Marketing Your Restaurant for Sale
Now that you’ve gathered and completed vital documents about your sale, you’re ready to begin marketing your restaurant for sale to potential buyers.
Your restaurant has a unique advantage — at least one — that could make it attractive to prospects. To command the highest possible price for your restaurant, you’ll want to identify its appealing qualities and communicate them to potential restaurant buyers.
This section will help you:
- Determine your restaurant’s key selling points
- Set your price, and justify that price to buyers
- Write an ad that attracts attention from serious, qualified prospects
- Make a great first impression with buyers by preparing your restaurant for sale
- Publish your ad on popular, high-traffic websites
By the end of this section, you’ll be ready to begin taking calls or emails from interested prospects.
Marketing Your Restaurant for Sale-Step 1
Determine Key Selling Points
What makes your restaurant unique or special? Why did you pick this location when you first built or purchased the place?
There are many factors that impact the value and location of a restaurant.
These factors include:
Location. What is attractive about your location? Visibility, easy access, parking, signage.
Is the location close to traffic generators such as office buildings, entertainment, and major retail draws?
Scarcity. Are there other comparable restaurants available in the area? How difficult would it be to build a new restaurant?
Here are some examples of key selling points.
- The restaurant has grandfathered status and could not be built today for various reasons such as the building does not meet today’s parking codes and would not be allowed.
- The restaurant has a difficult-to-secure liquor license that offers advantages such as service until 2:00 am or “live entertainment”
- There are moratoriums on new restaurants or bars in the area. If the City will not allow any new competitors in the area, your restaurant’s value is increased by scarcity. You are the only game in town.
Unique Features. Your restaurant has a view, outside patio, or other features not readily available in the neighborhood.
Below-market lease. For example, maybe the typical market rents in the area are $5.00 per square foot, but your lease is fixed for 10 years at $2.00 per square foot.
Action Plan
List every key selling feature you believe adds value to your location.
Marketing Your Restaurant for Sale-Step 2
Determine your Price
Similar to the real estate market, there are three ways to value a restaurant or property:
- Income approach
- Comparable approach
- Cost approach
Restaurant Valuations
Restaurants are typically purchased for their existing cash flow or purchased as an “asset sale.”
The following method is intended if you:
- can’t show positive cash flow, or
- don’t want to disclose financial information, or
- selling to a buyer that plans to convert your restaurant to their use.
If you are selling based on your income, you can value the business based on a multiple of either the adjusted cash flow method or percentage of the gross sales.
For example, if your adjusted cash flow is $50,000 per year and restaurants sell for 2.5 times net cash flow, the value of the restaurant is $125,000.
If you can’t show positive cash flow, but your sales are $500,000 per year, you may price your restaurant at 25% of sales or $125,000.
Note: If you’re selling based on income, you may wish to retain a restaurant broker experienced in selling ongoing businesses or work with your Certified Public Accountant to prepare financial statements and determine the value of the business.
Pricing your Assets
You should be aware of the “New Car Effect.” As soon as you drive a new car off the lot, its value decreases.
Unfortunately, the same is true for certain aspects of your restaurant.
Buyers aren’t interested in how much you paid for your equipment or build-out when it was new.
Instead, buyers wish to pay according to the current condition of what they’re buying.
Here are a few items you can use to justify your price, assuming they’re required by the buyer or city:
- Cost to install a hood system
- Cost to install a grease interceptor
- Cost-saving in time for permitting and construction
- Cost of a new liquor license if available
- Time and cost of Conditional Use Permit for Liquor License
- Below market lease. How much rent will buyers save over 5 years?
- Value-based on a moratorium against more restaurants/bar
The sale price you receive will be based on market forces, demand, and supply.
The more demand and less supply, the higher the price you will receive.
Comparable Sales
If you are unsure about how to price your restaurant, you can interview business brokers to receive their opinion or find information about recent sales on some of the bigger websites such as bizbuysell.com.
Action Plan
Using the key selling points and assets you’ve listed, determine the value of your restaurant.
Marketing Your Restaurant for Sale-Step 3
Get Show Ready
Have you ever shopped for a new home? You have certainly heard the term “curb appeal”.
What is the buyer’s first impression of your restaurant?
If the ceiling tiles are stained and the kitchen has not been cleaned properly in weeks, it won’t be very good.
A properly staged home sells faster and at a higher price than the unkempt, funky smelling house selling down the street.
Prior to marketing your restaurant, fix any broken items, and thoroughly clean the entire restaurant front top to bottom.
Photos/Video
A picture is worth 1,000 words.
Quality photographs will greatly increase the number of prospects requesting additional information as well as answer questions about the kitchen.
Include photos of the kitchen and individual photos of equipment and storage areas.
Be sure to CLEAN the kitchen and restaurant prior to shooting photos.
If needed, hire a professional photographer to photograph.
Warning: be sure to remove any items that would disclose your location, such as the name of the restaurant or other items that identify the restaurant.
There are many free photo editing programs available.
Marketing Your Restaurant for Sale-Step 4
Sale Copy
Effective copywriting paints a picture of the benefits the buyer will receive.
Use the key selling points above to describe the benefits of purchase to your buyer.
