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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Dominique Maddox of EATS Broker sells Papa’s Pizza To Go Franchise
Dominique Maddox of EATS Broker sells Papa’s Pizza To Go located at 3064 US-76, Hiawassee, GA 30546. EATS Broker represented buyer and seller.
The Gagnon’s were the sellers of the business, they plan to move to Florida to retire, after operating the business since 2009. The buyer ironically is moving from Florida to Hiawassee, Georgia. The buyer likes the lifestyle in Hiawassee and was tired of the Florida sun.
Dominique Maddox says, “ This is an interesting story of someone moving from Florida to buy a business in the beautiful mountains of Georgia, and the sellers are moving down south because of the weather. It’s common in the restaurant brokerage industry that a buyer located in a different state buys a restaurant in a different state and moves to that state to operate”.
Dominique Maddox is the President and Founder of EATS Restaurant Brokers and www.EATSbroker.com, a business brokerage firm specializing exclusively in restaurant franchise resales, restaurants for sale, bars, and nightclubs. After working with one of the nation’s largest restaurant brokerage firms for seven years, Dominique decided it was time to bring a new flavor to the Restaurant Brokerage Industry and founded EATS Broker.
Dominique Maddox has been selling restaurants since 2010 and has undergone intensive training in the Restaurant Brokerage Industry. Dominique attended Morehouse College on a football scholarship, he brings that same competitive spirit and energy to the field of restaurant brokerage.
EATS Restaurant Brokers are Restaurant Resale Specialists that can guide you thru the complex process of buying or selling a restaurant.
Let us show you how Restaurant Brokerage is done with flavor!
Thinking about selling a restaurant contact EATS Broker. 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 sales@eatsbroker.com. Visit our website at www.EATSbroker.com
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Dominique Maddox of EATS Broker earns CFE (Certified Franchise Executive) Designation
Dominique Maddox, Founder and President of EATS Broker has earned the CFE (Certified Franchise Executive) designation from the Institute of Certified Franchise Executives™ (ICFE). Dominique will graduate as a member of the class of 2021 at which time he will receive his CFE pin
Participants in the Certified Franchise Executive (CFE) program complete several course offerings in franchise management, leadership, and small business to gain insights into franchise strategy and operations. The mission of the Institute of Certified Franchise Executives (ICFE) is to enhance the professionalism of franchising by certifying the highest standards of quality training and education.
Dominique Maddox of EATS Restaurant Brokers says, “ I started this process in 2018 to get the CFE designation but money requirements and time did not allow me to make progress fast. I decided to recommit myself in March 2020 to finish the program and become one of the few Restaurant Brokers in the nation with a CFE designation.
The designation required 3500 credit hours which included online courses, classroom study, attendance requirements, and testing. I now can put the CFE behind my name, which gives me instant credibility in the Franchise Industry because it is comparable to having a master’s degree in Franchising”.
The Benefits of the Certified Franchise Executive Program are focused on the recognition and professional standing in the franchising community. The CFE designation is highly regarded and a symbol of continuance learning, years of experience, and a desire to grow in the franchise segment.
As a Business Broker focused on Restaurant Franchise Resales, Dominique plans to use his Certified Franchise Executive (CFE) designation to help franchise brands, multi-unit owners, and single-unit owners thru the resale process. Dominique is a Restaurant Resale Specialists that can guide customers thru the complex process of buying or selling a restaurant.
Thinking about selling a franchise restaurant contact EATS Broker. 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 sales@eatsbroker.com. Visit our website at www.EATSbroker.com
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What Should Your Business Broker know about your business?
If you’ve reached the point where you’d like to sell your business, odds are you’ll want to engage a business broker to help you through the process. The relationship between a Business Broker and seller is a key element to getting a business or restaurant sold. As a seller, a broker can help you streamline everything from pricing your business to marketing it to buyers.
The relationship between a seller and a Business Broker should be honest and open, with ALL negative information provided to the Broker upfront. Founder of EATS Restaurant Brokers Dominique Maddox says, “the worst feeling is to have a seller not disclose negative information on the listing and you find out later in the process”.
The act of withholding information from a Business Broker can decrease the chances of a business getting sold. Business Brokers are consultants with a job of keeping a deal together, this becomes increasingly difficult if they don’t have all the details of the business.
