Why do Restaurant Brokers prequalify buyers
Why do Restaurant Brokers prequalify buyers before providing the restaurant name and financials? The answer is simple to protect the confidential information on the restaurant for sale. Restaurant buyers sometimes don’t understand the process of buying a restaurant and what’s involved. Many potential buyers understand they must first sign a Non-Disclosure Agreement (NDA) or confidentiality agreement.
After the Non-Disclosure Agreement (DNA) is signed, restaurant buyers expect instantly to get the name and financials of the restaurant for sale. Buyers sometimes will request a copy of tax returns, profit and loss statements, a copy of a lease, etc. A professional Restaurant Broker should now ask buyers to provide proof of funds once this occurs.
Why do Restaurant Brokers prequalify buyers? The short answer is that only 2% of buyers that inquire about a restaurant for sale will buy. A Restaurant Broker usually must communicate with 60-75 buyers before a restaurant is sold.
Dallas Restaurant Broker Dominique Maddox says, “we prequalify buyers by getting proof of funds in the form of a bank statement, brokerage statement, 401K, or letter from a banker before providing their name, address, and financials on our restaurant listings”.
EATS Broker reasons to qualify a buyer:
- To protect the confidentiality of the listing agreement, limit the number of buyers with the information on the listing.
- Ensure the buyer has enough liquid assets to be approved by the landlord.
- Ensure the buyer has enough liquid assets to be approved by the Franchisor.
- To confirm, buyers can put down 10%-20% for SBA lending
Protecting the confidentiality of our client’s listing is a top priority at EATS Broker. Once the buyer signs the non-disclosure agreement and submits proof of funds, we provide the name and financials of the restaurant for sale.
For more information on the restaurant market and other available consulting services or 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 Hardest Restaurants to Sell?
The Hardest Restaurants to Sell have several issues that make it difficult to sell a restaurant. The grim reality is that only 30%-40% of restaurants listed for sale will be sold to a new buyer. Why do some restaurants sell, and others don’t?
We’ve seen it all, but these two concepts we will focus on for this blog can be the hardest to sell:
Not Profitable or Losing Money: Asset Sales
Selling a restaurant that is not profitable or losing money yearly is challenging. These types of sales are called Asset Sales.
Buying an existing restaurant sold as an Asset Sale is a quick path to Restaurant Ownership. The previous seller has done the hard work of building the restaurant, dealing with contractors, getting the permits, negotiating the term on the lease, and establishing the location as a restaurant.
CONS:
-Buying a restaurant that is losing money is a liability
-Lease Assignment is usually involved when selling a restaurant; the current tenant has already negotiated the lease terms.
-Buying used restaurant equipment, leasehold improvements, and goodwill. It can be hard to estimate restaurant value and offer price.
Sellers usually are only interested in what they “want” or “need” for the restaurant. The problem is that buyers don’t care and only put a value on the Furniture, fixtures, Equipment, and goodwill.
Restaurant Broker Tip: The Seller should be ready to negotiate on terms. The seller might not get the sales price and terms they originally wanted when listing for sale. Restaurant owners should consider the money saved on monthly payments for the remainder of lease obligations.
Example – Monthly rent $7,000 per month x 36 months left on the lease as personal guarantor
$7,000 x 36 = $252,000 savings!
Chef-Driven Concept:
Starting a restaurant is a Chef’s dream to have the ability to use their culinary skills to create unbelievable dishes. Chefs are trained to stand for hours and work in an intensive working atmosphere. Several chef-driven concepts don’t have written recipes; they are all in the Chef’s head.
Many chefs will burn out and want to sell to someone who can work demanding shifts.
CONS:
– Hard to find a trained chef with liquid assets to buy the restaurant and qualify for lease assignment with the landlord.
– Only a tiny minority of buyers looking to buy a restaurant are comfortable cooking in a commercial kitchen or have the desire to cook.
– The lack of documented recipes creates a problem with consistency
– Takes a certain level of culinary training and experience to be successful
Restaurant Broker Tip: These restaurant owners need to consider the importance of having a trained Sous Chef. The Chef needs to be skilled enough to operate the kitchen like the owner. When a buyer knows that an experienced Chef will stay on board once the restaurant is sold, it provides a certain level of comfort.
The restaurant owners need to have documented recipes with measurements to ensure consistency.
When trying to sell a restaurant that can be considered some of the Hardest Restaurants to Sell, owners should have realistic expectations.
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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Restaurant Broker Dominique Maddox of EATS Broker sells Lenny’s Subs & Grill
Restaurant Broker Dominique Maddox of EATS Broker sells Lenny’s Subs & Grill in Humble, Texas. EATS Broker represented the seller and buyer for this transaction.
