Suffering through the recent recession and overcoming other financial difficulties frequently prompts owners to explore the possibilities of selling their restaurants. However, to the owner’s dismay, the appraised value of their business may not be worth as much as they perceive it to be and they may be the reason why.
This is especially true in owner-chef situations where the kitchen is basically a one man operation with the owner’s name on the front of the building and his talent in the kitchen.
I recently read John Warrillow’s book, Built to Sell. Within its pages, the author explains through a fictional example how an Advertising Agency repositions itself, increasing volume, product, and examining personnel, thus making a sale opportunity feasible.
The book highlights the business life of imaginary character, Alex Stapleton, who heads his own advertising agency and handles most of the responsibility himself. When the book begins, Stapleton is basically a one man show with a maxed-out credit line and a handful of employees. By the book’s ending, Stapleton’s 1 million dollar business had increased volume, streamlined process and developed a management team structure. His newly positioned company garnered more than 5 million when sold.
Simply, Stapleton mirrors many single-unit restaurant operators. His quest for reinvention is something restaurant owners evaluate regularly and strive to complete before a finalized, profitable sale.
Here’s the quandary many owners face: single unit operators become so involved in every aspect of their business they are basically irreplaceable. They control their kitchens, create the menu, oversee the dining room and manage the staff. This vast responsibility often leaves them lifeless at day’s end and the thought of selling to another operator is not only exciting but often a necessity. Of course, a chef splitting his life between his kitchen and his dining room may assume his restaurant is worth more than it is in actuality.
The reality of the situation is that the asset of the business is not necessarily the business, but the chef. When a new owner comes in the menu may change, managers will need to be hired, and the focus of the restaurant may take another direction. It doesn’t seem practical for a new buyer to spend a fortune on a restaurant and have the major asset, the previous owner, leave.
So in order to sell a restaurant, owners need to develop a team that can stay in place once the restaurant is sold. That means implementing a management plan for the from of the house and the back of the and developing it so the chef-owner can leave- albeit this may be difficult for the owner- and have the restaurant run professionally.
Built to Sell is a great read for an owner who is considering selling, but is also an informative, enjoyable book for anyone who is exploring the need to develop a management team beneath them.