EATS Restaurant Brokers provides 3 things a Business Broker should know about your business.
Do the tax returns match the copy the IRS has on file?
When a buyer goes to a bank and provides Tax Returns provided by the seller, the bank will request tax returns directly from the IRS to confirm they match. Form 4506-T is an Internal Revenue Service (IRS) document that is used to retrieve past tax transcripts that are on file with the IRS. The document must be signed and dated by the taxpayer, thus giving third-party permission to retrieve the taxpayer’s data.
This is extremely important because if a seller has provided false tax returns or filed an amendment on his/her tax returns the Broker needs to know this information. Yes, as a Restaurant Broker I’ve had sellers provide false tax returns to a buyer and it was uncovered once the form 4506-T was signed.
Do you own the equipment?
Landlord these days when a tenant defaults on the rent they will evict the tenant and keep the equipment. This process makes it’s easier to lease the space to a new tenant. Savvy buyers can get a fully equipped restaurant to lease to convert to a new concept. This works well when you are opening but when it’s time to sell, what do you have to sellAn experienced Business Broker will have a seller provide an asset list to include only items owned by the seller. This makes a big difference in the potential list price. I’ve experienced sellers trying to sell a restaurant, but they don’t own the equipment, these deals rarely close.
UCC liens on the business?
UCC filing, also known as a UCC lien or a UCC-1, is a financing statement that lenders can file against your business with your secretary of state. ). This form is filed in order to “perfect” a creditor’s security interest by giving public notice that there is a right to take possession of and sell certain assets for repayment of a specific debt with a certain priority
Liens can be placed on business equipment, a vehicle, property, or even a blanket lien naming all your assets. Most Purchase Agreements will have language that a business or restaurant has to be free and clear of UCC liens before a sell can happen.
If a seller doesn’t want to tell a Business Broker about a UCC lien it will come up once the closing attorney does a lien search. Talking upfront about these issues with your Business Broker about your UCC lien situation can help the sale of the business. Your Broker should be able to help you through each situation, but they must know first before they can help.
The trust relationship between a Seller and Business Broker can be the difference between a business selling or not. Nobody hates surprises more than a Business Broker when they think they know all the details about a business they are trying to sell. Your Business Broker is like your lawyer, they need all the details before they can successfully represent you. The best piece of advice is to Disclose, Disclose, Disclose!
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 sales@eatsbrokers.com. Visit our website at www.EATSbrokers.com
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Should I Sell my Restaurant?
Every Restaurant Owner has asked the question to themselves, “Should I Sell My Restaurant” at one time or another. It takes a certain person and mindset to want to own a restaurant, and an even smaller set of people have an exit strategy to sell a restaurant when the time is needed.
Restaurant Ownership is a very rewarding experience but can also become a negative burden quickly. The Restaurant business can require an owner/operator to work 10-12 hours a day, work 5-7 days a week, and miss out on spending valuable family time with loved ones.
60% of restaurants will close within 3 years and 80% will close within 5 years. To better understand why restaurants, sell or close at a rapid pace, you must understand what it takes to operate a successful Restaurant business. Some restaurant owners check out mentally from operating the day-to-day operations once their restaurant ownership dream starts to crumble. There are times when selling a restaurant is the best option for an owner. Here is a list of situations:
Health Issues– Operating a restaurant can be very stressful and lead to multiple health problems. Stress can lead to Restaurant Owners experiencing low energy, headaches, chest pain, rapid heartbeat, and insomnia. Stress that’s left unchecked can contribute to many health problems, such as high blood pressure, heart disease, obesity, and diabetes.
Burnout- This is the #1 reason, according to industry experts, why owners consider selling their business. The normal 10-12 hour workdays can take a mental and physical toll on the body. The required working conditions can take out the excitement of restaurant ownership from most owners. The pressure to increase sales or stop sales from declining can be a mental drain that leaves owners with limited motivation.
Partner Disputes– Partnership disputes happen often and usually force the sale or closure of a restaurant. Most partnerships have a written agreement of each party’s responsibilities, and financial responsibilities. Partnerships come in all shapes and sizes, intending to protect all parties. The majority of partnerships involve an operations partner and financial backing partner. Once partners are not on the same page regarding the direction of the restaurant, it’s time to sell.
