EATS Restaurant Brokers are involved with multiple Professional Organizations that are created to educate Business Brokers. I recently attended a Georgia Association of Business Brokers Spring Conference. The topic that got my interest was the Difficulties Seller’s Encounter when trying to sell a business or restaurant.
80% of Business Owners don’t know the value of their business-Source M&A Today
80% of Business Owners don’t have an exit strategy.
When it’s time to sell Restaurant Owners encounter the following 5 problems if they don’t have Professional Help:
- Valuing the restaurant– The restaurant industry is a specialized industry that some books and records can be creative. EATS Restaurant Brokers are trained using the following methods:
- A liquidation asset-based approach determines the net cash that would be received if all assets were sold, goodwill, location, and lease terms.
- Earning Value Approaches-based on the owner’s past performance of restaurant financials. This method includes tax returns to find out the Seller’s true owner benefit for ownership.
- Percentage of gross sales- This method is not recommended.
2 Keeping Sale Confidential– Buyers request various financial records and information about a restaurant when it’s listed. This information is confidential and should be protected by a Buyer Confidentiality Agreement. Just hand-shakes no longer work, it’s best to put terms on paper.
3 Marketing- Marketing a restaurant for sale can feel like a full-time job. Buyer activity should be monitored to track success. Listings should be written to interest buyers to inquire for more information. Reports showing restaurant financials, equipment list, lease terms, store operations information, should be prepared to give to interest buyers.
4- Structuring the deal and negotiating- In Restaurant Brokerage the saying goes, “ It’s easy to get a buyer, it’s hard to get the deal closed”. This is a very important step because it sets expectations for the Restaurant Seller and Restaurant Buyer. Most deals will fail if the deal is not structured correctly on the front end. During this step, it’s highly recommended to get professional assistance with someone that has experience negotiating Restaurant Sales.
- Financing- This goes back to Question 1, I think this is the most important question Restaurant Owner should think about when selling a restaurant- “How will someone pay for my restaurant, will they pay with Cash, Bank Financing, or Seller Financing”. Once you have your answer it’s time to start preparing the docs required. Bank financing will require the most information and checks and balances. Clean books and records are required.