Commercial Real Estate Investment/how do I sell my restaurant?

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Expert: - 1/19/2011


Question
Phil I actually have 2 questions: I looked up "Phil Nicols" on realtor.ca and there is no-one in realtor search with your name - how would I contact you directly?

Question 2 - We'd like to sell our small-town Ontario family restaurant/pub, which has been in operation for over 17 yrs. What are the thinkgs we need to address first, and how can we estimate it's worth to compare to what a realtor looking for the listing tells us? Also, what is the market like for this kind of property?

Answer

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Sally

the first part is easy:

Phil Nicols
Broker of Record
Stockwell Realty Corporation
905-427-0026 Greater Toronto Area (GTA)
949-743-1209 Southern California Area

www.StockwellRealty.com
Phil "at" StockwellRealty.com

second part is a bit more tricky and I'm not going to sugar coat it..

1st, depending where it is, I may not be able to act on it directly but I belong to a world word network of commercial real estate practitioners. Im sure I can find someone in your area to refer you to.

2nd, they are hard to finance! The bank wants at least three years profit and loss statements and I have yet to see a small business with an accurate set of books!

3rd, people buying a restaurant typically say, "if I buy this restaurant, whats in it for me?"
since you cant really go by the books, buyers of small businesses sometimes want to "work there" for a week or so to see the income. Sometimes owners dont like that idea.

selling a small business is harder than selling a property. usually its in a leased premises ... cause if it wasn't, then we would be selling the property with it right?

then we have to deal with, is it a share sale? or asset sale? in a share sale, we are selling shares of the company and the buyer is assuming leases, and debts.

in an asset sale, we are selling assets, goodwill to some degree I guess, and the buyer has to be protected against liens, encumbrances and other contractual obligations.

there are MANY different formulas people use to come up with a "price tag" for the business. for small business we likely look at "double the net" but this is not always possible because (according to the books) 9 x out of 10, there IS no NET!

you want to know the "Text Book Answer" for "Whats it worth?" ok I will tell you...

"What a Buyer is Willing to Pay, and a Seller is Willing to Accept, after having been Reasonably Exposed to the Open Market, while Neither Party is Under Duress."

THAT'S what it is Worth.

I charge 10% of the sale price on business translations up to $1m its a sliding scale after that but not less! selling a business is a hard sale even in the best of times.

You might be interested to know (if you haven't heard) The Cadbury Plant just shut down in England where it had been operating for over 90 years! Cadbury was bought by Kraft Foods and the plant will be moved to Poland.

sorry that might not be what you want to hear but this it the report from the font lines!

let me know if I can be of further assistance.

best, Phil

Sally, now you say you are selling the "property" - this is a whole new ball game.... a restaurant might or might not be the "highest and best use" for the property.

for instance, if you were in downtown Toronto, you might have the best restaurant in town but the property might be better suited to condos for instance, in which case you sell the property for the highest and best use, and sell the restaurant equipment separately.

always look for the "highest and best use".

thanks for the ratings

best, Phil
    Questioner's Rating
    Rating(1-10)Knowledgeability = 10Clarity of Response = 10Politeness = 10
    CommentThanks Phil. We're selling the property as well as the business, so that sounds like it's in our favour...we're assuming all value is in the property and none in the business. So, we'll just keep working on it!


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Phil Nicols

Expertise

Legal issues which are specific from state to state.

Experience

Licensed Realtor since 1987, Broker Since 1991. Ontario Canada real estate -- Commercial, investment, leasing, business brokerage

Organizations
Stockwell Realty Corporation

Publications
www.StockwellRealty.com

Education/Credentials
Real Estate Council of Ontario, Registered under the real estate and business brokers act 2002

Awards and Honors
A few from past organizations I belong to. Now with my own company, it's hard for me to give myself awards.

Past/Present Clients
Dealt with both small as well as regional tenants, individual investors to syndications.

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