Restaurants, diners, pubs, and bars are the most frequently sold business opportunities. If you’re ready to sell your restaurant, there are three things that you should do to get it ready. These actions will place your business ahead of the competition and will help motivate an interested buyer into commitment.
The secret to successfully marketing your restaurant lies in the three M’s = management, money, and maintenance. Let’s look at each, one-by-one and see what you can do to get your restaurant ready to sell.
As you’re well aware, running a successful restaurant is a management-intensive occupation. If you’re an owner/manager, then I bet you feel like you live in your restaurant. While that may work for you, many buyers do not want that kind of obligation, commitment or stress. They’re going to look to a manager to handle the day-to-day operation of the restaurant business.
If you don’t have a qualified and reliable restaurant manager, then we encourage you to hire one at least one year before you decide to list your restaurant for sale. The manager should be trained in all aspects of running the business. They should become your right-hand employee and feel a personal commitment to your business’s success.
If you already have a manager, then you’re almost there. Now that you’re considering selling the business, does your manager know? It’s going to be much easier if he or she find out from you rather than hearing the rumor around town. Plus, you’ll want to assure your manager of your desire that they stay on and help the new owner with the business. This is a perfect opportunity to have your attorney draw up an employment contract. The benefits here is that (1) the manager knows that his or her continued employment transfers with the business under their employment contract and (2) a potential buyer knows that they are stepping into a business that can already be run smoothly. It is a win-win situation. Plus, you won’t have to worry about your manager quitting a week before the sale closes.
Including skilled management with the sale of the business cannot be underestimated. If you want your manager to sing the business praises to a potential buyer, then why not include a sizeable raise as part of the employment contract. A happy manager is the backbone of a successful restaurant.
Some restaurant owners may worry that the additional management expense will eat at the profitability and make the business worth less. This, however, is not the case. Regardless if the actual business is owner-managed or staff-managed, there needs to be a line item for this. If you are self-managing your restaurant, then your salary is probably more than what you should be paying a manager. The buyer is going to take that into account and factor in the costs of a management anyway.
Speaking of financials, that is actually the second secret to successfully getting your business ready to sell. A buyer is going to want to invest in a successful business. One that is already making a profit. If your restaurant business is struggling financially, are there some minor changes that could be made to make it more profitable? Consider these tips from the professionals:
- Reduce Waste. Work closely with vendors to reduce food waste and ensure cost effectiveness.
- Improve First Impressions. Your hostess does much to create a positive atmosphere that brings back customers and their great reviews.
- Adjust the Menu. Offering items that are unpopular increases food waste. Pairing down the menu a bit can dramatically increase profitability without sacrificing service.
- Keep Marketing. A common fault of restaurant sellers is to cut back on consumer marketing while the business is listed. Look for inexpensive yet effective methods such as websites, chamber of commerce or radio ads. Don’t underestimate social media.
- Offer a Takeout Menu. If Covid-19 hasn’t driven you to do so, offer takeout. It can generate much needed revenue in the same operational space.
- Offer Specials and Coupons. This is a great way to get customers in the door on slow days. Offer a return discount if they fill out a survey. How many times have you decided where to eat based on a newspaper or online coupon?
- Improve Customer Service. Customer satisfaction is always the number one priority. Do whatever it takes to make sure your customers are happy with their meal experience. Their repeat business and positive reviews will offset any discounts given.
Also, when you are ready to sell, work closely with your accountant to create a set of financial statements that reflect the true operating condition of the restaurant. Get rid of any expenses that are either personal items or “padded” to reduce income taxes.
First impressions can build or break a restaurant purchase deal. Working day-in and day-out in the same environment can make a business owner blind to the true condition of their surroundings. Before you list your business to sell, take the time to carefully examine each and every area of the building – inside and out.
Now is the time to take care of any minor, or major, repairs. Repair or replace torn upholstery; update faulty outlets; and replace worn out fixtures. Replace burnt out light bulbs or damaged towel dispensers. Have the carpet steam cleaned and while you’re at it, why not do the same with the whole kitchen. A fresh coat of paint can do wonders.
Seeing a restaurant in good condition and surprisingly clean will go a long way to convincing your buyer to trust other areas of the sale. Since these could be classified as one-time expenses, they will not need to be necessarily reflected in the business financial statements prepared for the buyer. Of course, typical maintenance costs should be included, but these “special” fix-up costs are a one-time expense.
If you’re getting ready to sell your restaurant business, make sure you go over the three M’s – management, money and maintenance. It will help you to better market your business and attract the attention of serious buyers.