Closing Attorneys for Restaurant Sales Transactions
Closing Attorneys for restaurant sales transactions are an essential part of the selling a restaurant process. Closing Attorneys act as neutral third parties in the transaction. Since they don’t represent either buyer or seller, as an attorney would.
Closing Attorneys are known by multiple names like Escrow agents and Real Estate attorneys. The Closing Attorney’s job is to ensure a smooth closing transaction, UCC-1 lien search, and wire closing proceeds to all parties.
Dallas Restaurant Broker Dominique Maddox says, “picking an experienced Closing Attorney that understands the Asset Sale Purchases is extremely important. Yes, you can close a deal without a Closing Attorney but EATS Broker always recommends a buyer to use a trusted Closing Attorney”.
Duties of a Closing Attorney
– Hold escrow deposit, and disburse closing proceeds to all parties
– Prepare Settlement Statement
– Prepare Bill of Sale
– UCC-1 lien Search
– Prepare Escrow Agreement
– Form of Restrictive Covenant Agreement-(sometimes)
– Prepare Representations and Warranties of Seller and Principal(s) (sometimes)
Closing Attorneys have to confirm that multiple tasks are completed before they will release escrow and send closing proceeds to all parties.
EATS Brokers provides a list of tasks that are completed or confirmed by an experienced Closing Attorney before closing:
Asset Purchase Agreement signed by all parties
All amendments are provided to Closing Attorney
Equipment List provided
Landlord’s Approval of Assignment or New Lease
Final inventory amount (if the purchase price is to be adjusted)
Prorations or Adjustments (if needed)
Franchise Agreement Approval
Wiring instructions for Franchise Transfer Fee
Wiring Instructions for Seller
Wiring Instructions for Broker
Allocation of Purchase Price-(8594 Form)-Asset Acquisition Statement
Buyer Funds-wired directly to the escrow account
Release of Liens or Payoff Letters
Lender’s Instructions (if third-party financing)
When selling a restaurant, EATS Broker always recommends contacting a closing attorney specializing in business transactions rather than residential transactions.
To learn more about EATS Broker consulting services or to receive a complimentary restaurant valuation, contact Texas 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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Questions to ask when Buying a Restaurant Franchise Resale
Customers that are buying a Restaurant Franchise resale do intensive research on the restaurant for sale opportunity but not enough research about the Franchise Brand. The relationship between a Franchisee and Franchisor is a business marriage that can end in success or divorce.
Franchise Brands provide the franchise disclosure document (FDD) to individuals interested in becoming a Franchisee. The FDD is the blueprint on how the working relationship between Franchisee and Franchisor will work.
Franchisors must provide the potential Franchisee with the FDD at least 14 days before it can be signed or any money transferred. It’s a great time to ensure potential restaurant buyers get some critical questions answered.
Dallas Restaurant Broker Dominique Maddox says, “most restaurant buyers only think about the royalty fees, marketing fees, transfer fees, and restaurant upgrades required.
When Buying a Restaurant Franchise for Sale, I think buyers should be focused on researching and asking questions about the Franchisor, Franchise Support Services, and operations.
The Restaurant Broker at EATS Broker provides a list of critical questions that should be answered or considered before buying a restaurant franchise for sale.
-How long has the Franchisor been franchising?
-What is the experience of the Management Team?
-What is the expansion strategy of the Franchisor?
-What is the Franchisee selection process?
-How long is the term of the Franchise Agreement?
-What does the initial training consist of?
-Does the Franchisor have a preferred food supplier?
-What makes the product unique?
-What is the brand position within the category?
-What is the market demand for the product?
-Have unit sales been decreasing or increasing?
-How many units does the Franchise have open?
The Franchise Disclosure Document (FDD) has some of the answers to these questions above but does not have them all.
To learn more about EATS Broker consulting services or to receive a complimentary restaurant valuation, contact Texas 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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What is Restaurant Prime Cost?
Restaurant Prime Cost can be described as the most critical number a restaurant owner should know to operate a profitable restaurant. Restaurant Prime cost should get extensive attention on the profit and loss statement because the category is highly volatile.
