4 Things Buyers Look for When Purchasing a Restaurant

Posted by Ivan Serrano on Jun 12, 2019 03:06 PM EDT
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(Photo : Chan Walrus)

After careful consideration, you've decided to sell your restaurant. Whatever your reasons, you have a lot of work to do if you hope to attract and secure a buyer. There are several things buyers are going to be looking for when evaluating your establishment.

1. The Financials

One of the most common reasons businesses fail to sell or wind up selling for less is because the owners' financial records are disorganized, incomplete or inaccurate.

Prospective buyers are going to want to see detailed, verifiable figures, and they're going to want to see this information in standardized formats, like a profit and loss statement or a balance sheet.

If you're paying employees with cash out of the register and tracking your bills on a spreadsheet, it's time to your financials in order. It's best to start doing this about 6-9 months before putting the restaurant up for sale. Be meticulous about documenting every cent that goes in and out.

2. The Legalities

Buyers will also be concerned about the legalities of the business. They'll want to know about the restaurant's:

Lease

Liquor license (if applicable)

Permits on the property and equipment

Results on the most recent health inspection

Buyers want to know that they're purchasing a restaurant that's in good working order and won't require any surprise expenses to get it up and running.

Make sure that you have organized records to verify all of these legalities. Pre-planning is also important to ensure that inspections are done regularly, and that permit renewals and recertifications are done properly and on schedule.

3. Price Valuation

A buyer will also want to evaluate the price of a business to determine if it's reasonable. Price valuation can be done in a couple of different ways.

Assets in Place: Typically done when the business isn't making money or is marginally profitable. In this case, buyers are usually interested in the restaurant's appliances and equipment, fixtures, lease, or any licenses that go with the business. They're typically not interested in the business name or the menu.

Going Concern: This type of valuation is usually done when the business is making money and the buyer is interested in continuing operations as the seller did. With this method, the equipment, fixtures, concept, name and menu are all included in the sale.

4. Location

Of course, buyers will consider the location of the restaurant. Location is one of - if not the - most important factors in a restaurant's success. When looking at location, potential buyers will keep several factors in mind, such as:

A built-out market. Buyers may prefer a restaurant in an area that has a combination of commercial businesses and residential population built out.

Diversified clientele. A restaurant with a mix of residents and commercial activity is most attractive.

Stable demographics. A solid demographic base of long-term residents who are educated and grounded with a strong commercial base of businesses and offices.

Growth potential. It is always desirable for a restaurant to be located in an area with growth potential.

Visibility and easy access. Buyers will prefer a location with high visibility and easy access. Locations with heavy traffic are also more attractive, as there is greater potential for exposure and increased sales.

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