EATS Broker sells a Pizza Franchise in Crawford, Georgia
Dominique Maddox of EATS Broker sells a Pizza Franchise in Crawford, Georgia. EATS Broker represented the seller and buyer. The seller is a repeat client; he bought the restaurant in 2021 with the assistance of the Restaurant Broker at EATS Broker.
The new owners bought the building and the Pizza Franchise for Sale. They plan to convert the location to a non-franchised pizza restaurant and open it in the next 60 days. The Crawford, Georgia, residents have been visiting this location for over 30 years.
Dallas, Texas Restaurant Broker Dominique Maddox of EATS Broker says, “Health issues can force a Restaurant Owner to sell immediately. I’m thankful Dan remembers using our services when he bought the restaurant and decided to use EATS Broker when it was time for him to sell a restaurant”.
The Restaurant Seller was filled with emotions about selling his restaurant. Still, he is pleased with the new buyers and believes they will do great in the business. Dan plans to enjoy his retirement and get the medical treatment he needs to get healthy.
It’s a common practice for restaurant owners to buy an existing restaurant and convert the location into a new concept. This approach helps restaurant owners not to go broke on the build-out and allows them to open the doors for business faster.
In the Restaurant Brokerage industry, the ultimate compliment is when a previous client returns for help. EATS Broker will always be thankful for Dan believing in our company and allowing us to help him sell a restaurant!
EATS Broker is based out of Dallas, Texas. Our 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
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5 Benefits of Buying an Existing Restaurant
The 5 Benefits of Buying an Existing Restaurant have many positive attributes. The current restaurant owner has built a proven business model, established a client base, and gone through the headaches of the initial building-out phase of the restaurant space.
The harsh reality of the restaurant industry is that 60% of restaurants will close their doors in three years. How to improve your chances for long-term success, the Restaurant Broker suggests not going broke on the build-out.
Buyers can learn a lot from the successes and failures of the current restaurant owner. Buyers can ask questions about the restaurant industry without going thru the growing pains.
Dallas Restaurant Broker Dominique Maddox says, “Buying an Existing Restaurant is a cheat sheet to success. The Restaurant Owner provides sales data, vendor relationships, landlord relationships, and stories of success and failures”.
EATS Broker provides a list of benefits of Buying an Existing Restaurant:
- Employees: An operating restaurant will have trained employees, including cooks. Employees will usually transfer will the sale of the restaurant.
- Customers: Established Customer base that is familiar with the concept
- Cash Flow: Restaurants with a positive cash flow provide a paycheck for the buyer.
- Time to open: Some buyers want to buy an existing restaurant to convert to a new concept.
- Vendor Relationships: The restaurant owner will provide a list of current vendors. Buyers can decide to use the same vendors or find an alternative.
Buying an existing restaurant eliminates some of the build-out time, stress and anxiety that come along with the process.
EXTRA Benefit
Bank Lending: A bank will be more willing to lend to a buyer purchasing an existing restaurant than a start-up restaurant concept.
To learn more about EATS Broker consulting services or receive a complimentary restaurant valuation, contact Dallas Restaurant Broker Dominique Maddox at 404-993-4448 or email at sales@eatsbroker.com. Visit our website at www.EATSbroker.com
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10 Ten Interesting Facts about the Restaurant Industry
It’s easy to find interesting facts about the Restaurant Industry. The National Restaurant Association publishes a Restaurant Owner Demographics Data Brief every year. After reading the March 2022 Data Brief, the Restaurant Broker at EATS Broker picked ten interesting facts.
- Hawaii (64%), Texas (59%), California (58%), Georgia (55%), Maryland (54%), and the District of Columbia (54%) have the highest proportion of restaurants that are owned by minorities.
- 63% of adults have worked in the restaurant industry, making it the nation’s training ground
- 41% of restaurant firms are owned by minorities – compared to 30% of businesses in the overall private sector.
- 9 in 10 restaurants have fewer than 50 employees
- 7 in 10 restaurants are single-unit operations
- 19% of restaurant firms are Asian-owned, 14% are Hispanic-owned, and 9% are Black- or African-American-owned.
