Day in a Restaurant Broker’s Life
What does a Restaurant Broker actually do daily? Dominique Maddox, Founder and President of EATS Broker share his thoughts about the Day in a Restaurant Broker’s life.
I wrote a blog last year about my daily activities by the minute as a Restaurant Broker that received great interest and replies. I have decided to start a series of blogs about some of my most exciting days as a Restaurant Broker. This blog covers a day where I drove 900 miles round trip in a day to visit four potential restaurant listings and two restaurant owners.
I was super excited about the potential to get four restaurant listings, and one of the restaurant owners operated three locations. My Day was planned out the night before with an 11am face to face listing appointment in Jasper County in South Carolina.
After my 11am scheduled appointment, I was scheduled to meet the restaurant operator of three locations in Florence County, SC, at any time because he would be working that day. His restaurants were located in three different cities. My strategy was to visit all his locations before I met with him in Florence County.
Let’s see how this goes:
4:00 am – Wake up and put on a pot of coffee, and drink water. Review my Cash Scoreboard with my to-do list for the Day. Add any items that come to mind.
4:15 am- 4:30 am – Pack snacks, candy, and energy shots for the day trip. Kiss my wife good-bye, say a quick prayer, and I’m in my car on the way to Sumter County, SC.
4:30 am- 4:45 am- I drive my wife’s car on my long road trips to visit customers. As usual, when I take my wife’s car, her gas is empty, so before I can really start my road trip, I stop for gas. The 1st restaurant location is 290 miles away from my home.
7:45 am – 8:00am- First stop of the Day to refuel the gas, respond to customers’ emails, stretch, and grab some Bojangles for breakfast.
8:30 am- Arrive at 1st restaurant location. I take notes about the restaurant’s appearance related to street visibility, the shopping center’s condition, lease vacant spaces, and other tenants in a shopping center. The restaurant is not open, so I can only look thru the window.
8:45 am- Jump back in the car to make my way towards my 11am scheduled face-to-face meeting with a restaurant owner located 145 miles away.
10:45 am- I arrive early in the surrounding area to drive around to have a better feel for the location. I take notes on the surrounding competition, businesses, residential properties, and the appearance from the outside.
11:00 am – 12:00 pm- Meet with the single unit owner. They would like to sell to relocate outside of the state. I educate them on the current restaurant resale market, provide a restaurant price valuation, and review the lease.
12:15 pm- Respond to buyer inquiries from my car, finalize my notes from my meeting, and input location three in the Waze App. I’m headed to the 2nd restaurant of three owned by the restaurant operator in Florence County, located 165 miles away.
2:45 pm – I arrive at the restaurant, and instantly I’m impressed with the beautifully built restaurant with a drive-thru. I was impressed with the street visibility and design of the restaurant. It was a fantastic improvement from the seller’s first location in Sumter County.
3:00 pm- I take a couple pictures of the restaurant building, outdoor signage, patio space, and drive-thru window. Finalize my notes from my car and head towards the face-to-face meeting with Restaurant Owner 2; the location is 25 miles away.
3:30 pm- I arrive at destination number four. During my ride, I was thinking about the difference between the owner’s two locations. I thought about the Pros and Cons of both places. I was ready for my face-to-face meeting. By this point, I had driven 625 miles in the Day.
3:45 pm – I walk-in a restaurant, and instantly, I’m impressed with the restaurant’s layout, bar area, and stand-alone building. I ask for the owner, grab a menu and take a seat.
The management team lets me know he is not there. I sit down and look at the menu order food. My food arrives, and it’s delicious, but the owner has not arrived yet.
4:15 pm – I start to get nervous, and doubt starts to kick in. I made the cardinal sales professional mistake; I didn’t confirm the scheduled meeting the night before with the owner. I sent a text and get no response.
4:30 pm- Management team members come over and let me know the restaurant owner will not make the meeting.
4:45pm – Disappointed, I get back in my car and start my journey home, located 300 miles away.
5:15pm – The Owner calls to apologize for missing the scheduled meeting. We talk on the phone for about 30 minutes (I have Bluetooth). He agrees to send his Profit and Loss statements to me via email to provide him a restaurant valuation for all three of his restaurants.
9:15 pm- I finally arrive at home after driving over 900 miles. I was mentally tired, my body ached, and my stomach was empty. I was lucky because my wife had dinner ready.
I returned home with zero signed listing agreements. Most would think my trip was unsuccessful, but I feel different.
