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Pro Business Valuations is a certified restaurant business, equipment and inventory appraiser. We offer SBA qualified restaurant valuations and restaurant equipment appraisals for a full range of purposes Whether it is a full service restaurant, Quick Service Restaurant (Fast Food), Independent or Franchise, we offer Fair Market Value, Investment Value or Liquidation Value appraisal reports. We provide owners, buyer and stake holders with authoritative, certified valuation appraisals used for financial reporting, business sale & acquisition, SBA lending, insurance and litigation.
We also provide owners and buyers of restaurants with market pricing analysis, cashflow justified pricing, proceeds from sale analysis and comparative industry analysis as well as packaging for sale, market position, and transaction management consulting. Whether you are selling a profitable on-going concern or liquidating a non-operating, asset in place restaurant. we can help you get it done right.Since we are SBA qualified business valuation and equipment appraisers, we can help you pre-qualify for SBA 7(a) acquisition lending for you future buyer. If you are looking to sell an independent or franchise restaurant business, we can help you price and prepare before going to market.
There are a number of reasons restaurant owners need a valuation or appraisal of their restaurants- Sale Plannning, Partner Buy-Out, Litigation, Marital Disolution (Divorce), etc. Regardless of the purpose, it’s essential to understand the factors the influence value. Important among these factors are financial performance, location, competition, and market trends.
The financial performance of a restaurant is a crucial factor in determining its value. Buyers and lenders will typically analyze the restaurant’s financial statements, such as income statements, balance sheets, and cash flow statements, to assess its profitability, liquidity, and financial health. Key financial metrics such as revenue growth, profit margins, and return on investment (ROI) are often used to determine the value of a restaurant.
The location of a restaurant is another important factor in determining its value. A prime location, such as a busy street or a shopping mall, can increase the restaurant’s visibility and customer traffic, thus boosting its revenue and profitability. On the other hand, a restaurant located in a remote or economically depressed area may have lower value due to limited customer demand and weaker sales.
Competition is another significant factor in valuing a restaurant. A highly competitive market with many similar restaurants may drive down prices, while a less competitive market with fewer options may increase the value of the restaurant. In addition, the restaurant’s unique selling proposition (USP) and brand recognition can also impact its value, as they differentiate it from other restaurants and create customer loyalty.
Market trends and conditions, such as economic growth, consumer behavior, and industry regulations, can also influence the value of a restaurant. For instance, a growing economy and increasing consumer spending may drive up the demand for fast food, while changes in government policies or consumer preferences may affect the restaurant’s profitability and growth potential.
The restaurant’s equipment and inventory are also important factors to consider when valuing a fast-food restaurant. The equipment’s age, condition, and maintenance history can impact its value, as can the inventory’s quality, quantity, and turnover rate. A restaurant with newer equipment and well-managed inventory may be worth more than one with older equipment and poorly managed inventory.
In summary, valuing a restaurant requires a comprehensive analysis of its financial performance, location, competition, market trends, equipment, and inventory. By understanding these factors and working with experienced appraisers, buyers, and sellers can accurately assess the restaurant’s value and make informed decisions about buying, selling, or refinancing.
f you’re thinking of selling your restaurant business, you may be wondering if you need to hire a restaurant broker. The fact is most businesses listed for sale on the open market do not sell. It is generally accepted as a fact that only about 10% of businesses listed for sale on the open market actually sell. Brokers improve those odds considerably, but only to about 25%. Some claim to sell 80 to 90% of their listings, but this is so misleading, it deserves its own page. For now, take it as simply a claim that the broker is so selective, that the businesses they list could easily be sold without the broker.
In most cases, yes. Most are not sufficiently experienced or dedicated to their profession to join a professional business brokerage association or even take one business brokerage course. However, the top 20% of business brokers do, in fact, add value. You know them because they are members of the International Business Brokers Association or one of the state business brokers associations (CABB, AZBBA TABB), and they have taken numerous professional development courses specific to business brokerage and have been doing this kind of work full time for over five years. In such cases, your broker will add value in a number of ways. But are they worth 10% to 15% of the transaction price?
Your restaurant sellable?
Is your restaurant justifiably priced?
Can it be purchased with SBA 7(a) financing?
Do you know how to package it for sale?
Do you know how to confidentially market it for sale without wrecking the place?
Can you field calls, qualify interested buyers, negotiate terms and structure the deal?
Know any attorneys or escrow agents familiar with asset or stock sale transactions?
Pro Business Valuations, LLC can help you with all these things. We are not restaurant brokers, but we have helped a great many restaurant owners with these issues and many others in restaurant sale planning and execution. So, the answer to the question: ” Should you hire a restaurant broker if your restaurant is sellable and priced right” is probably no.
