Pros and Cons for a Restaurant Asset Sale
The Pros and Cons of buying or selling a restaurant as an Asset Sale can be a Win-Win situation for both parties. In an asset sale, the seller retains possession of the legal business entity name and stocks, and the buyer only purchases the company’s assets.
The assets include equipment, leasehold improvements, Goodwill, trade secrets, trade name, telephone number, website address, social media accounts, and lease assignment.
Dominique Maddox, a Dallas Restaurant Broker and Founder of EATS Restaurant Brokers, says, “there are only two ways to provide a restaurant valuation, selling a paycheck or selling as an Asset Sale.”
Restaurant Valuation – Two Methods
1st Selling a restaurant that is profitable with good books and records. The restaurant buyer can anticipate receiving a paycheck from the restaurant ownership. For example, restaurant nets a profit of $100,000 a year, the restaurant buyer can expect to receive that income.
2nd Selling a restaurant that is not profitable, open for less than 2 years, has terrible books and records is an Asset Sale. They are priced pennies on the dollar. A quick way to spot a restaurant for sale that is an Asset sale is to look at the cash flow or EBITDA. If these numbers are missing or show a $0, chances are good the restaurant for sale is an Asset Sale
Pros and Cons of buying or selling a restaurant as an Asset Sale
Pros for Restaurant Seller
- Can close quickly (if franchise training is not required)
- Requires cash buyer-don’t have to worry about lending
- Can ask the landlord to be removed as lease guarantor
- No longer has to worry about restaurant ownership
Pros for Restaurant Buyer
- Will receive the equipment free and clear of any UCC liens
- Easy to convert to a new concept
- Saves thousands of dollars on build-cost
- Can benefit from Goodwill like previous owners Google Reviews, website, and social media followers.
- Buying a restaurant for pennies on the dollar
- Transfer cost fee is less than the original new store franchise agreement cost
- The majority of Asset Sale deals are restaurants that are still open and have employees.
Cons for Restaurant Seller
- The listing price is usually a lot less than build-out expenses.
- A more significant number of restaurant sellers will take a loss to get out of restaurant ownership.
- Harder to sell a restaurant that is not profitable or shows a small amount of profit.
- Cash buyer required because banks will not finance an unprofitable restaurant for sale.
Cons for Restaurant Buyer
- Buying a restaurant that might not be profitable is risky
- Buying opportunities can be challenging to price correctly
- Lease Assignment is agreeing to the previous owner’s lease terms and obligations,
- Becoming a guarantor on the lease
Asset Sales can be a perfect opportunity for existing restaurant owners to expand or for new restaurant owners to save money on opening a new restaurant.
For more information on the restaurant market and other available consulting services or a complimentary restaurant valuation, contact Dallas Restaurant Broker 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 Broker- What I like about the business
Restaurant Broker what I like about the business is a blog written from my viewpoint after being a successful Restaurant Resale Specialist for almost ten years.
I’m currently the Founder and President of EATS Broker, a brokerage firm specializing in selling Franchise Resales, independently owned restaurants, bars, and nightclubs.
The problematic fact about being a Restaurant Resale Specialist is that the average time to sell a restaurant is 6-8 months. The harsh reality is that only about 20%-30% of all restaurants listed for sale will actually sell to a new buyer. Most locations will be closed and returned back to the landlord.
The average survival time for a Restaurant Broker working full-time as a Restaurant Resale Specialist is less than 2 years.
You might be asking yourself, what do I like about the business if everything is negative?
My career as a Restaurant Broker started in 2010; I was told during the interview that it would take 6-8 months before I received a commission. I was broke at the time, but I believed in myself, and I was interested in becoming a franchise resale specialist.
Fast forward to October 2021, and EATS Broker is based out of Dallas, Texas. Our company sells restaurants in over 15 states. We hold a Brokers Real Estate License in Texas and Georgia.
EATS Restaurant Brokers and www.EATSbroker.com, only established in 2019, have quickly become a popular resource as a franchise resale specialist and restaurant broker nationwide.
What do I like about the business as a Restaurant Broker?
- Affect Peoples Lives– People usually want to sell a restaurant because of personal reasons. When a restaurant owner can sell a restaurant, their personal life is generally affected positively.
The restaurant owner’s life can be draining on an individual’s personal life. Sometimes selling a restaurant will help multiple personal issues, but it can’t solve all problems.
On the buyer side, they have just realized the American Dream of business ownership. Buyers come into restaurant ownership with new energy and commitment to be successful. Buyers are fulfilling a life dream, buying for income, having a family recipe, and etc.
- Selling restaurants in multiple states– Every state requires a real estate license to sell real estate or real property but doesn’t for the sale of a business. Currently, 19 states require a Business Broker to hold a real estate license in the state to sell restaurants; most are located on the West Coast.
EATS Restaurant Brokers sells restaurants in Texas, Georgia, Oklahoma, Iowa, Missouri, Indiana, Ohio, Kentucky, Tennessee, Arkansas, Louisiana, Kentucky, North Carolina, South Carolina, Virginia, and Alabama.
- Eating at Various Restaurants– I’m a self-proclaimed Foodie, so I choose the right industry. Part of my job description is to try several different restaurants weekly. When I’m working with a client or trying to become a franchise resale specialist for a Franchisor, I like to experience the food.
This year I flew to Indianapolis, IN, to visit a client that owns a franchise restaurant and drove to Clark County, OH, to meet with another client and enjoyed some great BBQ.
For more information on the restaurant market and other available consulting services or restaurant valuations, contact Dallas Restaurant Broker Dominique Maddox at 404-993-4448 or by email at sales@eatsbroker.com. Visit our website at www.EATSbroker.com
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EATS Broker expands to Dallas, Texas
EATS Restaurant Brokers is growing and has expanded its headquarters to Dallas, Texas. One of the nation’s specialized Business Brokerage firms, EATS Restaurant Brokers, has obtained a Real Estate Broker License in Texas and now are Restaurant Brokers in Dallas, TX.
Dominique Maddox worked with one of the nation’s largest Restaurant Brokerage Firms for seven years before starting his Restaurant Brokerage.
EATS Broker was established in Atlanta, GA, in October 2019. Less than two years later, EATS Restaurant Brokers is moving its headquarters to Dallas, Texas.
EATS Broker is among the few and far between Restaurant Brokerage firms that hold a Brokers Real Estate license in multiple states and hold a Certified Franchise Executive (CFE) designation.
Dallas Restaurant Broker Dominique Maddox, President of EATS Broker, said, “ Texas is a tremendous state for us to expand and grow our restaurant brokerage firm.
I’m excited to add the Lone Star state to our list of targeted markets for future growth. I have sold multiple restaurants for sale in Texas while living in Atlanta. Texas has one of the largest restaurant resale markets in the nation, with over 600 restaurants listed for sale now. “
Texas has substantial growth in the restaurant industry; the state has one of the fastest-growing population numbers in the nation. Dallas Restaurants, Houston Restaurants, and Austin Restaurants are known across the country. It’s an exciting time to be in the Restaurant Business in Texas.
EATS Restaurants Brokers is excited about living in Texas and connecting people with opportunities in the restaurant industry. We can help you sell a restaurant or buy a restaurant.
To learn more about restaurant resales or to receive a complimentary restaurant valuation, visit our website at www.EATSbroker.com. EATS Broker assist buyers and sellers in the market to buy or sell a restaurant.
Contact Restaurant Broker Dominique Maddox at 404-993-4448 or sales@eatsbroker.com
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