Restaurant Owner do you know the lease terms
Ask a Restaurant Owner if you know the lease terms of your restaurant. The common answer will be, “Yes, I signed the lease agreement and have a copy. The Restaurant Business Broker estimates that after selling restaurants for 11 years, only about 25% of restaurant owners actually know the critical dates of the lease agreement when it comes to lease renewal.
When selling a restaurant, the Owner is required to provide a copy of the lease agreement to the buyer. The lease terms can determine the likelihood of a restaurant sales transaction closing. All restaurant owners must deal with the language of assignment in the lease agreement while selling a restaurant.
The Dallas Restaurant Broker Dominique Maddox says, “When selling a restaurant business, I look for three critical dates on the lease: the Commencement date, Possession Date, and Renewal period.”
Restaurant Broker 3 Critical Lease Dates to know:
Lease Commencement Date:
Starts upon execution of the Lease Agreement and the clock starts ticking on your lease terms. It can be confusing to correctly identify the lease commencement date by viewing the lease regularly. The dates on the lease are usually just dates and have language that triggers the critical dates.
Fixturing Period:
This is the time you have to build out the restaurant space. Once this period starts, the lease commencement date starts. During this period, restaurant owners usually get free rent, reduced rent, or only have to pay Common Area Maintenance (CAMS).
Rent Commencement Date:
It starts the earlier of when the Tenant opens for business or after an agreed-upon time after the Lease Commencement Date. The time can range from 1 to 12 months.
Restaurant Broker Tip: Restaurant Owners who do not know the correct Rent Commencement Date can lose the right to extend the initial term. Missing this essential period can affect their ability to turn around and sell a restaurant.
Renewal Period:
This period comes before the anniversary of the rent commencement date and the expiration of the lease terms. Landlords will start communicating with Restaurant Owners about lease renewals 6-12 months before expiration.
The lease language requires the Tenant to exercise the Renewal Period by written notice to the landlord 3-6 months before the expiration of the original Lease Term.
Restaurant Broker Tip: Restaurant Owners should always keep track of the lease expiration and renewal dates. This can differentiate between selling a restaurant and the landlord backfilling the space with a new tenant.
For more information on the restaurant market and other available consulting services or a complimentary restaurant valuation, contact Restaurant Business Broker Dominique Maddox at
404-993-4448 or email at sales@eatsbroker.com. Visit our website at www.EATSbroker.com
Read MoreEATS Broker sells Gabriel’s in Santa FE, New Mexico
Restaurant Broker Dominique Maddox of EATS Broker sells Gabriel’s located at 4 Banana Ln, Santa Fe, New Mexico. EATS Broker represented the seller and buyer in the transaction.
The new buyers are excited about the opportunity. The buyers bring a wealth of knowledge coming from a restaurant background. They plan to keep the concept the same and continue the tradition.
Gabriel’s has been open for over 30 years and has become a landmark in the area and a tourist destination. For 30 years, locals and tourists have come to this Restaurant to celebrate anniversaries, birthdays, holidays, and parties.
Gabriel’s is known for its authentic mix of Southwestern cuisine and classic Mexican dishes. The Restaurant can seat 235 guests inside and 150 guests on the outside garden patio, which provides an unbelievable view of the Sangre de Cristo mountain range.
Dallas Restaurant Broker Dominique Maddox of EATS Broker says, “It was a great experience traveling to New Mexico to sell an iconic restaurant. I will be forever thankful for the opportunity to help Mr. Gabriel”.
The previous owners plan to retire and enjoy. The new owners plan to get ready for a busy summer tourist season.
EATS Broker is based out of Dallas, Texas. Our Restaurant Brokerage sells restaurants in over 15 states located on the South and East Coast.
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 MoreEATS Broker sells a Dickey’s Barbecue Pit in Fayetteville, Georgia
Dominique Maddox of EATS Broker sells a Dickey’s Barbecue Pit in Fayetteville, Georgia. EATS Broker represented the seller and buyer. The seller owned the business for only nine months before realizing they wanted to move on from the restaurant industry.
