The Food Service Professionals Guide To: Buying & Selling a Restaurant Business: For Maximum Profit
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This series of fifteen books - The Food Service Professional Guide TO Series from the editors of the Food Service Professional magazine are the best and most comprehensive books for serious food service operators available today.
These step-by-step guides on a specific management subject range from finding a great site for your new restaurant to how to train your wait staff and literally everything in between. They are easy and fast-to-read, easy to understand and will take the mystery out of the subject. The information is boiled down to the essence. They are filled to the brim with up to date and pertinent information.
The books cover all the bases, providing clear explanations and helpful, specific information. All titles in the series include the phone numbers and web sites of all companies discussed. What you will not find are wordy explanations, tales of how someone did it better, or a scholarly lecture on the theory.
Every paragraph in each of the books are comprehensive, well researched, engrossing, and just plain fun-to-read, yet are packed with interesting ideas. You will be using your highlighter a lot! The best part aside from the content is they are very moderately priced. The whole series may also be purchased the ISBN number for the series is 0910627266. You are bound to get a great new idea to try on every page if not out of every paragraph. Do not be put off by the low price, these books really do deliver the critical information and eye opening ideas you need to succeed without the fluff so commonly found in more expensive books on the subject. Highly recommended!
Lynda Andrews
Lynda Andrews is a teacher by vocation and lives in New Zealand. She has a lifetime passion for people and health and trained as a Laughter Yoga Teacher in 2008. She is committed to sharing the playful and creative, yet deeply effective ways of generating Health, Joy and Word Peace!
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Book preview
The Food Service Professionals Guide To - Lynda Andrews
B
BUS081000 BUSINESS & ECONOMICS / Industries / Hospitality, Travel & Tourism $19.95
L225
uying
This new series from the editors of the Food Service Professional Magazine are the best and most comprehensive books
&
G u i d e t o S e R i e S
for serious food service operators avail-
able today. The information is boiled down S
G u i d e t o
The following books are also
elling a
to the essence and covers all the bases, available in this series:
providing clear explanations and helpful, specific information. Plus, all titles in the RestauRant site
BuiLding RestauRant
Location: Finding,
PRoFits: How to ensure
series include the phone numbers and web negotiating & securing the
Maximum Results
sites of all companies discussed.
Best Food service site for
isBn: 978-0-910627-19-1
R
Maximum Profit
e
isBn: 978-0-910627-11-5
WaiteR & WaitRess
"In each book you will find practi-S
Buying &
tRaining: How to
cal, easy-to-understand, and crystal t
Buying & seLLing a
develop your staff for
au
clear explanations that will take RestauRant Business:
Maximum service & Profit
For Maximum Profit
isBn: 978-0-910627-20-7
the mystery out of the given sub-
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ject. They are filled to the brim Selling
isBn: 978-0-910627-12-2
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ant
isBn: 978-0-910627-46-7
with up to date and pertinent infor-RestauRant MaRketing
mation, ready for application,
a ReStauRant
& adveRtising: For Just
BaR & BeveRage
ensuring your financial success"
B
a Few dol ars a day
oPeRation: ensuring
u
isBn: 978-0-910627-13-9
success & Maximum Profit
— Ed Manley, CFE,
President and Chief Operating Officer S
isBn: 978-0-910627-21-4
BuSineSS
IFSEA - International Food Service Executives Association ine
RestauRant PRoMotion
For Maximum Profit
& PuBLicity: For Just a
successFuL cateRing:
Few dollars a day
Managing the catering
SS
isBn: 978-0-910627-14-6
operation for Maximum
Profit
F
contRoLLing
isBn: 978-0-910627-22-1
or
RestauRant & Food
M
seRvice oPeRating
Food seRvice Menus:
aximum
costs
Pricing and Managing the
• Learn the Proven Techniques
isBn: 978-0-910627-15-3
Food service Menu for
Maximum Profit
& Insider Secrets
contRoLLing
isBn: 978-0-910627-23-8
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• Everything You Need
RestauRant & Food
rofit
seRvice Food costs
RestauRant design:
to Know to Buy, Sell,
isBn: 978-0-910627-16-0 designing, constructing &
and Finance a Restaurant
Renovating a Food service
Atlantic Publishing Group, Inc.