- 9 in 10 restaurant managers started in entry-level positions
- 2023 Employment Forecast: 500,000 new jobs for total food service employment of 15.5 million
- 2023 Sales Forecast: $997 billion
- Restaurants employ more minority managers than any other industry.
Dallas Restaurant Broker Dominique Maddox says, “The U.S. restaurant industry has an enormous impact on how it affects people’s lives. I worked as a Sous Chef at the Alaska Club in Anchorage, Alaska, and as a waiter at Boniface Bingo. I’m forever thankful for my experience working in the Restaurant industry”.
Are you hungry for more exciting facts about the Restaurant Industry? According to Zippia.com:
-45.5% of restaurant owners are women, and 54.5% of restaurant owners are men
-46% of Restaurant Owners are over 40, and 28% are between the ages of 30-40
-49% of Restaurant owners earn a bachelor’s degree
-The average Restaurant Owner is 39
-The most common foreign language among restaurant owners is Spanish at 44.9%. The second-most popular foreign language spoken is French at 10.2%, and Thai is the third most popular at 7.9%.
To learn more about EATS Broker consulting services or receive a complimentary restaurant valuation, contact Dallas Restaurant Broker Dominique Maddox at 404-993-4448 or email at sales@eatsbroker.com. Visit our website at www.EATSbroker.com
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4 Worst Decisions when selling a Restaurant
Do you plan to sell a restaurant? What are the worst decisions when selling a restaurant? EATS Broker will provide an inside look at why some restaurant sellers can be disappointed when it’s time to sell a restaurant.
Did you know only 20%-30% of the restaurants listed on the market will sell to a new owner? With the odds stacked against a restaurant owner for success, there are strategies to use to increase the chances of success when selling a restaurant.
Texas Restaurant Broker Dominique Maddox says, “I always ask a restaurant owner before providing a restaurant valuation, how much do you think your restaurant is worth? The response I receive helps me understand the mindset and expectations of the restaurant owner”.
EATS Broker turns down several potential restaurant for-sale listings because of 4 reasons:
- Overpriced Restaurant for Sale-Over pricing a restaurant for sale lowers the chances of a
restaurant selling. Buyers are more educated than ever regarding restaurant valuations and multiples used to create a listing price.
Restaurant owners are known to list with Restaurant Brokers or Business Brokers based on the Brokers providing the listing price they want rather than what the restaurant is worth. The practice of putting overpriced listings on the market is common.
This strategy increases the number of days it takes for a restaurant to sell, and qualified buyers will avoid the listing because they are educated about the market.
- Being unrealistic as a restaurant owner-Restaurant owners have to understand selling a restaurant is like a slower cooker and not a pressure cooker. It takes an average of 6-8 months to sell a restaurant. Only 20%-30% of restaurants listed for sale will actually sell to a new buyer.
Restaurant owners should know they must be ready to negotiate terms with a ready, able, and willing buyer. Every deal is different, and all deals that go under contract will not close.
- Books and records-Buyers are interested in the financials when buying a restaurant and want to check and verify its performance. Restaurant owners with books and records that are not clean, organized, and available to provide to buyers usually will not sell.
- List for buildout cost– Buyers don’t buy a restaurant based on the buildout cost. One of the worst decisions a restaurant owner can make is to justify the listing price based on the money spent on the restaurant’s buildout.
The restaurant can easily cost $300,000-$1,000,000 to build out the restaurant before opening the doors and making one dollar of profit. Most improvements to the restaurant’s leased space belong to the landlord because they are attachments to the building.
60% of restaurants close within 1-3 years of opening the doors, and 80% close within five years. A restaurant that is not profitable is listed on the market as an Asset Sale, which gets sold for pennies on the dollar.
Restaurant Broker Tip: Restaurant owners are shocked when they learn they don’t own the hood system, walk-in coolers, and other attachments. Whether the restaurant owner paid for the items during the buildout phase doesn’t matter.