The new owner plans to continue the same operations and increase catering orders. This established Dickey’s Barbecue Pit franchise has been open since 2014. The new owner sent his manager to Barbecue University at Dickey’s Barbecue Pit corporate office in Dallas, Texas, for two weeks of training.
Restaurant Business Broker Dominique Maddox of EATS Broker says, “Selling a restaurant after only owning it for less than a year is common. The restaurant industry can be challenging, sometimes forcing people to make hard decisions.
Dickey’s Barbecue Pit is an American family-owned barbecue restaurant chain based in Dallas, Texas, and is a subsidiary of Dickey’s Capital Group. Since Travis Dickey established the restaurant in 1941, it has become the largest barbecue franchise in the United States & Worldwide.
EATS Broker is a restaurant brokerage based in Dallas, Texas. Our Restaurant Brokerage sells restaurants in over 15 states located on the South and East Coast. The Restaurant Business Broker has been selling restaurants for over 12 years. EATS Broker was founded in October 2019.
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 MoreCommon Mistakes: Restaurant for Sale by Owner
Restaurant for Sale by Owner listings usually try selling a restaurant business without the assistance of a Restaurant Broker. Some restaurant owners decide to sell a restaurant on their own to save on the commission a restaurant business broker charges.
The old saying is “knowledge is power,” and the art of selling a restaurant can be challenging for a Restaurant for sale by Owner. The Restaurant Broker at EATS Broker created a list of the three common mistakes made by Restaurant for Sale by Owner:
1.Restaurant Valuation: Determining the asking price when selling a restaurant is essential. The most critical stage of selling a restaurant business is coming up with the correct restaurant valuation.
Pricing a restaurant too high increases the chances of the restaurant not selling. Pricing the restaurant too low leaves potential profits on the table.
The three restaurant valuation methods are the asset-based approach, income approach, and gross revenue approach.
Restaurant Business Broker tip: Understanding the difference between a restaurant listed for sale based on earnings and an Asset Sale will make all the difference in the listing price.
Restaurants for Sale by Owner listings should consider paying a consulting fee to a Restaurant Broker to create an accurate Restaurant Valuation.
2.Lack of Financial Documentation: Owners should prepare and organize all detailed financial records when selling a restaurant. Restaurant buyers will want to see accurate financial statements to assess the restaurant’s potential.
Restaurant owners should be ready to defend the listing price with financial documentation and be willing to negotiate. Lack of transparency can lead to distrust. Restaurant for Sale by Owner listings should always provide accurate information.
3.Lack of knowledge to sell a restaurant: The average restaurant owner will only have to sell a restaurant once in their lifetime. The knowledge it takes a Restaurant owner to have a successful restaurant resale can be researched online, but overall, it’s a learned skill.
Owners thinking about selling For Sale by Owner (FSBO), the skill set to operate a day-to-day restaurant differs from selling your restaurant.
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 will move forward.
It takes an average of 6-8 months to sell a restaurant. The frustration of not selling, time commitment, and marketing fees can start to affect the restaurant’s operation.
Restaurant for Sale by Owner listings has to think if trying to sell a restaurant on their own to save on a listing commission is the right choice.
For more information on the restaurant market and other available consulting services or a complimentary restaurant valuation, contact Restaurant Business Broker Dominique Maddox at 404-993-4448 or email at sales@eatsbroker.com. Visit our website at www.EATSbroker.com
Read MoreSelling a restaurant? What does the buyer pay for?
When selling a restaurant, most sellers don’t know what the buyer pays for at the closing table besides the listing price. Outside of the listing price, several additional fees should be negotiated upfront between the buyer and restaurant seller.
Restaurant Business Brokers are trained to know the typical components of the fees associated with selling a restaurant and will inform potential buyers of the fees upfront. The average restaurant buyer needs to be more knowledgeable about closing costs. This blog will discuss the additional fees for selling a restaurant besides the listing price.
