Selling a Restaurant

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:

1. 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.

2. 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.

3. 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:

1. Good Books and Records help restaurants sell for the highest and best price
2. Don’t go broke on the build-out expenses and have to wait 3-10 years trying to get the initial investment back.
3. Make sure to have a restaurant/system that can transfer to a new restaurant owner.
4. 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.

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.

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 Restaurant Brokers, 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 Restaurant Brokers 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.EATSbrokers.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? 

1. 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.

2. 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.

3. 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@eatsbrokers.com. Visit our website at www.EATSbrokers.com

EATS Restaurant Brokers 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 Restaurant Brokers was established in Atlanta, GA, in October 2019. Less than two years later, EATS Restaurant Brokers is moving its headquarters to Dallas, Texas.

EATS Restaurant Brokers are 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 Restaurant Brokers, 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.EATSbrokers.com. EATS Restaurant Brokers assist buyers and sellers in the market to buy or sell a restaurant.

Contact Restaurant Broker  Dominique Maddox at 404-993-4448 or sales@eatsbrokers.com

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

Independent Owned Restaurants-How to Build Value?

As an Independent Owned Restaurant, how do you increase restaurant value for resale besides good food and environment? Independent Owned Restaurants for sale usually sell for less than Franchise Owned Restaurants.

Franchise Restaurants for sale provide a potential buyer with systems, training, and brand awareness to customers; these are non-tangible items that improve resale value.

The best time as a non-franchise restaurant to start thinking about organizing and operating your restaurant like a franchise is at the very beginning. Start thinking about training manuals, required training time for a position, social media presence, and misc.

60% of Independent owned restaurant operators will fail within three years of opening the doors for business. 80% will close within 5 years. The reality of opening a restaurant is you should always have an exit plan.

When it’s time to sell a restaurant, how does a non-franchise restaurant for sale increase its odds of selling a restaurant to a new buyer?

Dallas Restaurant Broker Dominique Maddox says, “ my suggestions to improve value are create a story behind the establishment, cook from scratch, have fantastic food, and create systems easy to follow.

After ten years of selling restaurants, I have found that non-franchise-owned restaurants for sale that are not unique and organized usually don’t sell.

EATS Restaurant Brokers provides TIPS to improve value! 

1. Story behind establishment: Have a story behind your restaurant; people relate and remember stories. This is one of the best ways to build brand loyalty from customers. Make sure your customers can read your story by posting on the wall, website, cups, etc.

Has the restaurant been passed down from generation to generation? Did a unique passion project inspire the owner to start the restaurant? These are exciting stories that make a restaurant unique. Key take-away people remember stories!

2. Create Systems: The POS system should be updated to record all valuable sales information. POS systems are useful tools to analyze to improve restaurant profitability.

Create Training Manual: A manual with all the training material needed for a new operator is a valuable tool. The manual should have the job descriptions for each position. The manual should describe the process and time requirements for new hires.

3. Unique Food– Do you have a unique cooking style, use exciting ingredients, how is the presentation? Outstanding food and experience will always get customers talking about a restaurant. Word of mouth referrals is the best and cheapest way to grow your restaurant.

Create a unique style of cooking that customers have to visit your restaurant to enjoy. Besides the type of cooking is the taste of food. The best non-franchise restaurants cook from scratch.

Create a menu book that lists all of the cooking recipes, measurements required and cooking time.

The suggestions listed in this blog are intended to help an Independently owned restaurant owner sell a restaurant business in the future. These tips should help the restaurant operator stand out from the competition.

Want more help selling a restaurant? Contact Restaurant Broker Dominique Maddox at 404-993-4448 or by email at sales@eatsbrokers.com. Visit our website at www.EATSbrokers.com

Selling a Restaurant-Mistakes to Avoid

If you are selling a restaurant, there are mistakes to avoid that can become obstacles to reaching the closing table. To increase the odds of a restaurant for sale getting to the closing table, the Asset Sale Purchase agreement needs to be adequately prepared by a trained professional.

The sales price is only the start of a complex negotiating process that the small details are a BIG determining factor for success. The restaurant resale process negotiations include language that must be agreed upon by both restaurant seller and restaurant buyer.

Once the price has been agreed upon, the knots and bolts of the deal still need to be finalized. Most are not familiar with the critical items that should be addressed in a purchase agreement.

EATS Restaurant Brokers are Restaurant Resale Specialist that understands the critical items on the Asset Purchase Agreement that need to be negotiated upfront between both parties. This blog will cover the essential details that should be addressed in an Asset Purchase Agreement.

Texas Restaurant Broker Dominique Maddox says, “We have a high closing rate because, after ten years as a Restaurant Broker, I have extensive training in restaurant sales negotiations. I understand the critical details to address upfront.

We recently moved our headquarters to Dallas, Texas; we are excited about helping restaurant owners in Texas to avoid mistakes that stop them from selling a restaurant and getting paid at the closing table”.

EATS Restaurant Brokers Top Mistakes to Avoid

Equipment List: The equipment list is usually an itemized list of restaurant equipment and decorations included in the restaurant sale. The list is created by the restaurant owner and provided to the interested buying parties.