Today’s restaurant industry is faced with increasing labor wages and an explosion in food costs. These factors stress restaurant owners’ net profits because it’s expanding the Restaurant Prime Cost.
What is Restaurant Prime Cost?
The formula for Restaurant Prime Cost is: COGS + Total Labor = Prime Cost
Restaurant Prime Cost should be reviewed monthly and, at worst quarterly, to monitor any changes that can negatively affect the Profit and Loss statement. Many successful restaurant owners actually calculate and evaluate prime restaurant costs weekly.
Dallas Restaurant Broker Dominique Maddox says, “the first items I review on a profit and loss statement is the Cost of Good Sold “COGS” and the total labor cost total percentage cost. Prime cost should be 55%-65% or less (total sales)”.
Breakdown of Restaurant Prime Cost:
Cost of Goods Sold:
The cost of goods sold (COGS) in a restaurant includes the price of all products, materials, and condiments used to create a dish or drink.
Total Labor Cost:
Total labor cost includes employees’ wages and benefits. This category contains hourly employees, salaried employees, payroll taxes, and employee benefits.
Restaurant Broker Tips:
-Training managers to be proactive in monitoring food loss, employee scheduling, and comps.
– Provide proper training for new employees
– POS System and technology should be up to date with inventory count
-Increase food prices
-Review restaurant numbers weekly
-Owner/operator or General Manager operated
To learn more about EATS Broker consulting services or to receive 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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7 Most Common Restaurant Sale Deal Killers
The most common restaurant sale deal killers are items that are usually out of the hands of a Restaurant Broker. The process to sell a restaurant can feel like a marathon that many participants will have fatigue and not finish the race.
It’s a known fact in the Restaurant Brokerage industry less than 50% of businesses that go under contract will close. Some Restaurant Brokers might advertise hiring closing rates, which could be possible.
The Restaurant Broker at EATS Broker Dominique Maddox said, “some deal killers can be addressed upfront if they are known; it’s the unknown details that kill deals.
How will the landlord, bank, and Franchisor react to the new potential buyer? Did the seller provide all the details? Over my ten years of selling restaurants, I have seen it all”.
Restaurant Broker list of Common Restaurant Sale Deal Killers:
- Landlord- The landlord is the KING for restaurant sale deal killers. The landlord owns the property, and transactions cannot be completed without a lease assignment or lease. A majority of the landlords are simple to work with because they want a guarantee they will continue to receive monthly rent.
- Bank-When a restaurant for sale can qualify for SBA lending, the chances of that restaurant selling increase drastically. That’s the good news; the bad news is that it takes some serious legwork and patience to get a deal to funding.
Banks have several qualifying requirements a buyer must be able to pass. There are many reasons why a buyer may not qualify for lending. Example credit score, lack of liquidity, no collateral or don’t want a lien on collateral, etc.
- Franchisor: Franchise approval is only an issue with Franchise Restaurants for Sale. Franchise resale listings are popular with restaurant buyers, but the buyer has to get approved by the Franchise.
Franchisors have many requirements before they approve a buyer to become a franchisee. If a restaurant is a franchise for sale, the sale cannot be completed without the Franchisor’s approval of the buyer. Franchise resales require the buyer to travel to the Franchisor headquarters for a discovery day.
The Franchise can schedule training in a different state than the restaurant for sale. Buyers are responsible for paying the transfer fee, travel arrangements, and housing accommodations while attending training. The training time can range from 2-8 weeks depending on the Franchise Brand.
- Restaurant Buyer Expectations: Rule #1 Buying a restaurant differs from buying a home. The majority of buyers that purchase a restaurant are first-time buyers and don’t understand the buying process.
Buyer fatigue and misunderstanding is a fundamental reason why some transactions fall apart. The buyer should educate themselves about the buying process and work with a Restaurant Broker thru the process.