The Restaurant Brokerage of EATS Broker provides a list of the common items to consider:
- Inventory Cost– Both parties will usually take an itemized physical count on the inventory the night before closing or the day of closing. The on-hand and in-transit marketable inventory at the closing shall be valued using the Seller’s Cost of inventory.
Restaurant Broker Tip: The buyer should come to the inventory count with a check ready to write out to the seller after completing the inventory count.
- Closing Attorney Fees: Buyer shall pay the Closing Agent’s fees and expenses. Such expenses may include, without limitation, costs for a judgment and lien search, documentary stamps taxes, and the recording or filing of UCC-1 financing statements in the state records.
The buyer can pick the Closing Attorney to be authorized to receive, deposit, and distribute funds for the parties. The average cost for deals under $1 million can range from $3,000-$5,000.
- Landlord Security Deposit: When doing a lease assignment while selling your restaurant, the landlord will commonly assign the security deposit they have in hand to the new tenant. The buyer is responsible for paying the current restaurant seller the security deposit back. This charge is added to the Settlement Statement.
Restaurant Broker Tip: Confirm that the landlord will assign the rights to the security deposit to the new tenant. EATS Broker has seen exceptions to this common practice in the past.
- Transfer Fee: Selling a franchise restaurant comes with an additional fee as a transfer fee. Depending on the franchise brand, this fee can range from $2,000 to $30,000. The transfer fee is listed in the Franchise Disclosure Document (FDD).
Restaurant owners do not benefit from the transfer fee; it is paid directly to the Franchise. The transfer fee is commonly paid at the closing table, but some brands require the fee upfront to consider the transfer to a new buyer before closing.
- Prorations: The expenses attributable to the operation of the Business prior to 12:00 p.m. on the Closing Date, including, by way of example and not by way of limitation, expenses for electrical service, natural gas service, telephone service, internet service, pest control service and trash removal, transferable taxes, licenses, rents, utilities, and other customarily prorated items, shall be prorated as of noon on the Closing Date, and may be made on estimates of amounts prorated; provided that the parties agree to recalculate such prorations when the actual numbers are ascertained.
Next time you sell your restaurant, consider the additional fees the buyer will pay outside the purchase price. It’s highly recommended that restaurant owners use a trained Restaurant Business Broker to negotiate and help maximize the dollar value received at closing.
For more information on the restaurant market and other available consulting services or a complimentary restaurant valuation, contact Restaurant Business Broker Dominique Maddox at 404-993-4448 or email at sales@eatsbroker.com. Visit our website at www.EATSbroker.com
Read MoreBuying an existing restaurant in 2024
Buying an existing restaurant in 2024 can be a great way to start the year. Buying a restaurant already established and built out can be a cheat code to success. Franchise Restaurant concepts are searching for existing restaurant space to convert to new concepts to save money on the initial build-out cost.
The Restaurant Broker at EATS Broker provides some tips on the buying process when it comes to restaurant resales:
Have a goal: When it’s time to consider buying a restaurant, buyers should have goals in mind that they want to achieve. The goals can vary depending on the buyer’s ambition.
– Buying Cashflow
-Continue current concept and grow sales
-Open more locations of the same concept
-Convert to a new concept and save on build-out cost
-Buy an established Franchise Restaurant for sale
-Buying an Asset Sale (Restaurant not making money) for pennies on the dollar of initial build-out cost.
Research and Market Analysis:
Potential restaurant buyers should research the restaurant physically and online. Visiting the restaurant as a customer is highly recommended to get the experience. Visiting the restaurant is a great place to start thinking about the Pros and Cons of the restaurants for sale.
Researching the restaurant’s online presence via Google or social media is an opportunity to learn more about the customers’ perception of the restaurant.