I was able to show my potential listing clients I will go the extra mile to provide exceptional customer service. I was trying to show Restaurant Owner 2 that I’m not a Broker that will just sit in an office and rarely visit clients at their restaurants,
EATS Restaurant Brokers commits to visiting potential clients within a 300-400 miles radius if needed to get a deal done. We can sell restaurants in Tennessee, South Carolina, North Carolina, Alabama, Texas, Kentucky, Missouri, Louisiana, Virginia and Georgia.
Thinking about selling a restaurant contact EATS Broker. 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
Read More
Why Do Restaurant Sales Transactions fall apart?
Restaurant Sales Transactions fall apart for a collection of reasons. Some of these issues can be resolved before they derail a deal from closing, but several problems are discovered along the way.
Once the restaurant seller and buyer have agreed to terms and signed an Asset Purchase Agreement, the due diligence period will start, and the buyer will deposit $10,000-$30,000 in escrow with a closing attorney. The due diligence period for a buyer is similar to a monopoly get-out-of-jail-free card. This gives the buyer the right to cancel the agreement for any reason and get their 100% escrow deposit back.
Due diligence on a main street restaurant sales transaction usually ranges from 10-30 days.
A main street restaurant can be described as a business that:
- Have less than $3 million in sales revenue.
- Have a restaurant valuation of $1 million or less.
- Have adjusted earnings or EBITDA of $1 million or less.
Dominique Maddox, a Restaurant Broker and Founder of EATS Restaurant Brokers says, “I can handle the lion’s share of the problems if I know about them at the start of the selling process.
The more information I can collect upfront can help me resolve future issues that might happen. I have been specializing in selling restaurants for over 8 years now, and I encounter new problems every day helping a buyer and seller arrive at the closing table”.
EATS Broker provides the Top 2 Reasons Restaurant Sales Transaction fall apart?
The Restaurant Seller does not tell the truth and is not upfront with important information.
The restaurant owners know the restaurant’s pros and cons better than anybody (or they should). The individual can be upfront with information or hold back valuable information, hoping it will not come back and hurt the deal.
When working with a restaurant brokerage, sellers are usually required to sign a listing agreement that indemnifies the Restaurant Broker from any future liens or lawsuits because they are only representing the information provided by the seller.
The biggest lies or half-truths a seller will provide will cover:
- Books and records-Profit and Loss Statements and Tax Returns
- Tax liens or UCC liens
- Kitchen equipment working status
- Partnership status
- Franchise required training
- Their current financial situation-includes monthly lease status (do they owe landlord money for back rent?)
Buyer changes mind about buying the restaurant
Owning a restaurant is a lifestyle choice that buyers have to realize before they buy a restaurant. During the diligence period, the buyer will start to poke and analyze the restaurant under a microscope. The buyer begins the buying process with tons of enthusiasm and thoughts of being a successful restaurant operator.
The buyer can easily change their mind once they start noticing errors and mistakes in the financials provided to them to analyze. Restaurant buyers will look at the kitchen equipment with a heavy microscope and detect if the restaurant kitchen equipment is outdated or not working.
The most significant issues for buyers to cancel contracts during the due diligence period:
- Books and records were not accurate
- They don’t like or trust the restaurant seller
- Can’t agree to terms with the landlord
- Can’t attend the required franchise training
- Spouse disapproves
- The restaurant lifestyle and hours are not a good fit
- Want to renegotiate the sales price and terms
- Can’t get approved for bank financing
For more information on the restaurant market and other available consulting services or a complimentary restaurant valuation, contact Dominique Maddox at 404-993-4448 or by email at sales@eatsbroker.com. Visit our website at www.EATSbroker.com.
Read More
Selling a Franchise Restaurant-Transfer Fee
When selling a franchise restaurant, how much is the Franchise Transfer fee? This question is one of the first questions EATS Restaurant Brokers wants to know from franchisees interested in selling a franchise restaurant. Franchises have various Franchise Fees, but one fee is significant for reselling a restaurant, and it’s the Franchise Transfer Fee.
The most common Franchise Fee is the Initial Franchise Fee paid by the franchisee to the Franchisor. The initial fee is a one-time payment for the right to operate as a franchisee. This fee is typically paid at the time of the signing of the Franchise Disclosure Document (FDD).
Initial franchise fees can range from $10,000-$75,000, depending on the Franchise Restaurant Brand. Generally, franchise transfer fees are 50% of the initial franchise fee.
Potential franchisees are usually aware of becoming a franchisee they will be required to pay royalty fees, marketing fees, renewal fees, advertising fees but are unaware of the transfer fee.
