Thinking About Selling? Plan Properly

There are numerous reasons that restaurant owners may decide to sell their business: retirement, burn-out and divorce are among them. But regardless, the owner must plan the sale properly or face major disappointment. “Grooming” a business to sale can mean the difference between selling at a considerable loss OR receiving a solid sales price for the restaurant. Too often, sellers are too busy with day-to-day house operations of the restaurant to take the basic steps necessary to put the facility in a saleable condition.

 

Preparing the “Hard” Assets would be the most obvious starting point. Business buyers associate a clean restaurant with a professional, profitable operation – and will often pass over a good opportunity simply because of poor sanitation & cleanliness.

 

        Exterior: restripe parking lots; repaint where needed; scrub can wash areas; mow grass and trim shrubs; clean windows and signs

        Dining: professionally clean carpets, flooring, walls, table bases, chairs, counters and cashier stations; professional extermination; scrub and paint restrooms

        Kitchen: service and clean the hoods & fire control systems; service the major equipment; document all equipment w/ age, condition & service records

        Mechanical Systems: service the HVAC systems and document

 

Cleaning Up and Grooming the Intangible Assets is just as important in obtaining a good sales price as scrubbing the restrooms or cleaning the hoods. Buyers will want to pay ONLY for the depreciated hard assets of the business – IF they CAN’T determine the “existence” or the extent of the “good-will” portion of the business. Is it making money & can you show it? Documentation is VITAL – financial claims that can’t be proven TURN OFF potential buyers.

 

        Financial books: the most important and most neglected area is the “proper” documentation of sales, purchases & expenses. This is, after all, what the buyer is really buying – the cash flow & the profits of the business! The seller should have a minimum of 3 years’ income statements, backed up with monthly sales tax reports and tax returns for the business. Astute, smart buyers will adjust the financials to determine cash flow & discretionary income … but will not buy the story of a seller having “no books!”

        Legal: the seller should consult with the restaurant’s attorney and bring all corporate books up to date. Discuss the possible structure of the sale with your legal advisor and partners or stockholders. Have on hand copies of property & equipment leases, insurance policies, business licenses, and any documents regarding trademarks, copyrights or logos.

 

        Employee Files: have separate files for each employee, documenting hourly wages & benefits, in addition to the standard withholding forms, I-9’s, etc.

        Menus & Recipes: institute price increases and menu changes before putting the business on the market. Print new menus if necessary. A recipe manual is worth its weight in GOLD to the new owner!

        Public Relations: create a portfolio of newspaper articles, advertising and any good photos of the restaurant

 

A meeting w/ your accountant is a good place to start … he/she may advise that creating or adjusting the historic financials of the business is in your best interest. Poor financial documentation is the #1 cause in preventing restaurants from selling in a timely manner & at a fair market price. A smart seller who has neglected his/her books may elect to have their financial advisor adjust and recapture lost sales, even if it means paying a tax penalty.

 

A professional restaurant broker can assist in the preparation of the selling package, and assist in the overall grooming of the business for sale – in addition to interviewing & pre-qualifying prospective buyers, educating buyers about the restaurant, and walking both the buyer & seller through each step of the purchase process. This allows the owner to continue to focus on operating the business up until the time of transfer.

 

For a private, confidential consultation about buying or selling a restaurant, bar or catering business, contact your local National Restaurant Properties branch office.

 

 

Sherman Walters

Broker – National Restaurant Properties

 

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