Selling a Failing Restaurant

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November 21, 2011 by Shelli Margolin

By Shelli Margolin, Restaurant Business Broker

In the current economy, many restaurants that once thrived are sadly no longer able to sustain a positive cash flow. However, the good news is that selling a restaurant that is operating under a loss or poor revenues is possible.

The biggest barrier to entry in the restaurant industry is the initial build-out costs.  If your restaurant has a functioning hood, flood drains, three part sink and a permitted refrigerator unit, then your restaurant will sell.  If you have a liquor license, your restaurant will sell for more!

The most common obstacles to selling your restaurant are:

1.      The price you want vs. the actual market price

2.      Messy, incomplete or none existent books and records

3.      Deferred maintenance

4.      Not being up to code

5.      Expiring lease

6.      Time and energy

Preparation is the best way to overcome these obstacles:

1.      Be prepared to carry a note, instead on insisting for all cash. If you price your restaurant too high or too low, you won’t get serious responses.  Tailor your expectations to the reality of the market.

2.      Your books and records can be your best friend in selling your restaurant.  They will highlight such things as Discretionary Earning which can actual cause your business to show a positive cash flow for a new buyer.  Any non-operational expense, such as your car payments or cell phone can be added back to your bottom line.

Your books and records can also be your enemy, if they are not kept organized and up to date.  Additionally, many businesses are opting to take cash instead of credit cards.  It is very typical that cash transactions aren’t recorded.  However when selling your restaurant, it is to your advantage to show all your revenue in order to receive a higher selling price.  Keeping a simple hand written or spreadsheet record of cash sales can often be sufficient documentation for a buyer, ...but only if those cash sales are real.

3.      Make sure all your major equipment and floor drains are in working order and are up to code.  Otherwise be prepared for a price that will reflect getting those items working and up to code.

4.      A new buyer will need to go through a County health inspection.  If your restaurant isn’t up to code, it will not sell!

5.      Location! Location! Location!  If your lease is expiring this year, you may want to think about getting an extension or exercise your option to make your restaurant more attractive to serious buyers.

6.      If you are planning on trying to sell your restaurant by yourself, be prepared to spend a lot of time and energy on the marketing, looky-loo's and a barrage of questions from would-be buyers.  Selling a restaurant is a full-time job and proper marketing can get expensive to successfully sell it yourself.

The decision to sell is as much an emotional decision as a business one.  Get some help by enlisting an experienced business broker.  They can help you overcome most obstacles and discreetly bring you qualified buyers, so you can your spend your time and money running your restaurant and living your life.

Enlist an experienced business broker.   They can help you overcome most obstacles and discreetly bring you qualified buyers.  We currently have over 3,000 buyers in our database alone.  For a free consultation, please don’t hesitate to call me.  Shelli Margolin-Mayer, Business Broker: (310) 882-2200 ext. 128.  I’m happy to help.


Industry, Restaurants, Business Sales Process, How to Sell, News

Broker Information

Shelli Margolin

4551 Glencoe Ave., Suite 210
Marina Del Rey, CA 90292
Office: (310) 882-2200 ext 128
Direct: 310-882-2200 x128
Lic#: 00902695

Logos Member of the California Association of Business Brokers Member of the International Business Brokers Association Member of the M&A Source Holder of the Merger & Acquisition Master Intermediary designation, M&A Source's highest qualification Holder of the Certified Business Intermediary designation, IBBA's highest qualification Holder of the Certified M&A Professional designation from Coles College Trained by the National Association of Certified Valuators and Analysts to conduct business valuations