Bring your own bottle (BYOB). Is it good for restaurants?
Bring your own bottle (BYOB) policy can be good for restaurants, but it also has some significant downsides. If a restaurant has a BYOB policy, customers are allowed to bring their alcoholic beverage of choice to the restaurant. Strict licensing requirements and high taxes on alcohol sales have made the idea of restaurant owners to offer a Bring your own bottle (BYOB) popular.
Dallas Restaurant Broker Dominique Maddox says, “BYOB restaurants and bars are popular in Texas; this is a practice not commonly seen in Georgia, where I relocated from last year to Dallas, Texas. The concept of providing customers the freedom to BYOB is growing in cities like Philadelphia, Boston, Phoenix, and Dallas Fort Worth”.
EATS Broker provides a list of the pros and cons of owning a BYOB restaurant:
Pros:
-Does not require a state license to serve liquor (restaurant owners may have a beer and wine license). Restaurant owners can save money by not paying for a full liquor license.
-Can charge a corkage fee, usually, $3-$10 is the average cost, but the cost can go up to $20-35 depending on the city and state.
-Buyers tend to spend more money on food and desserts
-Customers like the freedom to bring their drink
-Can charge for glassware or mixture to compliment their drinks
-There are no statewide BYOB laws in Texas
-Less storage space is needed in the restaurant for liquor inventory
Cons:
-Liquor and cocktails are high-profit margin items on the menu
-When it’s time to sell the restaurant, BYOB concepts can be hard to resell to a buyer that prefers to have a full liquor license.
-Buyers can take advantage of the policy and order minimal food
-The server’s/waiters tips might be affected by lower check averages
-Customers can complain about the corkage fee
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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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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3 Mistakes to Avoid in Selling Your Restaurant
Selling a restaurant can be a complicated process. What are the mistakes to avoid when selling your restaurant? The Restaurant Broker at EATS Broker has been selling restaurants for over ten years. This blog will provide insights for restaurant owners thinking about selling a restaurant.
Mistake #1 Listing your restaurant for sale too late
Ask the Dallas Restaurant Broker when it is time to list your restaurant for sale. The response will be when you start to think about it. It takes an average of 6-8 months to sell a restaurant in today’s market. Even once listing a restaurant for sale, it’s a process to get sold.
It’s human nature that once a person has decided the restaurant industry demands are not for them, the restaurant becomes a mental and physical burden. When people decide they are tired, bills are hard to pay, and mentally checking out, it’s time to sell a restaurant.
Restaurant Broker advice: Call a Restaurant Resale Specialist for a complimentary restaurant valuation. Discuss your options to list your restaurant for sale before deciding to close the doors to your restaurant forever.
Mistake #2 – Going to market without Good Books and Records
It’s a common saying, “time kills deals.” Once a buyer is interested in a restaurant for sale, it’s essential to provide the buyer with accurate financials. When a seller goes to market without the ability to give a buyer up-to-date tax returns and profit and loss statements, it always kills a deal.
Restaurant Owners that decide to list a restaurant for sale without the capability of providing financials in a timely matter are making a big mistake. The buyer will request some financials before making an offer and more during the due diligence.
Mistake #3 – Closing the doors
Buyers like to see the lights on, customers coming in the doors, and the cash register ringing. One of the biggest mistakes is to get a restaurant valuation and list your restaurant sale, only to close the doors months later.
Once a restaurant is closed reduces the value in the buyer’s mind. Instead of getting a turn-key restaurant, they are getting used equipment and rights to the lease. These types of transactions are harder to sell. 41% of buyers will be 1st-time restaurant buyers and favor an open restaurant.
Restaurant Broker advice:
List your restaurant for sale months before you decide to close the doors. Contact a Restaurant Resale Specialist to discuss the value before deciding to close your 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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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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Closing Attorneys for Restaurant Sales Transactions
Closing Attorneys for restaurant sales transactions are an essential part of the selling a restaurant process. Closing Attorneys act as neutral third parties in the transaction. Since they don’t represent either buyer or seller, as an attorney would.