- Restaurant Seller Expectations: Restaurant sellers can misunderstand the restaurant sales process. Sellers have to understand that everything is negotiable for a buyer’s offer (except rent terms). Restaurant owners have to be willing to negotiate, provide supporting documentation, be patient, and be trustworthy.
Restaurant sellers have to understand if the documentation they provide to a Restaurant Buyer during the due diligence period doesn’t check out, the buyer might want to submit a counteroffer and renegotiate.
- UCC liens: A UCC-1 financing statement is a legal form that a creditor files to give notice that it has or may have an interest in the personal property. Restaurants for sale should have the ability to sell a restaurant that is free and clear of liens.
The closing attorney will conduct a UCC lien search on the business weeks before closing. If a UCC lien is discovered, the restaurant owner will have to pay the fees before closing or at the closing table.
- Time: It’s a known fact in selling a restaurant that Time Kills deals. The longer the process to sell a restaurant, the greater the deal’s chances of falling apart. Buyer fatigue and seller fatigue become an issue if an agreement is dragged out.
Buyer and seller work off a closing checklist, and both parties must work together to meet deadlines.
To learn more about EATS Broker consulting services or to receive 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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Step by Step Process to Buy a Restaurant Franchise
The Step by Step process to buy a restaurant franchise for sale can be a complex process with multiple guidelines, requirements, and documentation to read. Did you know the top restaurant brands have a Checklist that potential franchisees have to complete before they can purchase a Franchise Restaurant Resale?
The Restaurant Resale Specialist at EATS Broker will share information on the step-by-step process to buy a restaurant franchise resale.
Restaurant Broker 6 Steps to Buying a Restaurant Franchise Resale:
Step 1: Asset Purchase Agreement
When buying a restaurant for sale that is a franchise, it’s considered a resale/transfer. The buyer and seller will agree to terms on an Asset Purchase Agreement. Once both parties have signed the agreement and the buyer has deposited the escrow, the approval process with the franchise brand starts.
Step 2: Contact Franchise for Approval
- Submit an inquiry by:
- Inquiries are made online by visiting the company’s website to submit an inquiry
- The buyer will have to fill out a Contact Us form; information usually asked includes:
-Franchise State
-Timeframe for opening
-Liquid Capital to invest
- The Franchise will reach out to potential candidates for an initial conversation
Step 3: Initial Conversation with Franchise
- The Franchise Development Team will reach out to discuss your interest in the brand. This initial call is an excellent opportunity for buyers to ask questions about the brand.
- This conversation usually covers the following topics.
– The buyer’s background
-Familiarity with the Brand
– Current Financial Situation; Liquidity and Net Worth Requirements
-Time frame to buy/open
- Restaurant Franchise Resales-buyers will let the Franchise know that they are buying a Restaurant Franchise Resale and are currently under contract with the seller and the location.
***Most franchise brands Net Worth Requirements are lower for Restaurants for sale than new restaurant openings.***
Step 4. Complete & Submit Required Materials
- Items required for the franchisee approval process:
- Completed Application For a Franchise
- Prospective Franchisee Business Plan
– Plans should include an executive summary, operating plan, marketing, advertising plan, and financials.
- Signed Franchise Disclosure Document (FDD) Receipt
- Validation Documents
Step 4. A
Signed Franchise Disclosure Document (FDD) Receipt
- You will receive a PDF copy of the Franchise’s current FDD for signature.
- The Franchise Disclosure Document should be signed and returned to Franchisor.
- You must receive this Disclosure Document at least 14 calendar days before you sign a binding agreement with or make any payment to the Franchisor or an affiliate in connection with the proposed franchise sale.
- The FDD summarizes a company’s history, business experience, assistance, support, franchisee’s obligations, training, fees, estimated initial investment, financial performance representation, franchise agreement, and other essential information.
Step 4. B
Validation Documents:
- Documents are required for financial validation with your application. The necessary documents can include depending on the Franchisor:
- Photocopy of your ID
- Last 3-6 months of your bank statement – including Checking and Savings
- Pay stubs, W-2s for 2-3 years, or other proof of Income.
- 401Kor other retirement account statements.
