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.
Read More
How to Sell a Restaurant- Telling the story
How to sell a restaurant in today’s market only months after the Covid-19 pandemic crippled the restaurant industry is a challenging task. EATS Restaurant Brokers understands selling a restaurant is just not about the tangible items or the goodwill. Buyers in today’s market want to know what the story is of the restaurant. How has covid affected restaurant sales?
Dominique Maddox a Restaurant Broker and Founder of EATS Restaurant Brokers says, “when I take a restaurant for sale listing, I want to know the story about the restaurant. Every Business Broker can look at the Profit and Loss statements, but most cannot tell the story of the restaurant to a buyer, because they did not ask the owners the right questions”.
When I am Telling the story of a restaurant, I want the potential buyers to understand the strengths, historical success, and possible future of a restaurant”.
EATS Restaurant Brokers provides tips to restaurant owners for “Telling the story”
1st Review the financial numbers from 2019 and get a monthly average for the sales, compare the numbers to the 2020 sales numbers. How much of a monthly decline or increase do you notice? In the past 3-months how close are monthly sales averages compared to 2020?
EATS Restaurant Brokers advice: If your sales have declined from 2019 to 2020, know your historical success. Is March-May your busiest months and your business was affected negatively by the pandemic? How were your monthly sales history from 2017-2019? What areas of your business were affected the most dining in, catering, and how are those areas now affecting sales now?
2nd Restaurant owners should understand the SWOT analysis of the business before they list for sale. SWOT analysis is a strategic planning technique used to help a person or organization identify strengths, weaknesses, opportunities, and threats related to business competition or project planning.
Restaurant owners should be about to tell the story about the strengths and opportunities of the restaurant. The strength of the business is the “Sizzle”, meaning why should a buyer considering purchasing the restaurant. Think about how is your social media, how does your menu look online, do you have Google Reviews?
EATS Restaurant Brokers advice: Provide your Restaurant Broker with selling points about your business that would encourage a buyer to purchase your restaurant. Provide information on expenses that can be reduced ex. Food cost or labor cost. What changes can be made to improve the business, and why should a buyer make the changes?
Selling a restaurant is an art and science at the same. Telling the story of the restaurant helps a buyer understand the strengths, opportunities, and value of the business. Next time you want to sell your restaurant do not just list it for sale, tell the story!
Thinking about selling a restaurant contact EATS Restaurant Brokers. 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
Read More
Dominique Maddox of EATS Restaurant Brokers sells Papa’s Pizza To Go Franchise
Dominique Maddox of EATS Restaurant Brokers sells Papa’s Pizza To Go located at 3064 US-76, Hiawassee, GA 30546. EATS Restaurant Brokers 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.EATSbrokers.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 Restaurant Brokers.
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 Restaurant Brokers. 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
Read More
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
Read More
4 Reasons Why Fast-Casual Restaurants are Growing
Reasons why Fast-Casual Restaurants are growing can be attributed to a number of factors. When you think of a Fast-Casual Restaurant what is the first thought that comes to your mind? Why are Fast-Casual Restaurants Growing?
Most people have an idea but don’t know how a Fast-Casual Restaurant is defined. Ask a person to name a Fast-Casual Restaurant and they may have trouble or be confused.
The Wikipedia definition is- A fast-casual restaurant, found primarily in the United States, does not offer full table service, but advertises higher quality food than fast-food restaurants, with fewer frozen or processed ingredients. It is an intermediate concept between fast food and casual dining and usually priced accordingly.
The concept originated in the United States in the early 1990s but did not become mainstream until the end of the 2000s and the beginning of the 2010s. Fast Casual Restaurants have built their popularity by offering healthful food prepared with better ingredients than those at fast-food chains.
According to 10Best.com, the top 10 Best Fast Casual Restaurants are as follows:
QDOBA Mexican Eats
Dickey’s Barbecue Pit
MOD Pizza
Chipotle Mexican Grill
Portillo’s
Panera Bread
Moe’s Southwest Grill
McAlister’s Deli
Five Guys
Au Bon Pain
A restaurant like Chipotle and Panera proved that Fast Casual restaurants could have success in the suburbs. Nowadays a growing number of Fast-Casual restaurants entering into a new market will open in the Suburbs before moving to the bigger cities.
In 2009, there were about 17,300 fast-casuals in the United States with sales of $19 billion, according to the market research firm Technomic. By 2018, the last year for which statistics are available, fast casuals had more than doubled their locations (34,800) and sales ($47.5 billion). Based on an article written by Tim Carmen
EATS Restaurant Brokers provides it’s 4 reasons why Fast-Casual Restaurants are growing so fast.
- The counter-service concept requires far fewer specialized employees than your full-service restaurants require. The Owner can save on salaries for Executive Chefs, Sous Chefs, and employees
- The improvements in technology and data to track buyer’s buying habits have given the owners and franchises tons of information on buyer’s buying habits.
- A better selection of healthful options on menus. The customization of meals, proteins, vegetables, vegan selections, sauces, wraps, etc.