Who pays the Franchise Transfer Fee can be negotiated between the restaurant seller and the potential buyer. Restaurant sellers naturally want the buyer to pay the transfer fee, and our company agrees, but why do we agree?
EATS Restaurant Brokers- Franchise Business Consultants explains why the buyer should pay the Transfer Fee:
- The buyer is paying for the Franchisor’s required training before a sales transaction can be complete. The new franchisee is required to train for 2-6 weeks, depending on the franchise brand.
- Sellers are commonly required to pay for restaurant upgrades before a Franchise Restaurant can be sold to bring the restaurant up to current franchise specs. This can include equipment upgrades, signage upgrades, POS sales system upgrades, new chairs, new tables, and other required upgrades.
- Restaurant upgrades cost to a seller can range from $5,000-$100,000. The buyer benefits from the upgrades.
- The buyer received the right to operate as a franchisee under the previous owners remaining franchise term years on the original FDD.
- The franchise fee is separate from the sales price. The restaurant seller does not benefit from the franchise transfer fee.
- The restaurant is turn-key for the new buyer.
- The buyer is usually paying half the fee of the initial franchise fee restaurant seller paid to have the franchise’s rights.
Visit our website at www.EATSbrokers.com for more information on selling or buying a restaurant. We are in the business of selling restaurants!
Read More
Who pays for closing attorney fees for restaurant sale?
Who pays for closing attorney fees for a restaurant sale, who does the lawyer actually represent? Once the buyer-seller has agreed to a purchase price, next, it’s time to open escrow and hire a closing attorney.
The closing attorney represents the buyer, and it’s the buyer’s expense to pay at the closing table. Most transactions only have a buyer closing attorney; occasionally, a seller will hire its own closing attorney.
Closing Attorney Fees for Restaurant Sales can differ from attorney to attorney. Unlike residential real estate transactions, restaurant buyers don’t need a closing attorney for the sales transaction to close, but it’s highly recommended.
What does a closing attorney actually do for the transactions? The closing attorney will provide a Bill of Sale, Non-compete agreements, settlement statements, and disburse closing funds to all parties.
Dominique Maddox, a Restaurant Broker and Founder of EATS Restaurant Brokers, says, “closing attorneys can be an asset or liability in a sales transaction. We always recommend closing attorneys that specialize in a business transaction rather than residential transactions.
The worst case I have experienced is dealing with a non-experienced attorney in Texas who was friends with the buyer. The buyer hired her “friend,” and he didn’t know what he was doing; he was actually learning on the job. He charged her $7,500 for a task that should have cost $1500-$2000”.
Closing attorney fees can fluctuate; find below three Attorneys EATS Restaurant Brokers recommends to clients for restaurant sales transactions and how the prices can differ.
Attorney #1
Base Closing: $1000-If cash transaction and includes a bill of sale, indemnifications, non-compete agreement, settlement statements, disbursements (wife fees included)
Base Closing with an institutional lender: $2000 includes all the above and dealing with lender requirements.
Seller Financing Docs: $350
Seller Wire $25
Lien Search: Cost but is included in the Base Closing fee
Draft Escrow Agreement: $350
Attorney #2
Base Closing $1200- If cash transaction and includes a bill of sale, indemnifications, non-compete agreement, settlement statements, disbursements (wife fees included)
Seller Financing Docs $400
Non-compete agreements-$200.
Lien Search $275-included in base closing.
Base Closing – All Cash (includes Bill of Sale, indemnifications,
Non-Competition Agreement, Settlement Statement and disbursements) $1,400
Closing Attorney #3
Base Closing – w/Seller Financing Documents $1,900
Base Closing – w/Traditional Loan $2,500
Base Closing – w/Small Business Administration Financing $3,500
Lien Search (the business name for UCCs and up to 2 individuals) $200
Escrow Agreement $350
Escrow Service Only $525
Mail Away Service $100
EATS Broker advice for using a Closing Attorney:
- Use a business attorney who commonly closes business transactions. Confirm your transaction will not be the 1st restaurant sales transaction they have completed.
- Agree on price and terms upfront for the restaurant sales transactions. Do not let the attorney charge you an hourly rate.
- Use the Restaurant Brokers Asset Purchase Agreement and have an attorney review. Do not ask the attorney to draft an agreement. This can be expensive, and some attorneys charge by the hour.
A closing attorney can be an asset or liability. It’s highly recommended to use a closing attorney for all restaurant sales transactions. If you don’t have a closing attorney, your restaurant broker should be able to recommend a good one.
Visit our website at www.EATSbroker.com for more information on selling or buying a restaurant.
Read More