- Authorization for Franchisor to complete a background and credit check.
- Discovery Day
- Buyer will fly to the headquarters of the Franchisor
- During the visit, buyers are introduced to the leadership team and representatives of every operational department who will train, support, and assist you as a franchisee.
- Face to face meeting with the decision-makers for franchise approval.
- Buyer should understand this is an interview to see if the Franchisor feels the candidate will be a good fit with the brand.
- Final Decision:
- Franchise Development Team member will contact buyer/candidate with approval.
- Franchisor will draft Franchise Agreement with buyer’s business entity information.
- Restaurant Buyer will sign the agreement and send Franchisor Transfer Fee.
- Franchisor will schedule a required training session for the buyer.
The transfer process can’t be completed until the restaurant buyer completes training. The required training depends on the Franchise Brand, which can range from 2 weeks – to 8 weeks.
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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Steps for first-time restaurant buyer
What are the Steps for first-time restaurant buyers? This question EATS Broker gets multiple times weekly for buyers inquiring about restaurants for sale. Many interested buyers looking at restaurants for sale opportunities will be first-time restaurant buyers.
Many buyers are shocked about the difference between buying a home compared to buying a restaurant. The buying process from purchasing a home to purchasing a restaurant has completely different steps.
The restaurant sales transactions can be more complex where the smallest detail can make the difference from selling a restaurant or a restaurant for sale not selling.
Dallas Restaurant Broker Dominique Maddox says, “I enjoy educating restaurant buyers about the process of buying a restaurant. A big part of my job responsibilities is to educate and help buyers through the restaurant buying process.
The Restaurant Broker at EATS Broker provides a Five Step-by-Step overview of the First time Restaurant Buyer process:
- Research online:Restaurant buyers can get an idea of the inventory available on restaurants for sale in the local market on BizBuySell.com. The site is the internet’s largest business-for-sale marketplace.
Individuals interested in buying an existing restaurant can get preliminary information on the site like price, income, EBITDA, cash flow, gross revenue, rent, and year established.
- Have documents ready to show– When buying a home, the buyers will contact the bank and get pre-qualified before contacting a Real Estate Agent.
Many buyers are shocked when a Restaurant Broker asks for proof of funds before providing the name, address, and financials of a restaurant for sale.
Restaurant Brokers Golden Rule of Thumb
-If the listing is a franchise or over $100,000, a Restaurant Broker will want to see proof of funds (bank statement, 401K, or letter from bank). The franchise requires a certain amount of liquid funds before approving a potential franchisee.
The landlord will want to see proof that the new tenant can afford the lease. There is no need to provide financials to a buyer that can’t qualify.
-The bank statement, 401K statement, or letter from the bank should be within 60 days; close out your account number because a Restaurant Broker will only need to see your name and amount.
- Contact a Business Broker
A majority of the restaurant for sale are listed by a Business Broker or a Restaurant Broker. Buyers are required to sign a confidentiality agreement to access more information about the listing for sale.
A select number of restaurants for sale brokers will provide more information instantly once the non-disclosure is signed. Unfortunately, a large number of the listings will require a buyer to provide proof of funds.
Once non-disclosure is signed and proof of funds, the buyer will get a copy of the package. The package will have the name, photos, financials, details about the lease, and the restaurant’s location.
4. Visit the restaurant
A restaurant buyer gets to visit the restaurant as a customer. Some buyers will want to skip this step and schedule a meeting with the owner to ask questions and tour the kitchen area.
The Restaurant Broker at EATS Broker Tip:
A restaurant buyer should come to the seller-buyer meeting provided with questions. A buyer will learn more about the business and its long-term potential by asking the right questions.
- Evaluate and make a buying decision
During this step, a restaurant buyer will evaluate the information they have received from the seller. The buyer will decide whether to make an offer and the contingencies needed to feel comfortable. The buyer will start the due diligence process if the purchase agreement offer is accepted.
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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What is a Cloud Kitchen? What should you know?