**Don’t go broke on the buildout**
To learn more about EATS Broker consulting services or receive a complimentary restaurant valuation, contact Dallas Restaurant Broker Dominique Maddox at 404-993-4448 or email at sales@eatsbroker.com. Visit our website at www.EATSbroker.com
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Time to sell your restaurant? How to defend your listing price
When it’s time to sell your Restaurant, how do you plan to defend your listing price? This question is excellent for anyone considering hiring a Restaurant Broker or For Sale by Owner.
It’s easy to think of a random number, list a restaurant for sale, and answer buyer inquiries. Selling a restaurant is like fishing; it’s time to make the catch when a customer is interested (a fish bite).
Dallas Restaurant Broker Dominique Maddox says, “The Restaurant Story is an opportunity to help buyers visualize themselves as part of the story. An experienced Restaurant Broker will explain the Restaurant’s financial, staffing, liabilities, food cost, and startup story to interested buyers”.
The 3 rules of defending your listing price:
Rule #1
Tell your Restaurant Story: The number one question buyers ask a Restaurant Broker when inquiring about a restaurant for sale is, why are they selling? Once this happens, it’s time to tell the Restaurant Story.
The Restaurant story is the message/description of opportunities that should be provided to the buyer. Buyers want a background of the Restaurant’s current and past operations, growth opportunities, and why the restaurant owners are selling? It’s time to sell the “Sizzle” of the Restaurant to the buyer.
Each Restaurant will have a different Restaurant Story, but the core of the stories will be the same. They will include the total expense of the rent, labor, and cost of goods (COGS); these three categories should be 60%-70% of gross sales.
Rule #2
Clean Books and Records make a BIG difference: Good bookkeeping and accounting help the odds of a restaurant selling. Once the seller and the buyer agree to the terms of the Purchase Agreement, the due diligence process starts.
Buyers will request several financial documents to verify the Restaurant’s operations and profitability.
The documents most requested from buyers include:
-Tax Returns
-Profit and Loss Statements
-Sales Tax Filings
-POS Sales Reports
-Franchise Royalty Reports
-Bank Statements
-W-2s for Owner/Operator or manager replacing an absentee owner
When it’s time to sell a restaurant, owners should check and verify all financial documents tell the same Restaurant Story. A Restaurant Owner can make or break a deal if the financials tell multiple stories. Buyers are looking at financials with suspicion and analyzing every line item.
Restaurant Broker Tip: The Restaurant Owner keeping two sets of books and records or cheating the IRS on tax payments will hurt the chances of your restaurant selling.
Rule #3
Repair and Maintenance-The lack of maintenance in a restaurant can hurt the chance of the Restaurant selling to a new buyer. Buyers will inspect the Restaurant and equipment for flaws and repairs needed.
A neglected restaurant appearance or broken equipment gives a buyer a great reason to reduce the offer price. Restaurant owners should focus on the Restaurant’s presentation before listing a restaurant for sale.
These three rules help any restaurant seller defend its listing price when it’s time to sell a restaurant.
To learn more about EATS Broker consulting services or receive a complimentary restaurant valuation, contact Dallas Restaurant Broker Dominique Maddox at 404-993-4448 or email at sales@eatsbroker.com. Visit our website at www.EATSbroker.com.
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Top 4 Biggest Myths about Selling a Restaurant
Many restaurant owners share the Top 4 Biggest Myths about selling a restaurant. Selling a restaurant is much different from selling other businesses, and many restaurant owners will only sell a restaurant once in their lifetime.
When it’s time to sell a restaurant, a large percentage of restaurant owners have common misperceptions about the process.
Dallas, Texas Restaurant Broker Dominique Maddox says, “There are NO guarantees when selling a restaurant, and every deal has unique stipulations and obstacles that somebody must overcome. Restaurant owners that believe common myths about selling a restaurant are commonly disappointed”.
The 5 Biggest Myths about selling a restaurant are:
- Every deal is the same: Restaurant owners that have bought or sold a restaurant in the past sometimes believe every deal process is the same, and this belief is far from the truth. Each Asset Purchase Agreement has several small details that make a big difference.