The seller had owned the location for 16 years before deciding to sell and retire. The new buyers are excited about the opportunity to own a restaurant in the United States. They were approved for an E-2 visa to purchase the franchise.
The E-2 Investor Visa allows an individual to enter and work in the United States based on an investment in a U.S. business. The E2 visa is valid for three months to five years and can be extended indefinitely. The investment must be “substantial,” although no legally defined minimum exists.
The city of Humble is home to some of the best-hidden gems in Texas. Rich in history, and located only 20 minutes from Houston, it’s known for the diverse community and family-friendly events and recreational areas.
Texas Restaurant Broker Dominique Maddox says, “to see someone have the ability to purchase a restaurant in America.
Receive an E-2 visa and start living the American Dream of business ownership is one of the reasons I’m in the business”.
The buyers plan to upgrade the restaurant with some visual changes and work in the restaurant daily as the Owner/Operator. Multiple members of the family plan to work in the business. If you are in the area stop by to grab a sub!
The buyers were trained to operate the restaurant in Memphis, TN, at the headquarters for Lenny’s Grill and Subs.
EATS Broker would like to thank Lenny’s Subs and Grill franchise development department for all the help in getting this deal to the closing table. The Franchise Department team made the process simple.
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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How to sell a restaurant? Tell your Restaurant Story
To sell a restaurant, one must first tell “The Restaurant Story” to the buyer that they believe and want to be a part of the story moving forward. Restaurant buyers want to know the story of the Restaurant and the owner. The “Restaurant Story” explains why, how, and opportunities for continued success to the buyer.
Most restaurant buyers will purchase a restaurant based on the opportunity to make a profit and the Restaurant Story. The most complex restaurants to sell are locations that are losing money or buyers don’t can’t relate to “The Restaurant Story.”
Dallas Restaurant Broker Dominique Maddox says, “The Restaurant Story is an opportunity to help buyers view 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”.
EATS Broker “Restaurant Story” Kit Includes:
– Restaurant’s startup story explains:
- Why was the Restaurant started?
- How was the Restaurant started?
- Who began the Restaurant?
- Success stories
- Failure stories-includes opportunities to improve business
– Financial Picture– Restaurant Profitable or not
– Liability Picture– Lease terms, franchise terms, UCC lien search, and financing liabilities
– Staff Concerns
- Labor Cost and why?
- Full-time vs. part-time?
- Legal workers or paying under the table?
- Employee benefits and perks
- Longevity of staff members
– Food Cost Concerns
- Food Inventory Cost and why?
- Food ordering system
Franchise Restaurants
– Royalty Fee and Marketing Fee
– Transfer Fee
– Required Training Time
– Store upgrades required by Franchisor
– Franchise has first right of refusal to buy (sometimes)
– Training location
– Years left of Franchise Agreement
Before a Restaurant Owner contacts a Restaurant Resale Specialist for a restaurant valuation or tries to sell by themselves, they should be ready to tell their Restaurant Story!
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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When to sell a restaurant? 8 reasons why that start with D!
When to sell a restaurant is a difficult decision for most restaurant owners. Interesting fact that the reason a restaurant owner wants to sell a restaurant usually will start with the letter D! Buyers are always curious about why a restaurant owner wants to sell a restaurant?
The Dallas Restaurant Broker at EATS Broker explains the most common reasons to sell a restaurant. There 8 reasons to sell a restaurant:
1. Debt– A restaurant owner has multiple forms of debt. All these forms of debt can affect a restaurant owner mentally and physically. One of the biggest concerns of a restaurant owner is to avoid bankruptcy and sell a restaurant for a profit.
-Landlord Debt
-Bank loan Debt
-Vendor Debt
-EIDL Loan Debt
-PPP Loan Debt
-UCC lien
2. Disability- There are many types of disabilities, such as intellectual, physical, sensory, and mental illnesses.
3. Divorce- Restaurant ownership’s demanding physical and financial requirements can break up a happy home and lead to divorce. Many restaurants depend on an owner/operator to be present to be successful.
It’s common for a restaurant owner to work 50-60 hours a week and work on the holidays. The life of a restaurant owner requires sacrifices from the family and owner.
4. Death- Everybody deals with recovering from death differently. The thought of restaurant ownership after death could seem impossible.
5. Disinterest– It’s easy to get disinterested in a restaurant that is unsuccessful or doesn’t live up to the restaurant owner’s dreams.
6. Declining Sales- This is one of the biggest reasons for selling a restaurant business. Inflation is at an all-time high, labor costs are exploding, and rents keep increasing.
7. Dissension among owners-Once partnerships start to be unproductive, and the relationship between parties starts to crumble, it’s time to sell your restaurant.
