Making An Exit By Jessie Szalay featured in QSR Magazine March 2016
“You want to do everything in your power to get that business running as well as as profitably as possible to make it attractive to a buyer,” says Bob House, general manager of BizBuySell, an online marketplace for business buyers, sellers, and brokers. Business owners should consider improving the curb appeal of their restaurant, making renovations, working with a PR firm, and doing what they can to improve reputation, as these things can improve the selling price.
Brokers also bring marketing strategies and networks of buyers. Steve Zimmerman is president, CEO, and principal broker of the California-based Restaurant Realty Company, as well as author of the book Restaurant Dealmaker. In addition to the expertise that comes with dealing exclusively in restaurants and nightclubs, Restaurant Realty Company boasts a database of potential buyers with whom Zimmerman keeps in regular contact through weekly and quarterly newsletters. These kinds of networks help brokers find the right match of buyer and seller.
For any type of restaurant, the prospective buyer’s financial viability is the most important factor in making that match. Experience is equally key when it comes to buying independent restaurants.
“Landlords are skeptical of dealing with newbies,” says Zimmerman, whose firm only deals with independent restaurants and nightclubs. “[Buyers] must have cash, good credit,… three to five years ownership or management experience, and food finance experience. Dealing with the landlord is the biggest hurdle, so we screen buyers from the perspective of a landlord.”
Other factors that go into a good buyer-seller match include the buyer’s location preferences and personal financial needs.
Zimmerman, House, and Bieber all advertise listings confidentially, meaning that the name and address of the business and its owner are not advertised. Bieber says that if customers know the restaurant is for sale, they may not come by anymore because they think the owner’s given up, and employees sometimes quit and find new jobs.
Secrecy often permeates the entire process. For example, Zimmerman’s brokerage firm requires each potential buyer to fill out a confidentiality agreement and undergo screening before being given the business name and address. Then, the potential buyer is instructed to go to the business as a customer during a busy period. Next, the broker will set up a time to meet with the owner. Zimmerman emphasizes that all meetings take place discreetly, in out-of-the-way locations.
Buyers don’t see the books and records until an offer has been made. The broker writes an offer, which the seller accepts, rejects, or counters. The agreement includes some contingencies, like transfer of licenses, inspections, approvals of landlord, and financial review of books and letters, Zimmerman says. In business, it’s common for a broker to represent both buyer and seller.
“Dual agency exists because there aren’t a lot of restaurant brokers,” Zimmerman says. “When you get a residential broker or someone who doesn’t have restaurant business brokerage experience, it adds complications and time. Time and surprises are the biggest things that kill deals.”