Starting a business is your opportunity to put your unique touch on a company. Operating a restaurant allows you to be creative, and build a loyal following.
Selling your restaurant presents a number of challenges, and a business broker can serve as your trusted guide throughout the process.
Overview of the Restaurant Industry
The Coronavirus has had a negative impact on the restaurant industry in the short term. However, Forbes explains several trends that are driving the restaurant industry over the long term:
- Restaurant delivery: “Data firm Second Measure reported U.S. restaurant delivery sales grew 52 percent year-over-year in May 2019.” Delivery companies DoorDash, Grubhub, and Uber Eats are taking advantage of this trend, which is a growing source of restaurant revenue.
- Commissaries: In this case, the restaurants rent cooking space on a short-term basis. This strategy eliminates the need to pay for building renovations or to make long-term lease payments. The business can launch as a delivery-only restaurant at a much lower startup cost. Cloudkitchens is an example.
- Grocerants: Grocery stores are creating outlets that offer grocery shopping, dine-in, and take-out services at the same location.
- Sustainable food products: According to Nielsen, sales of sustainable food products have increased 20% since 2014.
The fastest growing sector of the restaurant industry is fast-casual dining. RestaurantBusiness reports that the sector generated $42.2 billion in US sales in 2018, up 8% from the prior year. Panera Bread was the top restaurant in the fast-casual industry.
Restaurant Industry Challenges
1. Staff turnover
FinancesOnline noted that, in 2019, restaurant and foodservice employment totaled nearly 15 million people. Employee turnover ranges from 100% to 130% each year, and the average turnover cost is more than $2,000 per staff member.
2. Risk of theft
Restaurants typically handle many transactions that are relatively small. The number of transactions, particularly cash purchases, increases the risk of errors and possibly theft.
Many restaurants reduce the risks by moving away from cash transactions and processing more debit card and credit card sales. While electronic sales are more secure, the sheer number of transactions at a busy restaurant exposes the owner to risk.
Finally, a restaurant requires an owner to invest in fixed assets. The business must invest in furniture, fixtures, ovens, and refrigerators. Over time, these assets will need to be repaired and eventually replaced.
What makes a restaurant attractive to a buyer?
The Value Proposition
A successful restaurant may have a steady flow of repeat business from diners who visit the location every month. Interest in a good restaurant will spread by word of mouth, and a popular eatery may not need a big marketing budget
Some owners leverage a restaurant’s popularity by adding new lines of business. The owner can start a catering business, which repeat customers can use for parties and other events. If the restaurant has a unique menu item, the owner may sell the item through retail stores.
The brand awareness of a popular restaurant can generate multiple revenue streams. The business can grow, based solely on a loyal base of repeat customers, and word of mouth referrals. These businesses may not need a big marketing budget to generate consistent sales and profits.
Preparing for a Sale
Take action on these issues, so that your business is well-positioned for a sale.
Analyze your company operations, and document all routine tasks in a procedures manual. Using a manual reduces confusion about each task, and serves as a training tool for your staff.
Assess your accounting system and use technology to save time, and to produce accurate financial statements. Use software to manage accounting, invoicing, and other tasks.
Your managers produce value because they make smart decisions to grow sales and profits. If there’s a gap in your organization that is holding you back, find a manager who can fill the position. Delegate more management tasks to your team.
Review your contracts with partners, employees, vendors, and customers. Many of these agreements must be changed if you sell your business. Find out where your contracts stand now, so you can make plans for an eventual sale. Create incentive compensation plans for valuable employees, so they’re motivated to stay after a business sale.
A business sale requires careful thought and planning, and a business broker can be your trusted advisor along the way.
Work With a Business Broker
Business brokers can help with these issues:
- Use industry knowledge and marketing efforts to find buyers
- Understands the seller’s motivations, and potential obstacles to a sale
- Find buyers who are ready to provide documents for due diligence
- Pricing: Use metrics to determine the business price
- Research: Analyze the sales of similar companies and industry trends
- Negotiates the final price on seller’s behalf
Work With a Trusted Advisor
At Raincatcher, our business brokers focus on the seller’s needs, not our own.
Our objective is to educate the seller about their options. If it makes sense to work on the business, we will recommend affiliates that we partner with to help the owner maximize the value of the business. The Raincatcher team has worked with thousands of businesses, and we all have the small business entrepreneurial spirit.
Raincatcher works with other professionals, which may include an exit advisor, valuation expert, accountants, and attorneys. Our firm uses industry-leading proprietary valuation resources to value your business.
We will operate as your trusted advisor throughout the entire sale process, so you can sell your business at an attractive price without regrets.