Things to consider in each deal:
-Selling a profitable restaurant or an Asset Sale
-Selling a Franchise or non-franchise
-The buyer’s profile
-The landlord approval process
-The Franchise approval process
-Bank lending required or cash deal
-E-2 investor requirements
-Closing Attorney involved
-PPP or EIDL payments owed
-Sales Tax Filings
-Equipment repair requirements
- I will receive my asking price: When selling a restaurant, everything is negotiable, but the rent amount is owed to the landlord. The negotiation process between the buyer and the seller will determine the terms of the deal.
Restaurant owners can list a restaurant for sale, stating they want to recoup their equipment purchase price, build-out cost, or loan payoff balance, only to be disappointed. The market will determine the price of your restaurant.
Cash buyers are usually more aggressive in their offer price. Restaurant owners should expect offers at least 10% lower or more than the asking price.
- Time to sell a restaurant: The average time to sell a restaurant is 150-165 days, but this is only an average. Only 20%-30%of the restaurants listed will sell to a new buyer, and most restaurants for sale will sit on the market and never sell.
Only 2%-5% of the buyers looking to buy a restaurant will buy. Some deals are more like a slow cooker instead of a pressure cooker. Restaurant Sellers want a quick sale, while some restaurant buyers are not ready for quick closing.
- The Landlord is your partner: When dealing with a lease assignment approval from the landlord, some restaurant owners think the process is simple. Most owners have not reviewed the lease document they signed when opening the restaurant, and owners usually do not know what requirements are needed for lease assignment approval.
The Golden Rule when dealing with a landlord is that they are not your friend, and the landlord is looking out for their best interest in collecting future rent. If the landlord has a well-qualified restaurant owner as a lease guarantor, why would they approve a lease assignment for a questionable potential tenant?
The landlord can decide if a deal will make it to the closing table. Should the restaurant owner feel comfortable only in leases that don’t require landlord consent or have written auto-approval language for franchises.
Selling a restaurant can be a complex process. Hiring the right Restaurant Broker and understanding the selling process can make all the difference.
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 email at sales@eatsbroker.com. Visit our website at www.EATSbroker.com
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Challenges to Selling a non-franchise Restaurant
The Challenges to Selling a non-franchised restaurant differ from those selling a franchise brand. Restaurants that are Franchises are out selling independently owned restaurants for several reasons.
How often have you heard someone talk about opening or owning a restaurant? For the most part, our society loves the fantasy of restaurant ownership.
When it’s time to buy or start a restaurant, restauranteurs have to decide to join a Franchise Brand or start a non-franchise restaurant. The owners that prefer 100% ownership will choose to begin in a restaurant that is not a franchise.
The decision to open a restaurant that is a non-franchised restaurant can save a substantial amount of start-up money required for a franchise brand. Instantly restauranteurs save on the following items
–Development Fee ranges from $5,000-$50,000
-Royalty Fees range from 3%-10%
-National Marketing Fees
-Required Training cost
-Restaurant Equipment requirements
-Design requirements
Dallas, Texas Restaurant Broker Dominique Maddox says, “the initial fee to start a non-franchise restaurant is usually lower. When it’s time to exit, the restaurant valuation is generally higher for Franchise restaurants.
EATS Broker challenges to selling a non-franchise restaurant are:
Restaurant Valuations: Non-franchise brands usually will have a lower sales multiple compared to National Franchise Brands. The multiple is based on several considerations:
-Company strength
-Number of units open
-Longevity of brand
-Brand Goodwill
-EBITDA
Restaurant Valuation example:
Non-Franchise Brand: $100,000 (EBITDA) x 2.x (multiple) = $200,000 listing price
Franchise Brand: $100,000 (EBITDA) x 3x (multiple) = $300,000 listing price
Good Books and Records-Non-Franchise restaurants do not have a universal accounting system like most Franchise Brands require. The restaurant owner of an independently owned restaurant doesn’t have any checking their number for royalty and marketing fees.
Owners have the freedom to be creative with their books and records. Unorganized financials hurt when it comes to reselling a restaurant. Non-franchise restaurants with books and documents that are not clean or look fake rarely sell.