The equipment list is an essential part of the restaurant valuation, Asset Purchase Agreement, and assets a buyer will receive. Buyers should understand that fixtures attached to the building belong to the landlord and not the tenant.

Grease trap, hood system, walk-in cooler, walk-in freezer, water sink, and built-in bar should not be included on an equipment list.  When an Asset Purchase Agreement is fully executed, it contains a list of equipment that will transfer ownership.

Mistakes to Avoid: Check items on the equipment list to confirm ownership. Restaurant equipment is commonly rented (mainly dishwasher); a restaurant owner can’t sell something they don’t own. Read the lease to ensure the landlord does not own the equipment and the current tenant didn’t lease a fully equipped restaurant space.

Fees: Who Covers them?

Attorney Fees

Who pays the attorney fees and why? In residential real estate, it’s common for both parties to split closing attorney fees in residential real estate, or the Seller will sometimes pay the fees.

Restaurant Brokerage is different; it’s the buyer’s cost and responsibility. It’s beneficial for a restaurant buyer to pick and pay a closing attorney that understands business brokerage. A closing attorney is not needed to close a simple deal if a deal does not involve bank lending or franchise ownership transfer.

Mistake to Avoid– Choose a closing attorney that charges a flat rate compared to an hourly rate. Confirm the services the attorney will provide for the agreed price. Do not use a closing attorney that is not familiar with UCC lien searches or business brokerage deals. Always use a closing attorney for a restaurant sales transaction.

Inventory Cost:

The inventory on hand on the day of closing belongs to the buyer, but actually, they need to pay the restaurant owner first. Several buyers have a misunderstanding that the food inventory is included in the purchase price.

This understanding is far from the truth unless clarified at the beginning of the negotiations. The standard process is that an inventory count is complete the night before closing or the morning of closing. The buyer will pay inventory costs for the food items or other inventory.

Buyer and Seller take inventory together, and the buyer pays a separate check for the final sum. Occasionally a Restaurant Broker will put an estimated number on the Asset Purchase Agreement (for example, $5000). Once the inventory count is final, both parties will finalize the underpayment or overpayment for inventory.

Mistake to Avoid– Confirm restaurant owner will have a copy of recent inventory delivery invoices with current prices. I would suggest not paying for items that are almost gone.

Transfer Fee

A transfer fee is required when reselling a franchise restaurant for sale. The current restaurant owner has already agreed to this fee on the franchise on the Franchise Disclosure Document(FDD).

The transfer fee will cover the buyer’s required training, ranging from 2-10 weeks, depending on the franchise. The transfer fee does not directly go to the restaurant seller; buyers are expected to pay the transfer fee. This fee can range from $5,000-$50,000.

Mistake to Avoid– Confirm Transfer fee upfront and put language in the Asset Purchase Agreement for the party responsible for payment.

 Want more help selling a restaurant? Contact Restaurant Broker Dominique Maddox at 404-993-4448 or by email at sales@eatsbrokers.com. Visit our website at www.EATSbrokers.com

10 Reasons for selling a restaurant

Reasons for selling a restaurant can differ from restaurant owner to owner. Everyone has a specific reason that they want to sell a restaurant.

EATS Restaurant Brokers list of Top 10 reasons for selling a restaurant:

Retirement– The baby boomers are ready to retire and enjoy the last chapter of their life in peace without the stress of restaurant ownership. The Covid-19 pandemic and worker shortage have baby boomers listing restaurants for sale faster than in the past.

Failing Restaurant– 60% of restaurants will fail within three years after opening the doors. 80% will close the doors permanently within five years of opening up for business. Restaurant ownership is a rewarding but demanding business to survive in for multiple years.

Lack of Capital- The restaurant business is all about the numbers and ratios to total sales. Many restaurant owners have to use personal capital to keep a restaurant operating. Liquid capital can quickly disappear from bank accounts when it comes to restaurant ownership; money is one of the most significant driving factors for restaurant owners to sell a restaurant.

Burnout– The restaurant industry is a lifestyle that most people cannot handle over an extended time. Restaurant owners can be asked to work 10-12 hour shifts and always be on call for problems.

Divorce- Several restaurants for sale on the buyer market are due to parties getting divorced. 

Illness- To be successful in the restaurant industry, you need to stay healthy and active. The restaurant hospitality industry is for the strong mentally and physically and, individuals can endure long hours and stressful situations. Illness is a significant factor in the decision-making when it’s time to sell a restaurant.

Family – Time with the family or lack of time with the family is a big motivator to sell a restaurant. The kids grow up fast, the babies start walking before you know it, the time at night before bed with your soulmate means the world to most.

Bored-Depending on the type of restaurant owned, some restaurants have lots of downtown during non-peak hours. Restaurant owners whose sales are low and can’t attract customers can get bored with restaurant ownership.

Overwhelmed-Restaurant owners have to wear multiple hats when owning a restaurant. One minute they can be ordering inventory, next minute dealing with a busted leak in the ceiling, POS machine not working, and workers are calling out for work. Juggling multiple tasks and responsibilities can be overwhelming to even an experienced restauranteur.

