Restaurants are probably one of the most popular businesses in the world. People usually go out for a meal for many different reasons, such as birthday celebrations, happy hours with workmates, business meals, meeting friends or even when they don’t feel like cooking. The truth is you don’t really need a reason to go to a restaurant.
But all this popularity has a good side and also a bad one. The good side is quite obvious: you’ll always have customers — unless the food is terrible. On the other hand, as a lot of people go to restaurants, there are lots of them in the very same location as yours, which means more competition for your business. So you can’t invest only in the food, you have to literally convince people to eat in your restaurant.
In this article, you’ll learn how to sell your restaurant for the best value possible. But don’t think it’s an easy thing to do — it’s probably as difficult as running a restaurant, for instance.
And you know better than anyone how tough it is to run a business like that. You have to stay always in contact with distributors, keep one eye on the food quality, the other on your employees, make sure everything’s all right and your customers are having the best experience ever.
Here are some tips to value your business and sell it for a good and fair price.
What is your Restaurant business worth?
First step of the selling process: know what you restaurant is worth. In order to do that, you must pay attention to some specific aspects, such as:
- Invest in the presentation: make the restaurant more appealing to potential buyers. Make sure all the equipment is in perfect condition, lead your staff so they are nice and helpful to customers and most importantly: be aware that a lot of potential buyers visit restaurants the are interested of as regular clients, with no warning at all. So you better keep everything in order all the time, not only when you know there will be visiting.
- Look financially attractive: develop an organized financial system and gather as much finance information as you can in order to provide potential buyers with complete financial reports. You may also list your inventory and don’t hide eventual debts or food waste costs as well.
Don’t worry, if you have any questions, you can always hire a professional business broker to help you with the asking price and with everything else you need.
What makes a Restaurant business worth more?
After you have analyzed all your financial data and took all relevant information into consideration, you may set your asking price.
To do that, make sure you’ve introduced well your business for potential buyers so they have everything they need to form their opinion. After that you may set your asking price, which has to be a very fair and reasonable one, of course.
There are other business aspects that must be considered, which make your restaurant worth more. Make sure you know all information below:
- Predictable key drivers of new sales
- Stable or growing traffic from diversified sources
- Established suppliers of inventory with backup suppliers in place
- Traffic stats
- High percentage of repeat visitors and repeat sales
- Clean legal history
- Brand with trademark, copyright or legal concerns
- Documented systems and processes
- Growth potential
What does the average Restaurant business sell for?
As expected, a very large number of restaurants were sold in the past 10 years. According to our research, there were 7.181 deals since 2005. So you already know there’s a lot for you in the market once you decide to sell your business. But is selling a restaurant really a good idea? The numbers don’t lie and they say the answer is: yes.
Take a look at the average multiple for example, it’s near 3.0. That means the average asking price is three times bigger than average gross income, which means you’ll probably have good profit by selling your restaurant. And what about the money?
Average sales price is pretty high as well, up to $300k.
What is the most frequent deal size?
The most frequent deal size is what is expected when you sell your restaurant. It’s not what you are going to get exactly, it is just an estimative based on the past 10 years data.
In the case of the restaurant market it is $50.000, as most of the deals involved small businesses. But despite of the previous years numbers, most of 2015’s deals were bigger than $250k and less than $500k.
At least in 2014 and 2013, deals of $0-250k were by far the most frequent size.
Is the Restaurant market getting bigger?
Restaurant market is going well and looks very stable. The total transaction value in 10 years has three commas — up to $2 billion. In the past seven though, the yearly transaction did not pass $200 million mark.
So if you are thinking on selling your restaurant, it’s probably a good moment for it. The best thing to do now is learn how to sell it.
Are bigger businesses worth more?
Usually yes. Take a look at the chart. You’ll see the higher your restaurant is worth the higher the multiple, with few exceptions.
Let’s take a look at the 2015 numbers. A restaurant owner who sold his business for less than $250k had a multiple of 1.89, while someone that sold it for more than $250k and less than $500k had a higher multiple and so on. Only the $2-10 million multiple was smaller than the $1-2 million interval, but that can be explained by the number of deals that were made last year.
What states have the most Restaurant deals?
The best states to sell a restaurant are Florida (Miami, Orlando, Tampa) and California (Los Angeles, San Francisco, Sacramento).
But in Arizona (maybe because of Phoenix’s contribution), Georgia (Atlanta), Illinois (Chicago), Massachusetts (Boston), Maryland (Annapolis), North Carolina (Raleigh), New York (New York City), Pennsylvania (Philadelphia, Pittsburgh) and Virginia (Richmond) are good chances you set a good deal as well.
Why would you sell in the first place?
The reason to sell always varies from each person. Maybe you are looking for new challenges, businesses and opportunities, or you just want to enjoy your family and retire. Although it can seem tempting to get your hard worked cash, make sure that you are clear on the motives so you don’t regret afterwards.
How long will it take to sell your business?
If you have read all the necessary steps to understand your valuation, and think you have focused on all the topics that make your company worth more, it is maybe time to start the process. Selling your business is a long-term process, and doesn’t happen overnight. Usually companies sell in 12 months, but you can also see deals getting closed in 6 to 9 months depending on the opportunity.
What is the process of selling your business?
This step by step process will help you get less confused when you make sure you are ready and confident to let go of your business, and perform a nice and positive sell. Many entrepreneurs forget about a step, or just don’t have the right guidance to know all the stages necessary and get lost through the process. Don’t forget to go through all of these, and if you have any questions, comment at the end of the article or contact us for more help.
Who will buy your business?
If you are wondering about the buyers that can be interested in your restaurant, don’t worry, there are many options and possibilities. From First Time entrepreneurs, to businessmen interested in new opportunities, the chances are that in this particular industry it may likely be a person who already had a store in the field.
Restaurants are very popular, so if you want to start accelerating your buyout process, fill out our free valuation form and get your business valued today! Leave your comments on any questions or feedback, we are glad to hear your thoughts!