A cloud kitchen is a commercial kitchen, sometimes called a “ghost kitchen,” used for delivery-only or pick-up restaurants. New restauranteurs and current restaurant owners are expanding menu offerings and increasing delivery orders by opening cloud kitchens.
The popularity of ghost kitchens has increased over the years. Today consumers ordering food online might be shocked to find out they have ordered from a ghost kitchen restaurant.
Ghost kitchen restaurants can be open for a fraction of the price versus a brick-and-mortar location. Cloud kitchen restaurants are considered a low-risk method to grow a restaurant business and menu selections. They handle the logistics and fulfillment while the restaurant owner only has to worry about the cooking.
Dallas Restaurant Broker Dominique Maddox says, “ cloud kitchens are opening opportunities for new or current restauranteurs to open restaurant concepts with less capital investment and risk.
Ghost kitchens are a popular business model providing a solution for restaurant owners to expand delivery areas and increase pick up orders”.
The Restaurant Brokers at EATS Broker compares Cloud kitchen restaurants vs. Brick and Mortar restaurants:
Capital Investment( upfront cost) Cloud Kitchens- $30,000 vs. Brick and Mortar $100,000-$300,000
- Staff required
Cloud Kitchens 2-6 employees vs. Brick and Mortar 10-30 employees
- Time required to open
Cloud Kitchens 2-4 weeks vs. Brick and Mortar 4 months-1 year
- Real Estate and Location
Cloud Kitchens- 200-300 sq. ft. vs. Brick and Mortar 1000-5000 sq. ft.
Cloud Kitchens-delivery hotspot with low cost and low traffic.
Brick and Mortar- high price, need prime location, good locations can be hard to find.
- Breakeven Point
Cloud Kitchens- 6 months – 1 year vs. Brick and Mortar- 2 years-5 years
Critical takeaways for Cloud Kitchens/ Ghost Kitchens
They provide excellent delivery and pick up opportunities
Allows restauranteurs to experiment with low risk
Allows restaurant owners to build multiple concepts out of one kitchen
Cuts costs for front and back of house labor costs
The kitchen features an exhaust hood, three comp sinks, prep sink, hand sink, and grease trap.
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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Exit Planning for Restaurant Owners
Exit planning for restaurant owners is a process that should start before a restaurant has opened. The harsh reality of restaurant ownership is 80% close within five years. If you are going into the restaurant industry knowing that it will be time to exit within five years, why not plan in advance?
EATS Restaurant Brokers finds that restaurant owners’ lack of exit planning can create liabilities when selling a restaurant.
Dallas Restaurant Broker Dominique Maddox says, “exit planning for restaurant owners should start once a restaurant is open. The common mistake is that restaurant owners fail to plan an exit until they have to sell a restaurant. An exit strategy should allow the restaurant owner to sell a restaurant with limited liabilities”.
EATS Restaurant Brokers-Exit Planning MUSTS:
- Books and Records-keep clean, excellent, and organized books and records. The restaurant buyers in today’s market are educated and can analyze a restaurant owner’s numbers and expenses for red flags. The best way to sell a restaurant is to have clean tax returns; restaurant owners will have to pay taxes on reported gains.
Restaurants that don’t count cash payments, pay employees under the table, or don’t report most sales on tax returns to save on taxes will sell for less on the open buyer market.
EATS Restaurant Brokers Tip: Before listing a restaurant for sale, check to confirm current sales tax filings.
- Build-out expenses– The initial cost for a restaurant build-out can range from $50,000-$1,000,000for a restaurant space ranging in space between 1000-7000 sq. ft. Potential restaurant owners should analyze if it’s wiser to find a second-generation restaurant space to convert to their concept or build out a white box location.
A restaurant has previously occupied a second-generation restaurant space. In a white box location, the restaurant owner is installing everything needed to open a restaurant. The restaurant space has plumbing, electrical, refrigeration, and initial build-out done.
The person that benefits the most from a restaurant owner building out a first-generation restaurant space is the landlord.