Stress- The restaurant industry is notorious for sending people to the hospital. The stress related to the long hours, the bills adding up, labor work shortage, can lead to health-related stress issues for many individuals.

Additional Issues outside of Top 10 list:

All equity tied up in restaurant assets

The restaurant business is too risky

Want to focus on other business or core business

Outside factors (political/economic)

To raise capital/funds for another business

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

What restaurant numbers should YOU know?

What restaurant numbers should you know if you own a restaurant or want to buy a restaurant? Every independently owned restaurant is unique, while franchise concepts have common similarities. How do you compare the two different restaurants if you want to buy or sell a restaurant? Analyzing the Financial and Operational ratios is a great starting point.

What numbers should be significant to a restaurant owner that wants to sell a restaurant or a buyer that wants to buy a restaurant? Some key impact ratios compared to annual sales are food, labor, lease cost, and Sales per square foot.

Dominique Maddox, a Restaurant Broker at EATS Restaurant Brokers, says, “when analyzing Profit and Loss statements to provide a restaurant valuation, I always pay cost attention to the critical impact ratios.

The numbers and ratios can help explain the heartburn or opportunity in a restaurant.”

EATS Restaurant Brokers shares RATIOS to consider list:

Food Cost: Food cost as a percentage of food sales (costs/sales) is generally in the 28% to 32% range in many full-service and limited-service restaurants. Ratios can fluctuate depending on the type of restaurant.

Upscale restaurants can range up to 35%-40%, while pizza concepts can range from 20%-25%.

EATS Restaurant Brokers Tip: Food costs seem to always be higher at absentee-owned restaurants than Owner/Operator restaurants. The employees don’t operate the restaurant like an owner that manages the day-to-day operations.

Labor Cost: Payroll cost as a percentage of sales should not exceed 30%-35% of total sales for full-service restaurants and 25%-30% of total sales for limited-service restaurants. This percentage includes payroll taxes, insurance premiums, and other employee benefits.

EATS Restaurant Brokers Tip: Generally, you don’t want to see management salaries, including kitchen managers, assistant managers, and General Managers’ salaries to exceed 10% of gross sales.

Build-out-cost: The sales-to-investment ratio should be at least 1.5 to 1. This means a minimum of $1.50 in sales should be expected for every $1 of startup costs, according to www.Restaurantowner.com.

This means if you spend $300,000 on a restaurant build-out, the location should be able to generate at least $450,000 annual sales. The best restauranteurs know how to keep build-out costs at a minimum to increase the Sales-to-investment ratio.

EATS Restaurant Brokers Tip: Buying an Asset Sale restaurant is an excellent opportunity to save money on the initial build-out cost.

Rent and Occupancy: The ideal range for rent expense is 6% or less of total sales. This ratio includes costs such as common area maintenance (CAM) and other occupancy expenses.

Many operators are satisfied with an occupancy cost of 8% or lower. Once a restaurant owner-occupancy cost reaches 10% or higher, the charges start to deduct from the owner’s net profit.

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@eatsbrokers.com. Visit our website at www.EATSbrokers.com.

Restaurant Seller and Buyer Meeting: Tips for Success

EATS Restaurant Brokers decided to create a Restaurant Seller and Buyer Meeting-Tips for Success checklist. The initial meeting between the buyer and a seller can dictate how the working relationship will be in the future.

The goal of the initial meeting is to familiarize both Restaurant Seller and Restaurant Buyer, view the back of the house, buyers get an opportunity to ask probing questions and review restaurant financials. The most straightforward deals are when the buyer and seller like and respect each other. When the personalities don’t mix, the restaurant closing process could be filled with turbulence.

Dominique Maddox of EATS Restaurant Brokers says, “ The best method to minimize differences in personalities is to keep the deal flow managed by a specialized trained Restaurant Broker. When Restaurant Sellers and Buyers communicate directly without a skilled Restaurant Broker, a deal can crumble quickly”.

EATS Restaurant Brokers 7 Tips for a Successful Seller and Buyer meeting.

1. Buyer and seller should both have face masks on, even if social distancing is done.
2. Walk around the restaurant to get the seller talking and to get the buyer more comfortable. Great way to break the ice between parties.
3. We recommended starting with the back of the house (BOH) to show the kitchen area and cooking equipment. This task can range in time depending on the size of the restaurant and restaurant owner explaining items.
4. Sit down for a meeting- This is a great time to introduce each party to start talking about why one party wants to sell and the buying party to explain the interest in buying.
5. The sit-down meeting allows the buyer to ask questions about the restaurant operations, restaurant equipment, lease, employees, financials, and willingness to negotiate on price.
6. Restaurant sellers should be prepared to explain the Cost of Goods (COGS), Labor, Sales, and potential to increase sales.
7. Buyer should review financials before meeting with the seller. The buyer should come to the meeting with prepared questions to ask the seller.
8. Follow-up questions after the meeting should be directed to Restaurant Broker to share with the seller.

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@eatsbrokers.com. Visit our website at www.EATSbrokers.com.