EATS Broker items to consider when doing research are:
-The Restaurant Segment you have interest
-Competition in the area
-Target market
-Potential for growth
-Google Reviews
-Specific location demographics, average household income, vehicles passing per day, street visibility
Financial Assessment of buying a restaurant:
When buying a restaurant, the most important task is understanding the financial obligations. Restaurant buyers will review the financial records of the existing restaurant, including profit and loss statements, sales tax filings, POS sales reports, balance sheets, tax returns, and cash flow statements.
Evaluate the current and past financial performance to determine the restaurant’s profitability. Buyers will assume the current agreed lease terms between the restaurant seller and landlord. The lease is usually a new buyer’s most significant financial obligation unless they get a bank loan.
Restaurant Business Broker suggestions for items to consider on the lease:
-Yearly rent increases
-Years left on year
-The number of options to extend the lease
-Lease Assignment Fee
-Assignment Clause
-Exclusive Clause
-Relocation clause
-Lease Renewal notice requirement
Buying an existing restaurant is a wise path to restaurant ownership, but buyers should educate themselves about the buying process before starting the search. An existing restaurant has already built a brand identity, which can help to establish credibility and trust with customers. Or it provides a great option to convert to a new concept.
For more information on the restaurant market and other available consulting services or a complimentary restaurant valuation, contact Restaurant Business Broker Dominique Maddox at 404-993-4448 or email at sales@eatsbroker.com. Visit our website at www.EATSbroker.com
Read More4 Tips for a Successful Restaurant Sale
EATS Broker provides 4 Tips for a Successful Restaurant Sale in 2024 to any restaurant owner considering selling a restaurant. Selling a restaurant can be challenging, with only 30%-40% of restaurants listed for sale selling.
Selling a restaurant in 2024 comes down to careful planning and execution. The Restaurant Business Broker provides tips to ensure a successful restaurant sale in 2024.
Prepare your Financial Documents: Buyers will want to see organized financial documents that include tax returns, profit and loss statements, sales tax filings, a copy of the lease, equipment list, and any other relevant financial documents.
Restaurant Owners should be ready to discuss growth opportunities and positive trends in the restaurant with potential buyers.
Restaurant Valuation: This step is critical to selling a restaurant. There are three different approaches to come up with a restaurant valuation. The approaches are:
Asset-Based Approach– The buyer pays the seller an amount based on the opportunity to benefit from the existing business and build out
Income Approach: This approach determines an expected level of cash flow for the business using a restaurant’s past earnings record.
Gross Revenue Approach: This method is the most uninvolved that solely relies on a percentage of annual gross sales to determine a value and is not accepted by bank lenders.
The Restaurant Real Estate Broker at EATS Broker uses the Income Approach to determine the appropriate listing price.
Fix Equipment and Enhance Curb Appeal: Ensure all equipment is in working condition and looks clean and presentable. The restaurant should not have any noticeable flaws that can be fixed or replaced. First impressions matter to buyers; a well-maintained restaurant location will attract more buyers.
Legal Compliance: Restaurant owners should confirm all sales tax filings are paid and updated, check for any UCC licenses on the business, and ensure that the business license has stayed active.
Professional Assistance: It takes a team of professionals to get some deals to the closing table. Restaurant Owners should consider hiring a Restaurant Business Broker, accountant, and Attorney to guide them through the due diligence process.
Restaurant Owners should be aware that each restaurant resale transaction is unique and has several challenges to overcome. When it’s time to sell a restaurant, seeking professional representation increases the chances of a restaurant selling.
For more information on the restaurant market and other available consulting services or a complimentary restaurant valuation, contact Restaurant Business Broker Dominique Maddox at 404-993-4448 or email at sales@eatsbroker.com. Visit our website at www.EATSbroker.com
Read More3 Common Mistakes Restaurant Buyers Make
What are the Common mistakes restaurant buyers make when buying a restaurant? The answer is complicated but simple at the same time. There are several common mistakes that potential restaurant buyers should be aware of when deciding to buy a restaurant.
