Selling your restaurant business in the greater Tampa Bay area is a complex task. It requires careful preparation and professional support to ensure that you get the most money for your business.
Tampa Business Brokers has helped hundreds of business owners and purchasers close their transactions in a professional, confidential, expeditious, and thorough manner. Selling your restaurant, bar, or club requires three primary responsibilities that Tampa Business Brokers has the experience to guide you through efficiently: Price Valuation, Location Overview, and Lease Terms.
A potential buyer will use a few different methods to evaluate the price of your Tampa Bay area restaurant and determine if it is reasonable. With the help of Tampa Business Brokers, you can comprehensively tailor each component of your price valuation to attract qualified, legitimate buyers.
Assets in Place Method of Valuation
If your business is not making money, or it is marginally profitable, you will most likely pursue an Assets in Place purchase. Your buyer will pursue the fixtures, equipment, lease, and licenses that go with your business. In an Assets in Place purchase, your buyer most likely has his own menu and concept in mind, so he is not interested in the name or menu of your existing restaurant.
The team at Tampa Business Brokers will help you with the criteria for pricing your Assets in Place sale. This involves looking at the ratio between your sales price and your sales. It is most common for businesses doing $350,000 or less in yearly sales to sell for an average of 35% of sales, while businesses doing more than $1 million in annual sales can expect to sell at an average of 15% to 17%.
Going Concern Method of Valuation
A Going Concern method of evaluation indicates that your business is making money and the buyer has an interest in maintaining your business model, including the name, menu, operating systems, and personnel. With this method, the lease, leasehold improvements, fixtures, equipment, name, menu, concept, goodwill, and cash flow are included as part of the sale.
Tampa Business Brokers will help you define your Going Concern method of valuation to attract the right buyers. This involves a complex process of using discretionary earnings by adjusting the net profit on your tax return to add back one working owner’s salary and payroll taxes, any personal expenses charged by the owner to the business, depreciation, interest and amortization expenses on loans the buyer will not assume, and net operating losses carried forward. This figure is then adjusted by a sales price multiplier to determine the value of your business.
While Going Concern valuations vary, it is common for an independently owned, non-franchised food service operation to sell for one to three times its yearly adjusted cash flow, depending on risk factors like degree of operating difficulty, time in business, history of profitability, and lease value.
You’ve heard it more times than you can count: “Location, location, location!” So, what does your business location offer to potential buyers? Since selecting the right location is one of the most important factors for business success, buyers will look carefully at location details such as built out market, stable demographics, growth potential, diversified clientele, strong visibility and easy access, heavy traffic, nearby market generators, rent affordability, and trade area draw.
Tampa Business Brokers will help you analyze your business location to show potential buyers the many benefits of purchasing your restaurant. A built out market offers a combination of businesses and residential population where major competitors are already established, but growth potential is also important to have the opportunity to expand in the future. Stable demographics indicate educated residents with a strong financial basis to patronize your restaurant.
Buyers will also be looking to see if your business is located in a place with a mix of residents, retail businesses, office buildings, hospitals, schools, and other institutions that allow for diversified clientele. Strong visibility and easy access are highly sought after because they enable both drivers and pedestrians to visit your location without difficulty. Of course, your restaurant’s rent will also play a role since buyers want to purchase a business that can be easily sustained with annual sales.
Lease terms have caused countless business sales to fail, which is why you need the experienced team at Tampa Business Brokers to review your lease before you sell your restaurant. It is possible that your existing building lease contains clauses that can complicate the terms of your sale or make it impossible altogether. Ask for professional help investigating the assignment, subletting, renewal options, and renewal periods clauses.
Assignment and Subletting
The authority to assign and sublet a restaurant is often restricted to the landlord. You should expect to seek your landlord’s approval before initiating negotiations, though some leases do contain the term “permitted transfer” to allow for sales without landlord consent. It is essential for a restaurant broker like Tampa Business Brokers to assess your lease language before you officially put your restaurant up for sale.
Renewal Options and Periods
Most restaurant leases require business owners to renew a lease no more than 180 days prior to the termination of the current lease term. This puts you into a position of having to exercise your renewal option in a relatively short period of time, which then puts you at risk of getting locked into battle with your landlord over a lapsed lease and lost option rates. Restaurant brokers like Tampa Business Brokers know firsthand that landlords are not a restaurant owner’s friend, so confer with an expert to ensure your sale can move forward smoothly.
With the guidance, support, and expertise of the Tampa Business Brokers team, you can efficiently and successfully sell your restaurant and use your proceeds to begin another adventure. We will help you attract willing buyers and complete the sales process without any headaches or dead ends. Call (813) 750-0275 now to learn more and take the first steps to sell your restaurant in Tampa Bay.