Running a Restaurant/Selling an existing business
QUESTION: Mr. Foster:
I currently own and operate a 220 seat restaurant for the past 10 years. We have had it for sale for the past 7 years. This restaurant was established in the late 1800's and has been a part of our states history. My question is how do we draw interest to sell the place. We own the building, land and operation. It is not located in a prime location. This restaurant has a very good profit margin and produces adequate cash flow. We have had it listed with Realtors, business brokers and both can't seem to produce interest. The place is brand new with a total remodel and new equipment. I think the lack of interest is because of what a person may need for a down payment. $253,000. Any suggestions would help.
We are now thinking of selling the building separate from the business.
ANSWER: Hi Kathryn,
I believe I can help, but I may need a bit more information to give you the best possible answer. I am assuming the restaurant is currently open, correct? Can you tell me approximate sales volume and approximate cash flow? How large is the building and how large is the lot? Have you had a formal real estate appraisal and a formal business appraisal? I know that your question is how do you market this, but knowing these things will help me to recommend some marketing techniques to you that are appropriate. You haven't told me if you are retiring, moving away, have health issues or any of a hundred reasons why you might want to sell the business. Knowing more would also help me to help you.
There are advantages and disadvantages to selling the business separately from the building, but it is certainly worth exploring. As you pointed out, the down payment (is that to you - or the amount required for bank financing?) will stop many potential buyers. A scenario that you might want to consider would be to sell the business (and we can help with the valuation of that) and lease the building to the business operator - with or without the option to buy the building in 3-5 years. This gets someone in with much less out of pocket and gives you residual income from the rent until the operator is able to borrow enough to buy the building. The downside risk is that the operator fails - in which case you have the business back in worse shape than it was when you sold it. This means choosing an operator very carefully. This may still be your wisest course of action.
Were the business brokers you used local only? That may have lessened the audience they were reaching. Also, did the realtors and the business brokers feel that your asking price was fair?
I am sorry - I know I have asked you more questions than you asked me! We work with independent operators all over the country and are currently working with two clients that want to sell their businesses and buildings. If you would like to contact me directly (my email address is below) and set up a time for an absolutely free, no pressure phone call I would be happy to do that. Also, if you email me directly I can send you more info about who we are, what we do, our capabilities and some of our past and present clients.
Kathryn, I would love to visit with you.
(417) 849-1903 cell
(417) 877-0428 office
---------- FOLLOW-UP ----------
QUESTION: Mr. Foster:
Well let me try and answer all your questions.
1. is the restaurant open? Yes it is and will continue to be for I hope many more years.
2. Sales volume and cash flow? over 1 million in sales and cash flow is approximate 13%
3 building and lot size. the building is around 7000 square feet with a parking lot 1 acre in size. The entire property is 5 acres with a cell tower contract included.
4 I have had both a business and real estate appraisal done.
5 I am not retiring I am moving into another business venture.
6. Down payment is the amount required for bank financing. I am not interested at this time in financing the new owners.
7. business brokers were not local. Came from a larger city in another state. This was the closest to our establishment we could find.
8. Asking price is currently fair. the amount was established by broker and realtor based upon business and property analysis.
I do know the dangers of leasing out the building. the current location is only workable for a restaurant operation. It is a free standing building out in the country. The closest business to the establishment is 2 miles away.
Thank you again for your assistance Mr. Foster. have a lovely day
Last questions. What is the asking price on the land and building, and what is the asking price on the business? What type of menu do you offer? Are you open breakfast, lunch, dinner 7 days a week? I am trying to understand the sales potential of the restaurant.
Here are some ideas for marketing the restaurant for sale. The Nations Restaurant News used to offer a classified section (in print and electronically) that reaches many, many restaurant operators throughout the country. Their ad prices are not cheap but not outrageous. I am not positive they still have the classified section, but it is worth contacting them. There are other restaurant-related websites that you may be able to advertise on (your business broker should be aware of this as well). A dominant one is www.restaurants-for-sale.com. It may work well for you. There are others. You definitely need to have at least one, if not multiple, online listings.
Another venue would be through your state restaurant association. I believe it is the Wyoming Lodging and Restaurant Association. You may already be a member. If you are, you can access their membership directory and email out a flyer about your restaurant/property. In my opinion, the best candidate to buy your restaurant will be a restaurant owner that is successful with another location.
I would not rule out leasing the business to another operator with a lease/purchase option. If you do, just make sure they have a significant deposit with you so that the first time things get tough they don't bolt and run. Do you have a manager or key employee that has the ability and desire to own the restaurant? That would provide continuity for your current guests as well.
Ultimately, the market value of the property comes down to what someone will pay. It may well be worth your asking price IF you can find the right buyer.
Kathryn, I hope this helps. You are welcome to contact me directly if you would like to do so!
(417) 849-1903 cell
(417) 877-0428 office