Restaurant Broker tip: Restaurant owners should confirm that tax returns, profit and loss statements, and sales tax filings tell the same story.
Buyers may request the following financial documents from sellers:
-Tax Returns
-Profit and Loss Statements
-Sales Tax Filings
-POS Sales Report
-Credit Card Statements
-Bank Statements (this is rarely provided in restaurant sales transactions)
Training and Support-New buyers are on their own to learn the concept, operations, employees, and marketing. The buyer usually completes no formal training before or after the sale transaction.
A training schedule can be agreed upon on the Asset Purchase Agreement, but it’s up to the restaurant seller to coordinate and execute. Once the restaurant is sold, the support usually ends from the previous owner.
Unlike a franchise brand with a training program, vendor relationships, and a support system, non-franchise brands may only have vendor relationships.
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 email at sales@eatsbroker.com. Visit our website at www.EATSbroker.com
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Want to sell your restaurant? What Restaurant Equipment do you own?
Want to sell your restaurant, and it’s time to create an equipment list? What Restaurant equipment do you own as a restaurant owner? This seems easy to answer, but most restaurant owners misunderstand what they own when leasing a restaurant space.
The landlord is responsible for creating a lease to protect their interest when leasing a restaurant space. The restaurant owner is responsible for reading the lease to understand the terms.
Texas Restaurant Broker Dominique Maddox says, “ restaurant owners are shocked when they find out they don’t own any fixtures in the restaurant. The key items in a restaurant like the hood system, grease trap, sink compartments, walk-in coolers/freezers, and misc. Belong to the landlord”.
When selling a restaurant, a restaurant owner must create an equipment list to provide to interested buyers. The Restaurant Broker at EATS Broker requests an equipment list from restaurant owners ready to sell a restaurant before it goes on the market.
Restaurant owners are asked only to provide restaurant equipment that they own. The equipment list and details will differ from restaurant owner to owner, and restaurant owners unfamiliar with the language in their lease usually provide an incorrect equipment list.
A restaurant that is not profitable or closed will be listed as an Asset Sale. Selling a turn-key restaurant fully equipped as an Asset Sale is an excellent opportunity for buyers looking to create their own concept. Restaurant buyers will be curious to know the restaurant equipment involved in the sale.
The Restaurant Broker at EATS Broker creates an equipment checklist to consider:
Items Restaurant Owners should keep off an equipment list because they are attached to the building:
-Walk-in coolers
-Walk-in freezers
-Grease traps
-3 compartment sinks
-Hood system
-HVAC systems
-Tankless water heater
***Leased Items should not be added either***
-Fountain Drink Dispenser
–Dishwasher
–POS System
-Refrigeration, if provided by the vendor
This blog was written to help restaurant owners create an equipment list that reflects what they own and can be removed from the building. Next time when making an equipment list, restaurant owners should ask themselves do I own this equipment?
For more information on the restaurant market and other available consulting services or complimentary restaurant valuations, contact Dominique Maddox at 404-993-4448 or email at sales@eatsbroker.com. Visit our website at www.EATSbroker.com.
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What are the most demanding Restaurants to Sell
The most demanding restaurants to sell fall into three categories. Chef-driven restaurants, BBQ restaurants, and unprofitable restaurants or new openings. All three types of restaurants present considerable challenges when it’s time to sell a restaurant.
The cold hard fact is that only 30%-40% of restaurants listed for sale will sell to a new buyer. Some restaurant concepts are much easier to sell than others, depending on the skill level required.
Restaurant owners can improve their chances of selling if they understand the obstacles they will face while selling a restaurant.
Texas Restaurant Broker Dominique Maddox says, “ when a buyer is thinking about purchasing a restaurant for sale, they should think about an exit strategy. Concepts like pizza restaurants, sub sandwich restaurants, or ice cream concepts have a large ready, able, willing buyer pool looking to buy.