- Rare opportunity to purchase a restaurant in this high demand neighborhood
- Below market, the lease provides a competitive advantage
- Turn-key restaurant for less than 10% of the cost to build new
You want to provide enough information to generate interest from the right buyers.
If your copy is too broad, you may receive calls from buyers outside of your area.
If you can do so without divulging your actual location, list the city or neighborhood.
Marketing Brochure/Executive Summary
Create a flyer or executive summary highlighting the main selling points such as the lease terms, size of the restaurant, and asking price.
This will be useful when prospects request additional information from your ads.
Marketing Your Restaurant for Sale-Step 5
Where to Advertise
There are numerous sites to advertise your restaurant for sale or lease.
Here is a list of both general business for sale websites and restaurant for sale websites.
Most of these sites cover a broad range of properties or businesses, so the amount of traffic for restaurants in your area may be substantially less.
Websites
BizBuySell.com
An experienced restaurant real estate broker will have the experience and connections to ensure the transaction runs smoothly.
WARNING: There are many business brokers who do not cooperate with other brokers. This greatly reduces your exposure to potential buyers. When interviewing potential brokers be sure they cooperate with other brokers and make sure this is in writing.
Summary
Determine Key Selling Points
What makes your restaurant unique or special?
Why did you pick this location when you first built or purchased the place?
Determine your asking price
Here are a few items you can use to justify your price, assuming they’re required by the buyer or city:
- Cost to install a hood system
- Cost to install a grease interceptor
- Cost-saving in time for permitting and construction
- Cost of a new liquor license if available
- Time and cost of Conditional Use Permit for Liquor License
- Below market lease. How much rent will buyers save over 5 years?
- Value-based on a moratorium against more restaurants/bar
Get show ready
Prior to marketing your restaurant, fix any broken items, and thoroughly clean the entire restaurant front top to bottom.
Photos/Video
A picture is worth 1,000 words.
Quality photographs will greatly increase the number of prospects requesting additional information as well as answer questions about the kitchen.
Sale Copy
Effective copywriting paints a picture of the benefits the buyer will receive.
Use the key selling points above to describe the benefits of purchase to your buyer.
Marketing Brochure/Executive Summary
Create a flyer or executive summary highlighting the main selling points such as the lease terms, size of the restaurant, and asking price.
Where to Advertise
Pick one or two high traffic websites and list your restaurant
Brokers
If you decide to work with Brokers, sign a listing agreement.
If you’ve completed all prior steps, you’ve:
- Identified your key selling points
- Your restaurant is in show-ready condition
- You have attractive photographs and/or video ready
- Crafted an eye-catching ad
- Listed your restaurant for sale on one or more high traffic sites
Congratulations!
Let’s move on to Part 3: Working with Buyers.
does this work as it is not highlighting? Gave RTA commercial estate agents in Uk 7K upfront for 12 months marketing
They have not sent us a single viewer as they over valued the business in order to charge such a high commission. After making them bring the price to a more realistic level only 2 months remain during which we still have no interest even though we have dropped price by 800K Where do I go from here?
Hello Mark
Can you recommend a site for selling a Canadian seasonal restaurant in Sicamous British Columbia?
I checkedout Loopnet, your number one recommendation, and it doesn’t have a restaurant category.
I sent you email. There is a subcategory on Loopnet under the retail category. Best, Mark
Do I need a broker to sell a restaurant/bar with liquor license in los angeles
I sent you email. You don’t need a broker if you know the process. In most cases broker will get you more exposure and has the knowledgeand experience to avoid the minefields that can kill your sale if you are not aware of them. Best..
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I thought it was really interesting how the article mentioned that you should highlight what is attractive about your restaurant’s location when you are selling it. My brother owns an Italian restaurant in South Carolina that has not been getting a lot of business, so he has been considering trying to sell it. It would be good for him to get in contact with a company that is familiar with the process of selling a restaurant.
Good day Mark’
Thank you for your article.. Im writing from SWAKOPMUND, a coastal town in Namibia.
my family runs a franchise restaurant for nearly 2years now. but it has been so tough and we are in a lot of debt. We basically cannot keep up with it anylonger. We only make enought to pay staff salaries of about 15 employees monthly. We owe the landlord and franchisor as well as the bank and everyone else.
How do you suggest we advertise the restaurant. We had approached a business broker who suggested that we it was valued at 850 000 namibian dollars based on the financials we sent them. i understand and respect her eperinece but i think this is too little especially considering the money we put in roughly 8 000 000.00 namibian dollars. We dont know whom to approach now to help us sell it. We were thinking of putting ads in the local newspapers without the help of anyone.
Please advise.
Halo this is RADA I hv restaurant and caffe only 8 month I am the only restaurant and cafe in the place in shj Muwailah the best area in Sharjah
Restaurant doing good but need some one to focus more and increase the income
My job not easy I am pilot more of the time an away
And I have company in Abu dabi so not easy at alllll
so I can sale only 50% and all control to the person he will bay or I will sale it
If person he want buy 50% I can keep the license under my name and we go to the court to give him the 50% ,why? Bec I am local so renew and the rest less if he want
Thanks for sharing this amazing post.
Thank you for your article. Very informative and helpful. Do you by any chance have a sample flyer?