How
hard are you working just to break even?
Is your rent going up and your year over year customer counts going
down? If that is the case it just might
be time to ask yourself, what should I do next? Should I try again to evolve my
business model or should I just sell and move on?
Robin
Gagnon is the cofounder and CEO of We Sell Restaurants, a brand that has
carved an unparalleled niche in the industry as the nation's leading and only
business broker franchise focused on restaurants. Steven Johnson Grocerant Guru®
at Tacoma, WA based Foodservice
Solutions® understand the undercurrents driving change within the food industry
and believes that if you don’t think you are up to that degree of change again
it just might be time to work your way out of business or sell your business.
Under
Robin’s leadership, We Sell Restaurants has grown to 45 states where it
dominates the restaurant for sale marketplace, including franchise resales, delivering
on the founder’s vision to Sell More Restaurants Than Anyone Else. We Sell
Restaurants was named one of the most influential suppliers and vendors in the
country by Nation’s Restaurant News and has earned a position on INC 5000’s
list of fastest growing privately held companies. Here is some information from
Robin’s
team to consider:
“Restaurant
owners are part of a nationwide move to exit small business. A recent
survey by online business marketplace BizBuySell found that “28 percent are speeding up
their exit timelines.” The reasons include retirement (44%), burnout (30%) and
economic uncertainty (21%). For restaurant owners, the numbers could arguably
be higher.
The
baby boomer generation is driving retirement scenarios, with writers coining
the phrase “Silver Tsunami” to reflect large numbers of aging Americans turning
65. The count, based on the latest
census data,
shows approximately 10,000 Baby Boomers are hitting retirement age every
single day between now and 2030.
Burnout,
the second most common response to the survey, is certainly a factor for
restaurant owners who were initially hit by shutdowns and subsequently plagued
by persistent recruitment and labor shortages, inflation and supply chain
disruptions. Three out of four are only now, three years post-pandemic,
settling into what the National Restaurant Association terms “the
new normal.”
That
is why the timing for selling a restaurant, for many, may finally be right.
Those holding off, having delayed retirement or focusing on operations, could
signal a selling cycle on the horizon that may quickly accelerate inventory and
expand the restaurant for sale market.
For
restaurant owners, this creates a new set of struggles. Aging baby boomers,
having raised children who moved on to other careers, may not have family ready
to step into the business. That leaves them without an exit strategy. Some have
real estate holdings that could eclipse the value of the restaurant operation
itself and most have no idea what the business is worth.
Professionals
can assist in assessing the value of a restaurant that varies, but in general,
equates to two scenarios for buyers. There is either cash flow on the books or
used equipment or property suitable for conversion. In either case, the
restaurant has intrinsic value. Owners should always consider selling before
closing the doors.
Surprisingly,
buyer interest continues to be robust despite the hurdles faced by the
industry. The same problems that have been plaguing restaurant owners for the
past three years also impact new operators. Resales are appealing since someone
launching a concept sees less risk for an established business that has already
factored in the increased food costs, delivery fees, labor expenses and more.
This can be more appealing than starting a new venture with unknown and
projected income and expenses.
Even
a restaurant that is not generating positive cash flow holds value in its
existing equipment or property. Those attempting to equip a full kitchen or
construct a store are still grappling with supply issues, which can delay a
launch. For many, purchasing an existing restaurant is more expedient than
starting from scratch. Existing leases may also be transferred and assigned at more
favorable rates compared to negotiating new agreements. These factors have
led to
restaurants being sold more quickly than other small businesses for the past
year.
Steps
in selling your restaurant
Preparing
your restaurant to sell to maximize pricing includes getting your books in
order. Buyers seeking cash flow rely on the numbers. Financial statements must
be available, preferably monthly, and taxes should be filed. The rapid change
in economic conditions has buyers seeking up-to-date information to understand
the impact to the store’s financials.
Put
documented processes and recipes together before going on the market. If you
are not willing to sell your recipes, you must evaluate what you are selling to
a new buyer. Without recipes, and your processes, the new owner is essentially
buying used equipment, which is less valuable.
Assess
the condition of the store and equipment. Remove any personal items and
non-working equipment from the store before listing. Confirm the equipment is
in good condition and handle any deferred maintenance. As more businesses come
onto the market, buyers will have the upper hand in negotiations. Non-working
equipment provides an opportunity to further negotiate pricing during due
diligence.
Understand
your lease and any option years remaining. Below market rent can be a valuable
proposition for buyers, who in most instances can assume the lease. If you are
at the end of your term and there is no time remaining, ask the landlord what
he is seeking for additional term.
The
final step is to seek out someone experienced and knowledgeable in the field of
restaurant brokerage. Interview multiple parties and “shop” any would-be broker
by inquiring on one of their listings. If there is not follow up, you do not
want them representing your store. Ask for references and contact them. Be wary
of committing to costly valuation fees or retainers to assist in selling. Many
reputable firms provide a valuation as a courtesy prior to listing.
Make
sure you understand the restaurant broker’s marketing approach to finding
buyers. Understand how they will qualify prospects and keep the sale of the business
confidential, while at the same time attracting purchasers. If the sale of your
restaurant become common knowledge, this can negatively impact your business
and employee relationships.
It
is rare for businesses to sell immediately. Prepare to spend at least seven to
nine months on the market before landing a buyer. If you absolutely cannot wait
it out, then selling may not be a viable option. Once you are listed for sale,
focus on keeping the business at the same level of success.
Finally,
there are legal and financial consequences in the sale of any business. Once
you understand the selling price of your business, consult with your accountant
to understand the tax significant of any sale and ask your attorney to weigh in
on the terms of a purchase agreement.
According
to survey data from owners, the impending wave of baby boomer retirements,
along with those who postponed entering the market until the “new normal” was
established, all signs indicate more restaurants may be available for sale in
the coming year. Follow these tips to make sure your restaurant is positioned
to create the most successful liquidity event for your exit. “
Foodservice Solutions®
specializes in outsourced business development. We can help you identify,
quantify and qualify additional food retail segment opportunities or a new menu
product segment and brand and menu integration strategy. Foodservice Solutions®
of Tacoma WA is the global leader in the Grocerant niche visit us on our social
media sites by clicking one of the following links: Facebook, LinkedIn, or Twitter
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