The Restaurant Broker at EATS Broker provides some of the most common mistakes restaurant buyers make based on his experience of selling restaurants for eleven years.
- No Business Plan– The restaurant industry is a lifestyle with financial obligations. Restaurant buyers should have a clear and comprehensive business plan for the restaurant, which should outline their vision, strategies, and financial projections.
Restaurant Buyers should consider how the restaurant operations affect their current lifestyle, whether the spouse supports the decision, and whether they can afford any hardship from the restaurant.
Restaurant Business Broker Tip: The benefit of buying an established restaurant is that the current owner has done the hard work to get the restaurant up and running. Restaurant buyers are provided with Profit and Loss statements and tax returns to understand the strengths and weaknesses of the restaurant operations.
- Financials ready– It’s common practice for Restaurant Business Brokers to have interested buyers sign a non-disclosure agreement and request proof of funds for certain restaurant listings for sale. This is not always the case. It really depends on the restaurant listing.
When selling a restaurant that is a Franchise, an EATS Broker will request proof of funds that meet the franchisor’s financial requirements, ranging from $100,000 to over $1,000,000. Buyers can send a copy of a bank statement, 401K statement, or letter from a banker.
Potential restaurant buyers who request information on restaurants for sale that don’t have proof of funds ready to send will not be taken seriously by a Restaurant Brokerage.
Restaurant Business Broker Tip: When buying a restaurant, the landlord will request financial information for the new lease or lease assignment approval.
If the restaurant is a franchise, proof of funds will be needed for Franchise approval. When inquiring about a restaurant for sale, buyers should have proof of funds ready to be shared to get more information on the listing.
- Not understanding restaurant numbers: Restaurant buyers who understand how to analyze a profit and loss statement or tax return usually make better decisions. Restaurant buyers who understand food, labor, and rent costs compared to sales make decisions on financials and usually not emotions.
Restaurant Business Broker Tip: Research the expected ratios for food cost, labor cost, and rents for the restaurant segment you have an interest. Ask the restaurant broker or seller questions if you see odd ratios.
To avoid the three Common Mistakes Restaurant Buyers Make, prospective restaurant buyers should conduct thorough due diligence, seek professional guidance, and develop a well-thought-out business plan.
Additionally, it’s essential to understand the restaurant industry, local market conditions, and the specific challenges and opportunities associated with the restaurant they intend to purchase.
For more information on the restaurant market and other available consulting services or a complimentary restaurant valuation, contact Restaurant Business Broker Dominique Maddox at 404-993-4448 or email at sales@eatsbroker.com. Visit our website at www.EATSbroker.com
Read MoreSelling a Restaurant? Are you ready
When selling a restaurant, owners can make several mistakes that impact the experience. Restaurant Business Brokers sell multiple restaurants a year, while most restaurant owners will only experience selling a restaurant once in their lifetime. Understanding the resale process of restaurants takes years of experience.
When selling a restaurant, business owners should prepare mentally for the restaurant resale process. Restaurant sellers make several common mistakes before and after the restaurant is listed on the buyer market for sale.
Restaurant Broker -Three typical Mistakes restaurant sellers make:
- Unrealistic Expectations about selling a restaurant: Many Restaurant sellers have unrealistic expectations about the resale process. It’s different than selling a home or another business; reselling a restaurant can be challenging.
Nationally, only about 30%-40% of restaurants listed for resale will sell to a new buyer. In Texas, it’s more like only 20% of restaurants listed for sale will sell.
Most restaurants listed for sale will have to close their doors and remove the listing from the buyer market, and the restaurant tenant will give the restaurant space back to the landlord. It takes an average of 6-8 months to sell a restaurant “IF” it sells.
Selling a restaurant business is like a slow cooker, not a pressure cooker.
- Poor Financial Documentation: The fastest way to lose a buyer’s interest is to provide incomplete or inaccurate financial documentation. Sellers who decide to rush to list their restaurant for sale and don’t have good books and records increase the chances of the restaurant not selling.