Example: Restaurateur pays $300,000 in build-out expenses before opening the doors to a new restaurant. The restaurant owner estimates the restaurant should make a profit of $50,000 per year. The restaurant owner has to wait six years to get the build-out cost expenses back $300,000/50,000= six years!
EATS Restaurant Brokers Tip: Don’t go BROKE on the build-out.
- Restaurant’s Transferability- All restaurants for sale are not good listings because they lack transferability.
Ex.1 A chef-driven restaurant for sale depends on the performance of the chef. If an owner/operator is also the cook, these types of restaurants are difficult to sell. Most restaurant buyers are not looking at buying a restaurant to be a chef; they want a skilled chef in place.
Ex.2 Some restaurants for sale, the landlord, owns the equipment. Restauranteurs that lease restaurants that come fully equipped only own the business and goodwill; they have limited assets to sell.
This type of arrangement can make it difficult for a restaurant owner to sell in the future. Asset purchase agreements between buyers and sellers have the restaurant equipment being sold listed on the contract.
EATS Restaurant Brokers Tip: Before listing a restaurant for sale, check for UCC liens on equipment or business.
EATS Restaurant Brokers biggest take-aways from this blog are listed below:
- Good Books and Records help restaurants sell for the highest and best price
- Don’t go broke on the build-out expenses and have to wait 3-10 years trying to get the initial investment back.
- Make sure to have a restaurant/system that can transfer to a new restaurant owner.
- Own the equipment in the restaurant
To learn more about EATS Restaurant Brokers consulting services or receive a complimentary restaurant valuation, contact Texas Restaurant Broker Dominique Maddox at 404-993-4448 or by email at sales@eatsbrokers.com. Visit our website at www.EATSbrokers.com.
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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@eatsbrokers.com. Visit our website at www.EATSbrokers.com.
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Restaurant Sellers vs. Restaurant Buyers-Different Mindsets
Restaurant Sellers vs. Restaurant Buyers have different mindsets when it involves buying or selling a restaurant. When a restaurant owner decides to sell a restaurant, the primary goals are to get the highest sales price, highest net proceeds, remove the lease as a guarantor, and close quickly.
A restaurant buyer’s focus differs slightly from the sellers and is directly focused on the terms, conditions, and stipulations on an Asset Purchase Agreement.
An asset purchase agreement between a buyer and a seller explains the terms and conditions related to purchasing and selling a restaurant‘s assets. The Asset Purchase Agreement will automatically satisfy the restaurant owner’s needs when filled out correctly. The agreement will document the listing price and closing date.
The restaurant buyer needs to confirm that they are comfortable with the conditions and terms of an Asset Purchase Agreement before signing and setting up an escrow account. The escrow deposit is a good faith deposit that can range from $10,000-$50,000. The buyer’s deposit is protected by the stipulations documented in the purchase agreement.
Dallas Restaurant Broker Dominique Maddox says, “restaurant buyers should make sure they have a trained Restaurant Broker prepare an Asset Purchase Agreement on their behalf. A Restaurant Broker knows the stipulations to add that give the buyer’s escrow deposit the most protection.”
EATS Restaurant Brokers has encountered several buyers that have lost their escrow deposit because they had an untrained Restaurant Broker prepare an agreement for them.
A restaurant buyer should make sure to cover the basics of a Purchase Agreement:
- Due Diligence Period
- Landlord Approval Stipulation
- Bank Lending Approval-if lending is needed
- Escrow Deposit Amount
- All UCC liens should be removed from Equipment
- Sales Tax Clearance letter supplied by the seller before the closing date
- All Equipment should be in working order
- Franchisor Approval stipulation-if restaurant is a franchise for sale
- Who pays for the Transfer Fee?
- Who pays for restaurant remodels if required by franchise?
- Closing attorney contact information
- Restaurant Equipment included in the sale
- Inventory- paid outside of purchase price or included in offer price
For more information on the restaurant market and other available consulting services or restaurant valuations, contact Restaurant Broker Dominique Maddox at 404-993-4448 or by email at sales@eatsbrokers.com. Visit our website at www.EATSbrokers.com
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