What is a Restaurant Broker?
People ask me all the time What is a Restaurant Broker? Restaurant Brokers are specialists trained to facilitate a restaurant transaction between sellers and buyers. On a daily basis Restaurant Brokers are working with professionals in the Restaurant Industry. Some Restaurant Brokers know the financials of a business better than the restaurant owners due to years of daily experience reviewing restaurant financial statements.
Unlike some brokers that sell everything from a dry cleaner, gas station, to an automobile shop, Restaurant Brokers deal exclusively with the restaurant industry.
Some of the beneficial services Restaurant Brokers offer buyers and sellers during the sales process include:
Buyer Benefits
– Restaurant Brokers work on 100% commission and take their fee as commission out of the price agreed upon by seller and buyer. Broker and seller have a separate commission agreement signed. This means the benefit of the broker’s experience and knowledge without personal cost.
– Restaurant Brokers help the buyer client with analyzing the seller’s financials, collects sales tax filings, tax returns, leases, equipment list, utility providers, and does an introduction to the landlord for lease assignment.
– Every restaurant broker has a network of local vendors a buyer may need during the purchase process. These professional relationships were built over the years and help the buyer with a stress-free closing.
Seller Benefits
– A Restaurant Broker is a skilled professional who provides a restaurant price valuation based on the financials provided by the sellers. Restaurant Brokers know the guidelines for qualifying business for bank lending to help sellers get the most for the business.
– A Restaurant Broker is skilled in negotiation and document handling. Restaurant negotiations are complex, a Restaurant Broker can negotiate an agreement that works for everyone.
– Selling a restaurant can be a process that takes 6-9 months, the whole time a Restaurant Broker is screening buyers, pre-qualifying buyers, answering questions about your business to buyers, and marketing your business.
-Most importantly a Restaurant Broker only gets paid at the closing table when the business is sold. The commission ranges from 10%-15%, but the broker puts up all the money to market the business, spends the time with buyers, and only gets paid once the deal is closed. For the seller, this is professional representation without putting upfront fees!
A Restaurant Broker is a professional that can help you buy a restaurant, sell a restaurant, or lease a restaurant at a price you can afford.
EATS Broker is a full-service Real Estate Business brokerage practice focused on the restaurant industry. The company specializes in selling Restaurant Franchise Resales and Restaurant Sales. We also help clients with Restaurant real estate site selection, Tenant Representation, Franchise Consulting, and Business Price Evaluation.
For more information on the restaurant market and other available consulting services or restaurant valuations, contact Dominique Maddox at 404-993-4448 or by email at sales@eatsbroker.com. Visit our website at www.EATSbroker.com
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Restaurant For Sale By Owner Common Mistakes
Restaurant For Sale By Owner common mistakes are diverse and wide. A common question I receive monthly as a Restaurant Broker is, “Why list with a Broker, I can sell my restaurant For Sale by Owner (FSBO)? I understand the question because today’s websites offer sellers potentially cost-effective routes to selling a Restaurant online. Working as a Restaurant Broker for 8 years I have found a number of Restaurant For Sale By Owner Common Mistakes.
EATS Restaurant Brokers understand getting a buyer that is interested in buying a restaurant is the easy part, getting that buyer to the closing table is where the difference of being a trained Restaurant Broker compared to a restaurant seller trying to sell a restaurant for the 1st time makes a HUGE difference.
For that Restaurant, Owners thinking about selling by For Sale by Owner (FSBO), the skill set to operate a day-to-day restaurant is different than selling your restaurant. EATS Broker have created a list of, “The most common mistakes in selling your Restaurant for sale by owner”.
Review Books and Records- Listing price for restaurant
When it comes to selling a restaurant the owner is selling one of two valuables- Salary or Equipment. To receive the highest valuation on a restaurant the seller needs to have 3 years of strong verified tax returns. Once a seller has the tax returns coming up with a listing price is a mathematical equation and not a guess or price based on emotions.
Overpriced or Underpriced restaurants is a common mistake with For Sale Owner listings. Not having clean books and records, tax returns, profit, and loss statements will hurt the possibility of selling a restaurant.