8. Disaster- The pandemic is a good example of a disaster that happens and changes everything.
**Delivery of a child would be another good reason for selling a restaurant business**
To learn more about EATS Broker consulting services or receive a complimentary restaurant valuation, contact Restaurant Resale Specialist Dominique Maddox at 404-993-4448 or email at sales@eatsbroker.com. Visit our website at www.EATSbroker.com.
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Are you selling your restaurant? Are you ready?
Have you thought about selling your restaurant? Are you ready to sell and let go? Selling a restaurant can be a mentally tough and draining decision. Several restaurant owners view ownership of a restaurant as having a child, an business identity, a way to provide for the family, and a legacy.
According to Forbes, baby Boomers, defined as people born between the years 1946 and 1964, account for approximately 40 percent of small business or franchise ownership.
Forbes also states that the Baby Boomer generation accounts for an estimated 2.3 million small businesses in the United States, employing over 25 million people. Many of these businesses are thriving, and nearly 60 percent have no succession or transition plan in place.
The Baby Boomer population today is listing restaurants for sale or looking for a restaurant valuation to consider their options to sell a restaurant.
Reasons for Baby Boomers to Sell a Restaurant:
- Pandemic
- Work labor shortage
- Inflation
- Retirement
- Health
- Divorce
- Partnership Issues
The Dallas Restaurant Broker Dominique Maddox states, “EATS Broker provides restaurant owners with a complimentary restaurant valuation. Numerous restaurant owners will inquire about a restaurant valuation but are not ready to sell”.
Today’s Restaurant Owners must be honest with themselves if they are ready to sell a restaurant? The Restaurant Broker provides some questions to consider when thinking about selling a restaurant.
How to know if you are ready to sell a restaurant? Ask yourself these questions:
- Is the restaurant ready for a sale?
- What are my plans after I sell my restaurant?
- Am I ready to sell a restaurant?
- What happens if I don’t sell my restaurant?
- Who can help with selling a restaurant?
- Should I try For Sale by Owner or hire a Restaurant Broker?
- What sales price will I need to be happy?
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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What is Restaurant Prime Cost?
Restaurant Prime Cost can be described as the most critical number a restaurant owner should know to operate a profitable restaurant. Restaurant Prime cost should get extensive attention on the profit and loss statement because the category is highly volatile.
Today’s restaurant industry is faced with increasing labor wages and an explosion in food costs. These factors stress restaurant owners’ net profits because it’s expanding the Restaurant Prime Cost.
What is Restaurant Prime Cost?
The formula for Restaurant Prime Cost is: COGS + Total Labor = Prime Cost
Restaurant Prime Cost should be reviewed monthly and, at worst quarterly, to monitor any changes that can negatively affect the Profit and Loss statement. Many successful restaurant owners actually calculate and evaluate prime restaurant costs weekly.
Dallas Restaurant Broker Dominique Maddox says, “the first items I review on a profit and loss statement is the Cost of Good Sold “COGS” and the total labor cost total percentage cost. Prime cost should be 55%-65% or less (total sales)”.
Breakdown of Restaurant Prime Cost:
Cost of Goods Sold:
The cost of goods sold (COGS) in a restaurant includes the price of all products, materials, and condiments used to create a dish or drink.
Total Labor Cost:
Total labor cost includes employees’ wages and benefits. This category contains hourly employees, salaried employees, payroll taxes, and employee benefits.
Restaurant Broker Tips:
-Training managers to be proactive in monitoring food loss, employee scheduling, and comps.
– Provide proper training for new employees
– POS System and technology should be up to date with inventory count
-Increase food prices
-Review restaurant numbers weekly
-Owner/operator or General Manager operated
To learn more about EATS Broker consulting services or to receive a complimentary restaurant valuation, 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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Dominique Maddox featured in Voyage Dallas Magazine
In the February issue, the founder and President of EATS Broker Dominique Maddox was featured in VoyageDallas magazine Local Stories. This is Dominique’s second time being featured in the Voyage magazine; he was featured in VoyageAtlanta in 2020.
Voyage Dallas magazine’s goal is to highlight the best of Dallas people, businesses, organizations, and events. The Voyage Group of Magazines is based out of Los Angeles; they have magazines that feature local hidden gems in multiple states.
The company’s mission is to build a platform that fosters collaboration and support for small businesses, independent artists and entrepreneurs, local institutions, and those making different cities interesting.
Dallas Restaurant Broker Dominique Maddox says, “the opportunity to be featured in VoyageDallas is a blessing for my company. The article allows people to get to know me personally and learn more about EATS Broker.
I talk about my struggles as a Restaurant Broker and starting my Restaurant Brokerage firm. I moved from Atlanta, GA to Dallas, TX in August 2021 to grow my business”. http://voyagedallas.com/interview/exploring-life-business-with-dominique-maddox-of-eats-broker/
EATS Broker is a boutique restaurant brokerage specializing in exclusively selling restaurants, bars, and nightclubs. Our brokerage is known as Restaurant Resale Specialists that are Subject Matter Experts in the selling a restaurant and the buying a restaurant process.