Business
contRoLLing
establishment
RestauRant & Food
isBn: 978-0-910627-24-5
1405 SW 6th Ave. • Ocala, FL 34474-7014
• Learn to Analyze True
seRvice LaBoR costs
Phone 800-814-1132 • Fax 352-622-1875
isBn: 978-0-910627-17-7
incReasing RestauRant
www.atlantic-pub.com
Value While Getting
saLes: Boost your sales
the Best Terms
ISBN 978-0910627122
contRoLLing LiquoR,
& Profits by sel ing More
5 1 9 9 5
Wine & BeveRage costs
appetizers, desserts &
isBn: 978-0-910627-18-4 side items isBn: 978-0-910627-25-2
For all your answers to questions on hospitality 2
management go to www.atlantic-pub.com 9 780910 627122
365 InsIder secrets revealed!
Buying &
Selling
a ReStauRant
BuSineSS
For Maximum Profit
By Lynda Andrews
The Food Service Professionals Guide To: Buying & Selling a Restaurant Business For Maximum Profit: 365 Secrets Revealed Atlantic Publishing Group, Inc. Copyright © 2003
1210 SW 23rd Place
Ocala, Florida 34474
800-814-1132
352-622-1875 - Fax
www.atlantic-pub.com - Web site
sales@atlantic-pub.com E-mail
SAN Number :268-1250
All rights reserved. No patent liability is assumed with respect to the use of information contained herein. Although every precaution has been taken in the preparation of this book, the publisher and author assume no responsibility for errors or omissions. No warranty is implied. The information is provided on an as is
basis.
International Standard Book Number: 978-0-910627-13-9
Library of Congress Cataloging-in-Publication Data Andrews, Lynda.
Buying, selling & leasing a restaurant for maximum profit : 365 secrets revealed / by Lynda Andrews.
p. cm. -- (The food service professionals guide to ; 2) Includes bibliographical references and index.
ISBN 978-0-910627-12-2 (pbk. : alk. paper) 1. Restaurants--Valuation. 2. Restaurants--Finance.
I. Title.
II. Title: Buying, selling, and leasing a restaurant for maximum profit. III. Series.
TX911.3.V34A53 2003
647.95'068'1--dc21
2002010831
Printed in Canada
CONTENTS
intRODuCtiOn
1. BaSiC ReQuiReMentS
Commonsense Thoughts on Selling .................. 9
Consider the Practicalities -
Don’t Be Too Trusting ............................... 10
A Step Beyond Common Sense ...................... 13
Set Priorities and Proceed at Your Pace .......... 15
Basic Selling Principles .................................. 18
Find Your Buyer ............................................. 20
Your Job Is to Protect Your Restaurant -
Other Considerations ................................ 23
The Transition - Get a Team in Place ............. 24
Get Your House in Order Legally .................... 26
2. PRePaRatiOn
Getting Ready for the Sale ............................. 29
Preparation - The Less Obvious Aspects .........31
More Steps to Selling ...................................... 32
Putting Together a Winning Prospectus .......... 34
The Prospectus: Don’t Overdo It ..................... 37
Setting the Right Price .................................... 38
The Value of Other Assets .............................. 40
Beyond Real Estate - Other Pricing Factors .... 41
The Low-Down on Stocks ............................... 44
Just for Buyers .............................................. 46
3. FRanCHiSing
What about Franchising? ............................... 51
Advantages of Franchising ............................. 52
Disadvantages of Franchising ........................ 54
Franchise Financing ...................................... 57
Evaluating a Franchise Opportunity .............. 58
Franchising Checklist .................................... 59
Legalities Involving Franchise Restaurants ..... 63
Living with the Franchisee/
Franchiser Relationship ............................ 64
4. leaSing
Leases and the Start-Up Owner ..................... 67
Ask Yourself the Question Why Lease?