Restaurant Broker list of challenges to selling a restaurant in each concept:
Cons: Chef-Driven Restaurants: Are usually started by a trained Chef
-The majority of restaurant buyers looking to purchase are not trained, Chefs
-The restaurant is usually branded with Chef’s name and goodwill
-Some locations don’t have a trained Sous Chef
-The consistency of the food can be a problem
-Most will not have recipes documented
Cons: BBQ Restaurants:
–The skill level required to produce an excellent product can be high
-Some cultures don’t eat pork products, so they would not be interested in buying a BBQ restaurant
– Everybody does not want to be a pit master
-Time required to cook meats
– Most will not have recipes documented unless it’s a franchise
Unprofitable restaurants or new openings- The most common phrase from Restaurant Owners is, “I just want my buildout cost or original investment back” it sounds good, but it’s not that simple.
Cons: Unprofitable Restaurants
-Not making money-buyers mainly want profitable restaurants
-Can be considered risky
-Buyers are more cautious when buying restaurants that are not profitable
-Most times, limited books and records are provided
-The new buyer will assume lease obligations
-Buyer is purchasing used equipment and leasehold improvements
Cons: New Buildout-open less than one year (Seller usually doesn’t get original build-out cost back when selling)
-Tenant is usually responsible for obtaining a Certificate of Occupancy (CO)
-Many restaurant owners go over the original buildout cost
-Can take an extended time to open depending on supply and demand for supplies and contractors
-The “unknown” cost associated with a new buildout
-Tenants can be responsible for the following build cost before opening the doors
Installing a Hood System
Installing a Grease Trap
Installing new plumbing
Installing sinks
Building out bathrooms
Building outside seating
Installing walk-in coolers
-First, all Restaurant Sellers should understand that the landlord owns all leasehold improvements that are fixtures.
-Restaurant Valuations for new build-out locations is a challenge for a Restaurant Broker
**These restaurant segments were chosen from past experiences after 11 years of being a Restaurant Broker and specializing in selling restaurants only.**
For more information on the restaurant market and other available consulting services or complimentary restaurant valuations, contact Dominique Maddox at 404-993-4448 or email at sales@eatsbroker.com. Visit our website at www.EATSbroker.com.
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Buying an existing restaurant to convert to a new concept
Buying an existing restaurant to convert to a new concept is an excellent way for a non-experienced restaurant owner and an experienced restaurateur to become a restaurant owner. The new buyers benefit from the hard work the current owner has experienced to build out the restaurant, open the restaurant, and maintain the restaurant.
An existing restaurant can be purchased to keep operating as the current concept or converted to a new one. The buyer who plans to convert an existing restaurant space to a new idea thinks about the deal differently than a buyer who keeps the concept the same.
Dallas Restaurant Broker Dominique Maddox says, “buying an existing restaurant for sale and converting to a new concept saves time to open the doors and money on the build-out cost.” It takes out some of the unknown cost that is usually associated with new restaurant openings”.
Restaurant Franchise Brands are buying Asset Sale Restaurants and converting the space to a new franchise opening for a fraction of the price of a completely new build-out.
Buying an existing restaurant doesn’t come with a checklist. EATS Broker Checklist provides a list of items to consider when purchasing an Existing Restaurant.
Converting Restaurant to New Concept: 10 THINGS TO CONSIDER
-Does the size of the kitchen work for your concept?
-What kitchen equipment currently installed will you use?
– Does the size of the grease trap work for your concept?
-Parking available for customers
-How long is the hood system?
-How much does new signage cost?
-How much will be painting the walls cost?
-Does the HVAC system work correctly?
-Can the new concept support the current lease and rent structure (rent should be only 4%-8% of total sales)
-Will the landlord approve the lease?
Items to have ready for the landlord to review:
Business Plan with three years forecast- Tell your Restaurant Story and why your new concept will succeed.
Personal Financial Statement
Copy of Menu-
Resume or Bio-explain how our past work experience will help you in the new role.
Proof of liquid assets-Bank Statement, 401K statement, or letter from your bank
Copy of Personal Tax Returns
Restaurant buyers that want to buy a restaurant and convert an existing restaurant to a new concept can see that a restaurant space has potential but needs the right idea!
For more information on the restaurant market and other available consulting services, 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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