It’s no secret: Many restaurant owners are seriously contemplating selling their properties, taking on partners or closing for good to pursue other more profitable interests.
Monterey Peninsular restaurateur Bill Lee, who introduced me to the restaurant community in
Attempting to follow the industry currently, or figure out how your restaurateuring neighbor or competition down the street is fairing is virtually impossible. I decided to make some inquiries on properties listed for sale. In most instances restaurant owners were searching for Pie in the Sky prices for businesses that didn’t support any thing close to a profitable p & l statements. One owner in particular piqued my curiosity with his “Partner Wanted” ad on Craigslist.
When asked ho much revenue the restaurant is doing, Mr. Bucky said “around $400.00-$600.00 a day”. My inquiry about how much Bucky’s was losing prompted this response from the owner: “I’m not losing money, there about $3000.00 a month to spend.”
Those are both very bad responses. Anyone selling a restaurant, either a portion or the whole package, should quote yearly revenue and yearly profit or loss. Daily revenue quotes generally signify no plan, no history and no books. If this is the case, the potential buyer should say no sale.
However, assuming Mr. Bucky is not a financial friendly owner, we have to look at the numbers. If the property is open seven days a week, and is actually dong $500.00 per day, a $36,000.00 profit hardly justifies a purchase price of $80,000.00 for half of the business. That would calculate to $160,000.00 for the entire kit and caboodle. A hefty investment to acquire a job for $18,000.00 (half of the profits), a year.
Mr. Bucky would have been wiser to ask for a $20,000.00 cash outlay from the new partner as a good faith down payment on the property. And after having him work it for a few months offered to sell the entire operation for another $60,000.00, divided into payments over a certain period of time.
The owner of Bucky’s is in LA pursuing another life. It is unjustifiable to assume he will ever want to go back to his previous life in burger town. His attempt to entice someone to buy half a business is a half thought out idea.
The first thing every owner needs to consider is what your ultimate goal is. Do you want to pay off your debt? Do you want to walk away with some cash in hand? Or, so you just want out or are you looking for a partner to share the pressures with?
All of these goals are realistic and obtainable. But the deal you structure, the price you advertise and the terms you seek need to be fair and equitable for the buyer and the seller. Nothing is worse than a restaurant deal going south a year or two into the agreement. Taking a depleted restaurant back after a new partner or buyer has destroyed your customer base, your reputation and your restaurant’s brand is a hospitality nightmare that few owners can recover from.
While this holiday season may be one that injects new life into your venture, the New Year may be the perfect time to begin thinking about divesting yourself of your culinary properties. If that be the case make sure you design a package that is as appealing to a potential buyer as your restaurant was to new customers when you first opened.
The market is now flooded with properties for sale. The once with the most creative financial packages are the ones who will walk away with the biggest culinary prize any owner can achieve. A sold sign on you window.