........ 69
Using a Lease Broker ..................................... 71
What Are the Benefits of Hiring a Broker? ...... 72
Getting Yourself Ready to Lease ..................... 74
The Power of Words ....................................... 76
Changing the Face of Your Space ................... 79
Clearly Define Who Does What ....................... 81
Understanding Your Lease Agreement ............ 83
5. FinanCing tHe Deal
Where Will the Money Come From? ................ 87
Getting Enough Money .................................. 90
Financing Made Easy ..................................... 92
Other Ideas for Financing Your Restaurant .... 93
The Process of Due Diligence -
General Considerations ............................. 95
Get to Grips with the
Demands of Due Diligence ........................ 97
Making Money, Paying Taxes ......................... 99
Sale as Capital Gain? -
Some Important Considerations .............. 102
Closing the Deal ........................................... 103
6. OtHeR POSSiBilitieS
Going Through with the Deal -
Should You Do It? ................................... 107
Deciding Not to Sell ..................................... 110
Closing Your Doors for Good? ...................... 113
Don’t Make a Decision out of Embarrassment -
Consider Alternatives .............................. 114
Selling Your Restaurant to an Employee ...... 116
So, You Still Want Out? ............................... 118
7. enSuRing FutuRe SuCCeSS
How Do I Project Future Sales? .................... 123
Verify the Data ............................................. 128
Service after the Sale ................................... 130
Advice for the New Proprietor ....................... 134
Closing Thoughts ......................................... 138
There are many factors
to consider when
buying or selling
a restaurant.
INTRODUCTION
The buying and selling of a restaurant can become a very complex task with multiple considerations.
In many ways, the purchase of a restaurant involves more arduous planning than that of other types of businesses because of the very nature of food service establishments.
This is not to say that other industries do not take on the personalities of their owners and employees.
However, there is something about the food service experience that is very personal and fulfilling to its customers. We need only think back as far as the highly popular TV sitcom Cheers to get a wonderful picture of how patrons take on the personality of a restaurant or tavern. Many even find refuge from life in that very place. As a result, the owner of such an establishment cannot simply grow weary of long hours and sell out in a few short weeks or months.
Selling a food service business is a complicated process and must be entered into with care, legal knowledge and great wisdom.
It is the intent of this manual to guide both the buyer and the seller through a process that can seem over-whelming and never-ending at times. Within these pages, you will also find valuable information on leasing restaurants. Leases affect a major sector of the restaurant industry, and a manual on buying and selling would not be complete without the addition of lease information.
Cheers!
7
Keep the business
running right up until
the last second.
8
C H A P T E R O N E
BASIC REQUIREMENTS
Commonsense thoughts on Selling
While selling your restaurant may involve detailed financial strategies or lengthy paperwork, there is a very sensible aspect to the whole idea of selling your business. Let’s start with common sense.
Consider the following:
• Don’t assume anything. Remember, it’s very easy to get caught up in the momentum of selling a business - just to have the deal fall through at the last minute. Nothing is certain until the last line on the contract is signed.
Don’t assume you’ve sold the restaurant unless everything is truly, legally finalized. Keep the business running up until the last second. If you run a restaurant with the anticipation of closing it, sloppy management can occur. These kinds of errors can be very costly in the long run. Don’t slack on your diligence until the fat lady sings.
• Commit yourself to investigating and exploring options. Don’t commit yourself to selling anything - not your restaurant, not a spatula, nothing. In your mind, simply promise yourself that you will explore your options.
Jumping in too fast can be a mistake that will cost you thousands. Remember that your word 9
may be seen as your bond. Don’t shake hands or make promises until no rock is left unturned.
• Be honest. Being honest from the beginning can save more than face. It can save a business deal.
Remember that it is better for a buyer to know unpopular or unflattering information up front.
Problems that are uncovered late in a deal risk your reputation as a businessperson. They may also adversely affect the price you’ve agreed on.
If shady dealings are uncovered well into the negotiations, the price may not be the only thing affected. You could see the entire sale fall through. So remember, honesty really is the best policy.
• Have realistic goals. Wouldn’t it be great to sell your