You’re Short on Time or Resources
Selling a restaurant can be a time-consuming process, especially if you’re also managing it. Working with a broker can help take the burden off your shoulders, allowing you to focus on running your business. Brokers can handle many of the time-consuming tasks involved in a transaction, such as marketing the business, screening potential buyers or sellers, and negotiating deals.
You Couldn’t Maintain Confidentiality
Maintaining confidentiality is often critical when buying or selling a restaurant, especially if you’re still operating the company. Restaurant brokers can help ensure that sensitive information is protected and only shared with qualified buyers or sellers. They can also help manage the flow of information and communication throughout the transaction, minimizing the risk of leaks or breaches.
You Need to Sell Your Restaurant Quickly
Ultimately, the goal of any restaurant sale transaction is to maximize the proceeds from sale, and you do that, in part, by avoiding a 10%-15% restaurant broker commission. However, if your goal is a fast sale transaction, a broker is the way to go. With staff support, systems in place and sheer experience, restaurant brokers can quickly get your business in front of likely buyers. They can quickly sift through the noise to qualify buyers likely to perform, and they can ensure the transaction proceeds smoothly and efficiently while you manage your restaurant.
You Are Too Emotionally Involved Or Can’t Be Objective.
There is a saying in business brokerage: “All deals die ten times”. The biggest reason why sellable, well priced restaurants don’t sell is difficult sellers. You may find this hard to believe, but emotional, easily offended restaurant owners blow deals up because they think buyers should be forever grateful for the opportunity to buy their “baby”. Far more businesses fail to close that actually close because sellers often lose their minds once they get close to the finish line. If a broker’s 10%-15% commission is earned, it is here. They take the beatings as they go, shielding owners from things buyers say and do that would trigger an explosion. They resurrect deals multiple times until closing. So yeah, this is probably the most important reason to hire a broker: owners simply make it hard to close.
With some professional guidance and support from Pro Business Valuations, as well as an experienced enterprise transaction attorney, escrow agent, and CPA, you can avoid restaurant brokers and their 10%-15% commissions.
The failure rates for startup restaurants can vary depending on various factors and studies. While it’s challenging to provide an exact failure rate, it is commonly understood that the restaurant industry is highly competitive and prone to a higher rate of failure compared to other businesses. Several studies and industry reports have highlighted different failure rates based on different timeframes and geographic locations. Here are some general insights:
It’s important to note that these statistics provide a general understanding and may not reflect the specific conditions or demographics of every restaurant market. Success and failure rates can vary significantly based on factors such as location, concept, management, market demand, financial management, and overall industry trends.
Given the low rates of success, what the advantages and considerations of starting a restaurant from scratch over buying an ongoing restaurant business:
Creative Control: Starting a restaurant allows you to shape every aspect of the business according to your vision. You have the freedom to design the concept, menu, ambiance, and branding from the ground up.
Flexibility: Starting from scratch provides flexibility in selecting the location that aligns with your target market, negotiating lease terms, and customizing the space to fit your specific needs. You can also build a team and culture that reflects your values and work style.
Lower Initial Investment: Generally, starting a restaurant from scratch requires a lower upfront investment compared to purchasing an existing establishment. You have more control over budgeting, spending, and prioritizing expenses according to your business plan.
Opportunity for Innovation: Starting a restaurant allows you to introduce innovative concepts, cuisine, or dining experiences that may not exist in the current market. This can help you stand out from the competition and attract a niche audience.
Brand Building: Building a brand from scratch gives you the opportunity to create a unique identity and develop a loyal customer base. It allows you to establish your reputation through consistent quality, exceptional service, and effective marketing strategies.
Established Infrastructure: Acquiring an ongoing restaurant provides you with an existing infrastructure, including kitchen equipment, furnishings, interior design, and trained staff. This can save time and money compared to starting from scratch.
Cash Flow and Revenue: An ongoing restaurant often has established cash flow and revenue streams from existing customers. This can provide a more stable financial situation compared to the uncertainties of a new startup.
Proven Concept: Buying a successful restaurant means acquiring a proven concept that has already gained acceptance in the market. The menu, ambiance, and overall experience have demonstrated their appeal to customers.
Faster Start: Purchasing an ongoing restaurant allows for a faster start as many elements of the business are already in place. You can begin operations almost immediately and focus on refining and improving the existing model.
Due Diligence: When buying a restaurant, conducting thorough due diligence is crucial. You need to assess the financial performance, reputation, operational efficiency, lease agreements, and potential risks or liabilities associated with the business.
It’s important to note that both options come with their own challenges and risks. Starting a restaurant from scratch requires careful planning, market research, and building a customer base, while buying an ongoing restaurant demands thorough evaluation and potential turnaround efforts.
Ultimately, the decision should be based on your individual circumstances, experience, financial capacity, risk tolerance, and preferences for creative control versus acquiring an established foundation.
Restaurant valuation specialists serving independent and franchise restaurant owners and lenders nationwide.
