demonstrate the individual could purchase. They may also conduct an interview to learn more about the restaurant buyer. Expect open ending questions like, “Tell me a little about your background” while you are learning more about the restaurant for sale.
Buyers are often so excited once they receive a package with the financial information that they immediately leap to the next step, a buyer/seller meeting or due diligence. This is where a broker works to assist the buyer but also confirms that Quid Pro Quo remains in effect.
We often ask the buyer to visit as a secret shopper before ever setting up a seller meeting. Quid – “I want to meet with the seller” – Pro Quo – “Have you visited as a customer?”
It is always a good idea to visit as a customer before asking for a buyer/seller meeting. It is not uncommon for someone to get to the parking lot and say, “I would never own a business here because of the (Fill in the blank) - condition of the store, neighborhood, adjacency to a school, clientele, competition. All these objections are revealed during a secret shopper visit.
The ultimate Quid Pro Quo surrounds Due Diligence. As a restaurant buyer, you are seeking answers to lots of questions. The deep dive into many of those questions is known as the due diligence period.
While it is tempting to put this ahead of the other steps, you should assume that the seller will want to see more commitment from you before providing some sensitive data. Multiple years of profit and loss statements or tax return information is typically never released until due diligence is underway. That means an offer is accepted between the buyer and seller and the parties are working to confirm numbers, conduct inspections and assure lending is in place.
If you are unwilling to give in the transaction in order to get something, all parties are likely to fail. A restaurant buyer is smart to consider the principle of Quid Pro Quo and be willing to offer something at each stage of the transaction to move it successfully to the closing table.