Financial Reason– Liquidating the business can often relieve restaurant owners of the debt, other financial burdens, or cash out for financial gain. Many restaurant owners have much of their net worth invested in their restaurant. They have dedicated years of blood, sweat, and tears to build up the business and now it’s time to cash out and retire or move until the next adventure.
Lifestyle Changes– I know of several restaurant owners who have built successful restaurants but want to sell because their lifestyle has changed since they open. Uncontrollable life changes can force the sale of a restaurant. The biggest issues I find are divorce, kids, changes in family living arrangements, spousal job opportunities, or just want to take life in a different direction.
Losing interest in one’s business usually indicates that it is time to sell.
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 sales@eatsbroker.com. Visit our website at www.EATSbroker.com
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Restaurant For Sale By Owner Common Mistakes
Restaurant For Sale By Owner common mistakes are diverse and wide. A common question I receive monthly as a Restaurant Broker is, “Why list with a Broker, I can sell my restaurant For Sale by Owner (FSBO)? I understand the question because today’s websites offer sellers potentially cost-effective routes to selling a Restaurant online. Working as a Restaurant Broker for 8 years I have found a number of Restaurant For Sale By Owner Common Mistakes.
EATS Restaurant Brokers understand getting a buyer that is interested in buying a restaurant is the easy part, getting that buyer to the closing table is where the difference of being a trained Restaurant Broker compared to a restaurant seller trying to sell a restaurant for the 1st time makes a HUGE difference.
For that Restaurant, Owners thinking about selling by For Sale by Owner (FSBO), the skill set to operate a day-to-day restaurant is different than selling your restaurant. EATS Broker have created a list of, “The most common mistakes in selling your Restaurant for sale by owner”.
Review Books and Records- Listing price for restaurant
When it comes to selling a restaurant the owner is selling one of two valuables- Salary or Equipment. To receive the highest valuation on a restaurant the seller needs to have 3 years of strong verified tax returns. Once a seller has the tax returns coming up with a listing price is a mathematical equation and not a guess or price based on emotions.
Overpriced or Underpriced restaurants is a common mistake with For Sale Owner listings. Not having clean books and records, tax returns, profit, and loss statements will hurt the possibility of selling a restaurant.
Restaurant Brokers know the acceptable add-backs on tax returns, to provide the seller with the highest selling price. An EATS Broker is trained on reviewing profit and loss statements and tax returns to provide a restaurant valuation that will be approved by the bank for lending.
Selling a restaurant without good books and records takes another skill set most Restaurant Owners don’t have because they don’t sell restaurants daily. The listing price has to be based on an Asset Sale which includes equipment, goodwill if any, and rights to lease assignment. This method receives a much smaller valuation and should be priced according to market prices.
Time and Effort
Selling a restaurant is a contact sport meaning you will have tons of buyer inquiries, questions, requests, calls, emails, docs requested, information requested, and hopefully, the buyer moves forward. Most For Sale by Owners don’t understand the average length of time on the market for a restaurant is 9 months. Over these 9 months the frustration of not selling, time commitment, and marketing fees can start to affect the operation of the restaurant.
Buyers are Liars and Seller are Too
Finding the truth between a For Sale by Owner and an unqualified buyer can be a tough situation. The ownership of a Restaurant is a symbol of the American Dream for tons of people. Everyone has that recipe or idea from their family that will make their restaurant successful. The actual reality is that most people are not ready to open a restaurant and are merely inquiring about information on restaurants they can’t close on.
Providing too much information upfront to a buyer without qualifying the buyer is a big mistake. We have found sellers are so eager to sell their restaurant they will meet with just about anyone. During these meetings, the sellers provide buyers with confidential information regarding their business. Wasting time dealing with unqualified buyers that say they have the money but don’t show the money is a huge common mistake for For Sale by Owners.
Many educated and sophisticated buyers have experienced a negative time working directly with owners who don’t know how to sell a restaurant, so they simply avoid those listings. Why would you list your restaurant For Sale By Owner if you are eliminating some of the available buyers in the market?
Attracting serious qualified buyers while maintaining confidentiality is a key component of what we do. We use our time and effort and pay all the marketing dollars to get a restaurant sold, we only get paid a Success Fee once we have sold a restaurant.
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 sales@eatsbroker.com. Visit our website at www.EATSbroker.com
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