How should I sell my restaurant is a question most restaurant owners will have to deal with before exiting their business. Similar to residential real estate owners, restaurant owners have multiple options to choose from. Each option has pros and cons, but which one is actually better?
Today’s internet has tons of information on selling a restaurant, how to do a valuation, and ways to market a restaurant for sale. Some people think they can actually become experts in Restaurant Brokerage overnight.
Dominique Maddox a Restaurant Broker and Founder of EATS Broker says, choosing the right option to sell a restaurant makes all the difference. Only about 30-50% of all restaurants listed for sale on the market will actually sell, the best way to increase your odds of selling a restaurant is working with a trained professional in restaurant sales.”
Restaurants for Sale by a Restaurant Broker– Restaurant Brokers are specifically trained in the Restaurant Resales process. On a daily basis, they view restaurant owners’ profit and loss statements, negotiate lease terms with landlords, work with banks for SBA approval, and work with Franchise Restaurant Resales.
Pros:
-Expert in Restaurant Sales Industry
-Knowledgeable about the Restaurant Sales Process
– Understands industry specifics and comparable financial data for specific restaurant concepts
-Has experience working with buyers thru the Franchise Approval Process
-Has resources and vendors to help during the buying process
-Has forms and documents for an Asset Purchase Agreement
Cons:
-Will require an exclusive listing agreement for 6-12 months
-Commissions range from 10%-15%
Restaurants for Sale by a Business Broker- Business brokers, also called business transfer agents, or intermediaries, assist buyers and sellers of privately held businesses in the buying and selling process. They typically estimate the value of the business; advertise it for sale with or without disclosing its identity; handle the initial potential buyer interviews, discussions, and negotiations with prospective buyers; facilitate the progress of the due diligence investigation, and generally assist with the business sale.
Pros:
-Trained on Business Brokerage
-Have knowledge of business valuations
Cons:
-Jack of all trades-sells everything ranging from a gas station, laundry mat, hair salon, and etc.
-Not specifically trained in selling restaurants
-Most do not understand the usual cost in restaurants for food cost, labor cost, rent cost, and normal add-backs.
Restaurants for Sale by Owner (FSBO)- For Sale by Owner, or FSBO, is the process of selling a restaurant without the representation of a broker or agent. Restaurant owners may employ the services of marketing or online listing companies or market their own restaurant. Typically, they represent themselves with the help of a lawyer.
Pros:
-No Broker Commission to pay
-Have 100% control of the sales process
-Can dictate listing price with no logical reason
Cons:
-Emotionally attached to the sale of the restaurant
-Most Owners will overprice restaurant for sale
-Do not understand the sales process of a restaurant, UCC lien search, Sales Tax Certificate, and lease obligations
-Do not have the right paperwork to write an Asset Purchase Agreement, Amendment to change the contract, escrow docs, or any other document related to the closing.
Franchise Restaurants for Resale by Franchisor-The Franchisors are in the business of maintaining open locations and getting new franchisees to build out new restaurants. Franchisors are not in the business of resales. Franchisors have started to try helping current franchisees sell their franchise when they want to exit the business.
Pros:
-Franchisors have the power to approve any potential new franchisees
-Franchisors have the sales information for restaurants
-Receive customer inquiries seeking to join the franchise
Cons:
-Do not have a dedicated department for franchise resales
-Are not trained on doing restaurant valuations based on profit and loss statements, tax returns, or an Asset Sale
-Conflict of interest
-Too much time required for franchise resales
For more information on the restaurant market and other available consulting services or restaurant valuations, contact Dominique Maddox at 404-993-4448 or by email at [email protected]. Visit our website at www.EATSbroker.com
