Time to sell your restaurant? How to defend your listing price

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When it’s time to sell your Restaurant, how do you plan to defend your listing price? This question is excellent for anyone considering hiring a Restaurant Broker or For Sale by Owner.

It’s easy to think of a random number, list a restaurant for sale, and answer buyer inquiries. Selling a restaurant is like fishing; it’s time to make the catch when a customer is interested (a fish bite). 

Dallas Restaurant Broker Dominique Maddox says, “The Restaurant Story is an opportunity to help buyers visualize themselves as part of the story. An experienced Restaurant Broker will explain the Restaurant’s financial, staffing, liabilities, food cost, and startup story to interested buyers”.

The 3 rules of defending your listing price:

Rule #1 

Tell your Restaurant Story: The number one question buyers ask a Restaurant Broker when inquiring about a restaurant for sale is, why are they selling? Once this happens, it’s time to tell the Restaurant Story. 

The Restaurant story is the message/description of opportunities that should be provided to the buyer. Buyers want a background of the Restaurant’s current and past operations, growth opportunities, and why the restaurant owners are selling? It’s time to sell the “Sizzle” of the Restaurant to the buyer. 

Each Restaurant will have a different Restaurant Story, but the core of the stories will be the same. They will include the total expense of the rent, labor, and cost of goods (COGS); these three categories should be 60%-70% of gross sales. 

Rule #2

Clean Books and Records make a BIG difference: Good bookkeeping and accounting help the odds of a restaurant selling. Once the seller and the buyer agree to the terms of the Purchase Agreement, the due diligence process starts. 

Buyers will request several financial documents to verify the Restaurant’s operations and profitability. 

The documents most requested from buyers include:

-Tax Returns

-Profit and Loss Statements 

-Sales Tax Filings

-POS Sales Reports

-Franchise Royalty Reports

-Bank Statements

-W-2s for Owner/Operator or manager replacing an absentee owner

When it’s time to sell a restaurant, owners should check and verify all financial documents tell the same Restaurant Story. A Restaurant Owner can make or break a deal if the financials tell multiple stories. Buyers are looking at financials with suspicion and analyzing every line item. 

Restaurant Broker Tip: The Restaurant Owner keeping two sets of books and records or cheating the IRS on tax payments will hurt the chances of your restaurant selling. 

Rule #3

Repair and Maintenance-The lack of maintenance in a restaurant can hurt the chance of the Restaurant selling to a new buyer. Buyers will inspect the Restaurant and equipment for flaws and repairs needed. 

A neglected restaurant appearance or broken equipment gives a buyer a great reason to reduce the offer price. Restaurant owners should focus on the Restaurant’s presentation before listing a restaurant for sale.  

These three rules help any restaurant seller defend its listing price when it’s time to sell a restaurant. 

To learn more about EATS Broker consulting services or receive a complimentary restaurant valuation, contact Dallas Restaurant Broker Dominique Maddox at 404-993-4448 or email at [email protected]. Visit our website at www.EATSbroker.com.