Restaurant Brokers know the acceptable add-backs on tax returns, to provide the seller with the highest selling price. An EATS Broker is trained on reviewing profit and loss statements and tax returns to provide a restaurant valuation that will be approved by the bank for lending.
Selling a restaurant without good books and records takes another skill set most Restaurant Owners don’t have because they don’t sell restaurants daily. The listing price has to be based on an Asset Sale which includes equipment, goodwill if any, and rights to lease assignment. This method receives a much smaller valuation and should be priced according to market prices.
Time and Effort
Selling a restaurant is a contact sport meaning you will have tons of buyer inquiries, questions, requests, calls, emails, docs requested, information requested, and hopefully, the buyer moves forward. Most For Sale by Owners don’t understand the average length of time on the market for a restaurant is 9 months. Over these 9 months the frustration of not selling, time commitment, and marketing fees can start to affect the operation of the restaurant.
Buyers are Liars and Seller are Too
Finding the truth between a For Sale by Owner and an unqualified buyer can be a tough situation. The ownership of a Restaurant is a symbol of the American Dream for tons of people. Everyone has that recipe or idea from their family that will make their restaurant successful. The actual reality is that most people are not ready to open a restaurant and are merely inquiring about information on restaurants they can’t close on.
Providing too much information upfront to a buyer without qualifying the buyer is a big mistake. We have found sellers are so eager to sell their restaurant they will meet with just about anyone. During these meetings, the sellers provide buyers with confidential information regarding their business. Wasting time dealing with unqualified buyers that say they have the money but don’t show the money is a huge common mistake for For Sale by Owners.
Many educated and sophisticated buyers have experienced a negative time working directly with owners who don’t know how to sell a restaurant, so they simply avoid those listings. Why would you list your restaurant For Sale By Owner if you are eliminating some of the available buyers in the market?
Attracting serious qualified buyers while maintaining confidentiality is a key component of what we do. We use our time and effort and pay all the marketing dollars to get a restaurant sold, we only get paid a Success Fee once we have sold a restaurant.
For more information on the restaurant market and other available consulting services or restaurant valuations, contact Dominique Maddox at 404-993-4448 or by email at sales@eatsbroker.com. Visit our website at www.EATSbroker.com
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How to Sell a Restaurant
Many restaurant owners get into the business thinking only about operating a restaurant but never an exit strategy to sell a restaurant. Getting out of the restaurant business can be a challenge for most sellers in today’s market. Operating a restaurant day-to-day operation is much different than operating the sales process for selling a restaurant.
A large number of restaurant owners try to sell their restaurant first and struggle for months to find a buyer. Restaurant ownership has two endings that are sell to a buyer and cash out or foreclose and lose everything. Find 3 Tips below to make selling your restaurant easier:
Inspect your restaurant books and records:
Selling a restaurant is more challenging than selling a home but both selling processes require an inspection. When selling a restaurant, the seller should confirm no UCC liens exist, liquor and retail taxes are paid, no pending lawsuits and filed tax returns match profit and loss statements. Nobody likes surprises when it comes to selling a restaurant addressing these items upfront can save a future deal.
The first thing to do when you are planning to sell your restaurant is to start gathering the required paperwork. The financials are always a critical piece of selling a restaurant.
Sellers should be prepared to provide buyers with the following documents:
- 3 years of tax returns
- 3 year of profit and loss statements
- A list of assets
- A copy of the lease
- Copies of inspections records
- Sales Tax Filings
- Copy of Franchise Reports (if restaurant is a franchise)
- Vendor List
Stage your restaurant for sale
The way a restaurant looks can mean the difference between selling a restaurant and closing the doors. Sellers can improve the chance of a sale by managing the things they can control training and appearance of staff, maintenance of equipment, and cleanliness. Buyers look for red flags when inspecting a restaurant to buy, a filthy hood system, or restaurant will have the buyer looking for reasons not to buy. The best way to increase your chances of selling a restaurant is to maintain a professional-looking business with high inspection ratings.