Closing Attorneys are known by multiple names like Escrow agents and Real Estate attorneys. The Closing Attorney’s job is to ensure a smooth closing transaction, UCC-1 lien search, and wire closing proceeds to all parties.
Dallas Restaurant Broker Dominique Maddox says, “picking an experienced Closing Attorney that understands the Asset Sale Purchases is extremely important. Yes, you can close a deal without a Closing Attorney but EATS Broker always recommends a buyer to use a trusted Closing Attorney”.
Duties of a Closing Attorney
– Hold escrow deposit, and disburse closing proceeds to all parties
– Prepare Settlement Statement
– Prepare Bill of Sale
– UCC-1 lien Search
– Prepare Escrow Agreement
– Form of Restrictive Covenant Agreement-(sometimes)
– Prepare Representations and Warranties of Seller and Principal(s) (sometimes)
Closing Attorneys have to confirm that multiple tasks are completed before they will release escrow and send closing proceeds to all parties.
EATS Brokers provides a list of tasks that are completed or confirmed by an experienced Closing Attorney before closing:
Asset Purchase Agreement signed by all parties
All amendments are provided to Closing Attorney
Equipment List provided
Landlord’s Approval of Assignment or New Lease
Final inventory amount (if the purchase price is to be adjusted)
Prorations or Adjustments (if needed)
Franchise Agreement Approval
Wiring instructions for Franchise Transfer Fee
Wiring Instructions for Seller
Wiring Instructions for Broker
Allocation of Purchase Price-(8594 Form)-Asset Acquisition Statement
Buyer Funds-wired directly to the escrow account
Release of Liens or Payoff Letters
Lender’s Instructions (if third-party financing)
When selling a restaurant, EATS Broker always recommends contacting a closing attorney specializing in business transactions rather than residential transactions.
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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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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4 Tips – How to Sell a Restaurant
How to Sell a Restaurant and get the highest and best offer can be challenging. Restaurant owners can help themselves sell a restaurant by checking their “restaurant paperwork” details before listing it for sale!
When selling a restaurant, the real work starts before the restaurant has been listed for sale. An experienced restaurant owner should know the details, expiration dates, and options available in crucial restaurant paperwork.
Today’s buyers are more educated than ever when buying a restaurant. The internet provides information on restaurant valuations and lists of items that buyers should collect during the due diligence period.
Restaurant owners have to remember that the buyers are looking for Problems, Opportunities, and Lies when verifying information provided to them for review.
The Restaurant Broker provides 4 Tips – How to Sell a Restaurant– Items to review:
- Lease
Review to understand the terms and conditions that the buyer must agree to before selling the restaurant.
Questions to know:
- When does the lease expire?
- How many option terms and years?
- Security Deposit?
- Assignment language-any specific qualifications net worth/experience/restaurant concept
- Guarantor language
- Profit and Loss Statements (P&L)
An income statement or profit and loss account is one of a company’s financial statements and shows the company’s revenues and expenses during a particular period.
P&L is the document that tells the story of the restaurant. The restaurant owners should understand the story the paper is telling and why?
Questions to know:
- Does P&L tell the same story as the Tax Returns?
- Does P&L include all sales?
- Did you include PPP loans in net sales? (remove)
- Restaurant Upgrade Requirements (Franchises only)
Several franchises require franchisees selling a restaurant to bring the location up to current company specs and standards.
The restaurant upgrade requirements can include new signage, new chairs, tables, cooking equipment, painting, and more.
Questions to know:
- Last time the restaurant was remodeled?
- Does the Franchise require an upcoming remodel?
- What estimated cost of upgrades would be required to transfer the store to the new owner?
- Do you plan to pay for upgrades, or will you require the buyer to pay upgrade costs?
- Franchise Agreement (Franchises only)
Franchise owners should know how many years are left on the Franchise agreement and how much it costs to extend the Franchise Agreement, and for how many years.
It helps if the seller also knows the Transfer fee amount because usually, the buyer will be responsible for paying this fee.
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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