We help our clients through the complex process of buying or selling a restaurant. Our company specializes in selling Restaurant Franchise Resales and Restaurant ReSales. We also help clients with Restaurant real estate site selection, Tenant Representation, Franchise Consulting, and Restaurant Price Evaluations.
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 by email at sales@eatsbroker.com. Visit our website at www.EATSbroker.com.
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Meet Dallas Restaurant Broker Dominique Maddox
The title Dallas Restaurant Broker Dominique Maddox is a title I’m still getting used to hearing. I relocated from Atlanta, Georgia, to Dallas, Texas, in August 2021 to expand my Restaurant Brokerage firm.
My story starts in Anchorage, Alaska, where I lived from 1981-2000; I received a football scholarship to attend Morehouse College in Atlanta, GA. After high school, I actually thought about attending culinary arts school to become a chef. My ambitions of a culinary arts career ended when I visited Atlanta, Georgia, on my football recruiting trip to Morehouse; I knew Morehouse was for me.
My life is full of examples of my ambitions and goals of always “betting on myself.” I left Corporate America in 2008 to go full-time in Real Estate. Well, I couldn’t have chosen a worse time to get introduced to residential home sales.
During this time, homes in Atlanta, Georgia, were selling for unbelievable discount prices; I would always get the investors looking for homes in the price range of $10,000-$100,000. The first home I sold in Atlanta was for $10,000 in an area that sells for over $200,000 today’s market.
I always had dreams of getting into Commercial Real Estate. My life changed in September 2010; I received a random email asking if I ever thought about being a Business Intermediary and selling restaurants?
Well, I had never thought about selling a restaurant, but I was very interested in the opportunity. My interview was a couple days later, and the next thing I knew, I was a Restaurant Broker.
I worked with the Nation’s Largest Restaurant Brokerage firm for 7 years, ranging from Restaurant Broker to Sales Development Manager. I began to notice I had reached a glass ceiling with the opportunity and wanted change.
I opened EATS Restaurant Brokers in October 2019 in Atlanta to bring a new flavor to the Restaurant Brokerage Industry and bring diversity. I decided to change the company name to EATS Broker in December 2021.
Dallas Restaurant Broker Dominique Maddox biggest lessons:
- Selling a restaurant is like a combat sport; the Restaurant Broker has to contact buyers. It’s game day when it comes to selling the restaurant to a new buyer on the phone or by email.
- Only 30%-40% of restaurants listed for sale will actually be sold, and only 2% of buyers on the market looking for a restaurant to buy will actually buy.
- The platform of owning EATS Broker has given me a purpose to help people realize the American Dream of owning a restaurant or selling a restaurant.
I have also been blessed and humbled by the people that have reached out to me for guidance on selling a restaurant, buying a restaurant, or leasing a restaurant.
To learn more about EATS Broker consulting services or to receive a complimentary restaurant valuation, 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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3 Biggest Mistakes Restaurant Sellers Make
The biggest mistakes restaurant sellers make are simple issues that can be addressed before a restaurant is listed for sale. The mistakes are based on facts, books, and records and lack of understanding of selling a restaurant.
Dallas Restaurant Broker Dominique Maddox says, “ the small details in the process to sell a restaurant make all the difference at the end. The lack of attention to the facts or books and records will make buyers not interested in buying the restaurant for sale.
The Restaurant Broker at EATS Broker listed out the Biggest Mistakes Restaurant Sellers Make:
- Leaving out the essential facts:
-Ownership of Furniture and Fixtures- what items are leased or owned by the landlord?
-UCC liens that can stop the sale of the restaurant and have to be paid before closing
-Filed tax returns that don’t match the profit and loss statements provided to Broker or buyer
-Restaurant upgrades that are required by Franchise( only applies to franchise restaurants)
-Behind on rent payments
- Clean Books and Records
-Sales Tax Filings don’t match Profit and Loss Statements
-Has two sets of books-provides different copy to IRS and provides the buyer with the accurate numbers
-Does not have a Profit and Loss statement to provide
-Slow to provide updated numbers
-Lack of clean books and records will not qualify for SBA bank lending
-Lack of transparency builds distrust in the buyer
- Not realistic about the selling a restaurant process
-Unlike residential sales, it can take 6-8 months to sell a restaurant
-Only 30%-40% of all restaurants for sale listings will actually sell to a new owner
– Everything is negotiable when it comes to price-need to be flexible
-Only 2% of buyers on the market looking for a restaurant for sale will buy; it can take multiple interested buyers before the actual buyer is found.
To learn more about EATS Broker consulting services or to receive a complimentary restaurant valuation, 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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