Hire a Restaurant Broker
For Sale by Owners quickly find out the majority of buyers contacting them on a daily basis do not have finances to move forward, don’t qualify for a bank loan, and don’t understand the buying process. Selling a restaurant is a unique niche market, hiring a professional Restaurant Broker can make all the difference considering the time and effort it takes to sell a restaurant. These brokers will know where to look for qualified buyers and will have the best understanding of the marketplace.
Another advantage not to overlook is that Restaurant Brokers are specialized brokers only working with buyers looking for restaurants for sale. Everyday Restaurant Brokers are analyzing profit and loss statements, pre-qualifying buyers, negotiating lease terms with landlords, and writing Asset Purchase Agreements. It takes an average of 6-8 months to sell a restaurant, and an average of over 50 buyer inquiries before a restaurant is sold.
Restaurant Brokers usually only get paid a commission if they sell a restaurant. They will pay for all the marketing costs, pre-qualify buyers, schedule buyer meetings with sellers all for the opportunity to sell a restaurant.
For more information on the restaurant market and other available consulting services or restaurant valuations, contact Dominique Maddox at 404-993-4448 or by email at sales@eatsbroker.com. Visit our website at www.EATSbroker.com
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5 Things Sellers should consider with the lease assignment
5 Things Sellers should consider with the lease assignment:
The best day of a Restaurant owner’s life in the business world is usually when they first open the doors to their restaurant! The Restaurant Industry can be a tough business and the second-best day for a Restaurant Owner is usually when they sell the restaurant. When it’s time to sell, the business owner will prepare docs to provide to a potential buyer and review the lease signed with the landlord.
Most Restaurant owners have to dusk off the original lease and review what obligations they have to the landlord, some don’t have a copy of the lease at all. A commercial lease can range from 1-90 pages or longer and contain some very specific language that can make it challenging for lease assignment approval.
Here are the top 5 issues a Restaurant Broker will find in a lease:
The Personal Guarantee:
Landlords want a blanket guarantee over the entire term of the lease, even if the seller completes a sale with a buyer. Someone buying or selling a restaurant should fully understand their obligations when it comes to a personal guarantee, and the financial obligations that come with the agreement. This clause allows the landlord to come after the original tenant’s personal assets long after they have sold their business if the current tenant defaults on the monthly rent. This is very important to negotiate upfront with the landlord so no surprises will come up when it’s time to sell.
Consent to Transfer:
As a restaurant broker interacting with landlords every single day on lease assignments, this clause can be very misleading. Landlords will write the vague language in the lease usually like “Shall not unreasonably withhold” or “Shall not unreasonably withhold” or “Same net worth as current”. This gives the landlord total control of who they will approve for the lease assignment. The lease needs to have specific, measured steps with a timeline in the event you ever transfer the store when leasing a restaurant.
Assignment Fee:
Landlords usually will have a legal team prepare the original lease and put protect themselves from future expenses of creating a lease assignment by adding an Assignment Fee. This is one of the biggest item sellers will overlook when reviewing a lease. This becomes a big issue when it’s time to sell and the landlord is asking for $5000 from the seller to have the right to assign the lease. Assignment fees range from $0-$10,000, negotiate this fee upfront before you sign the lease because you have the most leverage at that time.
Option Terms with no agreed rent amount:
The landlord is not your friend when it comes to your monthly rent amount and yearly increases. The landlord is looking out for only one person in the transaction. He/she wants to improve their checkbook, and the bottom line and his earnings. The tenant should protect themselves from future increases by having the numbers agreed upon upfront, the national average for yearly rent increases is 3%-5%, but tenants cannot assume a landlord will not increase rates by more
Security Deposit:
The security deposit is usually required from landlords and can be the amount for 1-3x times monthly rent. When it’s time to sell the restaurant, what happens to this security deposit? Tenant’s should get confirmation upfront on how their security deposit will be returned if a lease assignment is approved.
When it’s come to landlords, remember it’s business and not personal and protect yourself. Use what you learned to get the best deal possible for a leasing assignment or a new lease for a restaurant. If you need help, contact EATS Broker to help you negotiate a deal.
For more information on the restaurant market and other available consulting services or restaurant valuations, contact Dominique Maddox at 404-993-4448 or by email at sales@eatsbroker.com. Visit our website at www.EATSbroker.com
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