How to grade a restaurant for sale is a good question for a restaurant owner. Since Pre-K, most have been taught to judge performance by our grades. Office Buildings in Commercial Real Estate are placed in one of three categories: class A, class B, or Class C.
A building rating is a national benchmark. Each class is typically based on a general combination of factors, including building aspects, location, rents, and misc. Restaurants for sale do not have a grading system.
If restaurants for sale had a grading system, it would include profitable or not, location, longevity, brand strength, goodwill, and employees. When it’s time to list a restaurant for sale, restaurant owners should have a good idea of the grade of their Restaurant in today’s market.
Dallas, Texas, Restaurant Broker Dominique Maddox says, “ I grade all EATS Broker listings for sale. The Class A restaurants for sale will include strong financials, brand name recognition on a local or national basis, a good location, established business, and substantial goodwill.
The Texas Restaurant Broker provides a grading template for owners to review and think about when it’s time to sell a restaurant.
Class A. Restaurants for Sale
- Qualify for SBA bank lending-buyer only has to bring 10%-20% down cash payment
- They will have clean books and records that show a sizable profit
- The tax returns, profit and loss statements, sales tax filings, and POS sales system will all tell the same story.
- The location is usually in a prominent place or well-known location.
- The monthly rent structure is less than 10% of gross sales.
- It has a brand name recognized locally, state-wide, and sometimes nationwide.
- Franchise Restaurants for Sale that are performing well
- Restaurant equipment and furniture are in good condition
These restaurants for sale usually come with a trained staff and sometimes with managers in place. The lease terms are generally good and can be transferred to a new buyer.
Class B. Restaurants for Sale
- Will not qualify for SBA bank lending.
- It shows a profit, but it could be a minimal profit margin.
- Clean Books and records
- The location sometimes is outside of a highly visible area or desirable area.
- The rent percentage could be high, 10%-15% of gross sales
- Restaurant equipment and furniture are in good condition
- Franchise Restaurants only
-High remodeling cost associated with the transfer
Class C. Restaurants for Sale
- Not profitable
- Books and records are not organized and show errors.
- Restaurants open for less than a year
- Restaurants that overspent on the initial build-out cost and want to sell within two years.
- Aggressive yearly increases on the lease
- The surrounding area can be underdeveloped, less desirable, or not safe
- Restaurant equipment and furniture may not be in the best looking condition or need repair
Next time a person thinks about selling a restaurant or buying a restaurant, they should take a minute to think about the EATS Broker grading system and the grade for the Restaurant for sale.
For more information on the restaurant market and other available consulting services or a complimentary restaurant valuation, contact Texas Restaurant Broker Dominique Maddox at 404-993-4448 or email at [email protected]. Visit our website at www.EATSbroker.com