- Dress Code requirement-On the weekends I’m dressed in sweats and a sweatshirt. I want somewhere where I don’t have to dress up to enjoy great food. (#4 is my personal opinion)
Thank you for reading my blog. Next time you enter a Fast-Casual restaurant you will know and can say “Hey this is a Fast-Casual 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@eatsbrokers.com. Visit our website at www.EATSbrokers.com
Read More
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@eatsbrokers.com. Visit our website at www.EATSbrokers.com
Read More
5 Reason’s I can’t sell my Restaurant.
EATS Restaurant Brokers are involved with multiple Professional Organizations that are created to educate Business Brokers. I recently attended a Georgia Association of Business Brokers Spring Conference. The topic that got my interest was the Difficulties Seller’s Encounter when trying to sell a business or restaurant.
80% of Business Owners don’t know the value of their business-Source M&A Today
80% of Business Owners don’t have an exit strategy.
When it’s time to sell Restaurant Owners encounter the following 5 problems if they don’t have Professional Help:
- Valuing the restaurant– The restaurant industry is a specialized industry that some books and records can be creative. EATS Restaurant Brokers are trained using the following methods:
- A liquidation asset-based approach determines the net cash that would be received if all assets were sold, goodwill, location, and lease terms.
- Earning Value Approaches-based on the owner’s past performance of restaurant financials. This method includes tax returns to find out the Seller’s true owner benefit for ownership.
- Percentage of gross sales- This method is not recommended.
2 Keeping Sale Confidential– Buyers request various financial records and information about a restaurant when it’s listed. This information is confidential and should be protected by a Buyer Confidentiality Agreement. Just hand-shakes no longer work, it’s best to put terms on paper.
3 Marketing- Marketing a restaurant for sale can feel like a full-time job. Buyer activity should be monitored to track success. Listings should be written to interest buyers to inquire for more information. Reports showing restaurant financials, equipment list, lease terms, store operations information, should be prepared to give to interest buyers.
4- Structuring the deal and negotiating- In Restaurant Brokerage the saying goes, “ It’s easy to get a buyer, it’s hard to get the deal closed”. This is a very important step because it sets expectations for the Restaurant Seller and Restaurant Buyer. Most deals will fail if the deal is not structured correctly on the front end. During this step, it’s highly recommended to get professional assistance with someone that has experience negotiating Restaurant Sales.
- Financing- This goes back to Question 1, I think this is the most important question Restaurant Owner should think about when selling a restaurant- “How will someone pay for my restaurant, will they pay with Cash, Bank Financing, or Seller Financing”. Once you have your answer it’s time to start preparing the docs required. Bank financing will require the most information and checks and balances. Clean books and records are required.
What is a Restaurant Broker?
People ask me all the time What is a Restaurant Broker? Restaurant Brokers are specialists trained to facilitate a restaurant transaction between sellers and buyers. On a daily basis Restaurants, Brokers are working with professionals in the Restaurant Industry. Some Restaurant Brokers know the financials of a business better than the restaurant owners due to years of daily experience reviewing restaurant financial statements.
Unlike some brokers that sell everything from a dry cleaner, gas station, to an automobile shop, Restaurant Brokers deal exclusively with the restaurant industry.
Some of the beneficial services Restaurant Brokers offer buyers and sellers during the sales process include:
Buyer Benefits
– Restaurant Brokers work on 100% commission and take their fee as commission out of the price agreed upon by seller and buyer. Broker and seller have a separate commission agreement signed. This means the benefit of the broker’s experience and knowledge without personal cost.
– Restaurant Brokers help the buyer client with analyzing the seller’s financials, collects sales tax filings, tax returns, leases, equipment list, utility providers, and does an introduction to the landlord for lease assignment.
– Every restaurant broker has a network of local vendors a buyer may need during the purchase process. These professional relationships were built over the years and help the buyer with a stress-free closing.
Seller Benefits
– A Restaurant Broker is a skilled professional who provides a restaurant price valuation based on the financials provided by the sellers. Restaurant Brokers know the guidelines for qualifying business for bank lending to help sellers get the most for the business.
– A Restaurant Broker is skilled in negotiation and document handling. Restaurant negotiations are complex, a Restaurant Broker can negotiate an agreement that works for everyone.
– Selling a restaurant can be a process that takes 6-9 months, the whole time a Restaurant Broker is screening buyers, pre-qualifying buyers, answering questions about your business to buyers, and marketing your business.
-Most importantly a Restaurant Broker only gets paid at the closing table when the business is sold. The commission ranges from 10%-15%, but the broker puts up all the money to market the business, spends the time with buyers, and only gets paid once the deal is closed. For the seller, this is professional representation without putting upfront fees!
A Restaurant Broker is a professional that can help you buy a restaurant, sell a restaurant, or lease a restaurant at a price you can afford.
EATS Restaurant Brokers is a full-service Real Estate Business brokerage practice focused on the restaurant industry. The company specializes in selling Restaurant Franchise Resales and Restaurant Sales. We also help clients with Restaurant real estate site selection, Tenant Representation, Franchise Consulting, and Business Price Evaluation.
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
Read More