Depending on the type of transaction, buyers will request several supporting documentation to review and verify. Restaurant sellers should have specific documentation ready for a qualified buyer to check. Time kills deals, and the longer a buyer waits to receive documents, the likeliness of closing the deal decreases.
Dallas Restaurant Broker tip:
Restaurant sellers should have the following documents ready before listing a restaurant for sale:
-Tax Returns 2-3 years
-Profit and Loss Statements 2-3
-Year-to-date Profit and Loss statement within 60 days
-Copy of Lease
-POS Sales Reports
-Monthly Sales Tax Filings
-Balance Sheets
- Inaccurate Restaurant Valuation: This is restaurant owners’ number #1 mistake. Restaurants listed too high will hurt the potential sale; listing too low will leave money on the table.
Getting a restaurant valuation and not just a “WAG” wild-ass guess is critical!
Restaurant real estate brokers can provide a restaurant valuation to give buyers a Broker’s opinion. The Restaurant Broker at EATS Broker provides complimentary restaurant valuations to customers.
After reading this blog, avoiding these mistakes and seeking professional advice and guidance can significantly improve the likelihood of selling a restaurant.
For more information on the restaurant market and other available consulting services or a complimentary restaurant valuation, contact Restaurant Business Broker Dominique Maddox at 404-993-4448 or email at sales@eatsbroker.com. Visit our website at www.EATSbroker.com
Read More
What is the best time to sell a restaurant?
The best time to sell a restaurant can depend on various factors outside the Restaurant seller’s control. The elements can include specific circumstances of the restaurant business, market conditions, and your personal goals.
The Restaurant Broker at EATS Broker provides some considerations to help you determine the optimal time to sell a restaurant:
Financial Performance is key: The best time to sell a restaurant is when it’s profitable and has good books and records. Potential buyers will be more interested in a profitable restaurant for sale. Ensure your restaurant has a track record of solid revenue, profit margins, and positive cash flow.
Restaurant Broker Tip: The tax returns and profit and loss statements should tell the same financial story. During the due diligence period, buyers will sometimes request financial documentation directly from the IRS on the restaurant.
Market Conditions: Local and regional market conditions can significantly impact the sale of your restaurant. Factors like population growth, demographic changes, and competition can influence the demand for restaurants.
Lease Terms: If your restaurant operates in a leased space, consider the remaining lease term and whether it’s renewable. A long, favorable lease can make your restaurant more appealing to buyers.
Personal Goals: Your own circumstances and goals are essential. If you’re looking to retire or pursue a different business venture, that could be the right time for you to sell. Additionally, consider factors like your health and life events.
Seasonality: If your restaurant has a seasonal aspect, such as a beachfront location, the best time to sell may be at the end of a successful season.
Market Trends: Keep an eye on industry trends and consumer preferences. Selling while your restaurant aligns with current trends can be advantageous.
Brand Reputation: A strong brand and positive reputation can enhance the value of your restaurant. Selling when your restaurant is highly regarded in the community can lead to a better deal.
Financial Documentation: Ensure your financial records and tax returns are in order. Buyers will want to see accurate financial data before making an offer.
Consult with Professionals: Seek advice from professionals like business brokers, accountants, and attorneys who specialize in restaurant sales. They can provide insights into the current market and guide you through the selling process.
Exit Strategy: Plan your exit strategy well in advance. Selling a restaurant can take time, so start preparing at least a year or two before you intend to sell.
Ultimately, the best time to sell a restaurant will vary depending on your specific circumstances and the condition of your business. It’s essential to conduct a thorough assessment and seek professional guidance to determine the optimal timing for selling a restaurant.
For more information on the restaurant market and other available consulting services or a complimentary restaurant valuation, contact Restaurant Business Broker Dominique Maddox at 404-993-4448 or email at sales@eatsbroker.com. Visit our website at www.EATSbroker.com
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