This post originally appeared on tBL member Mark Chase's blog Restaurant Real Estate Advisors Blog and is republished with permission. Find out how to syndicate your content with theBrokerList.

marketing your restaurant for sale

Now that you’ve gathered and completed vital documents about your sale, you’re ready to begin advertising your restaurant 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 buyers.

This section will help you:

  1. Determine your restaurant’s key selling points
  2. Set your price, and justify that price to buyers
  3. Write an ad that attracts attention from serious, qualified prospects
  4. Make a great first impression with buyers by preparing your restaurant for sale
  5. 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 restaurants value is increased by scarcity. You are the only game in town.

Unique Features. Your restaurant has a view, outside patio or other feature 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 tutorial is intended for you if:

  • You can’t show positive cash flow, or
  • You don’t want to disclose financial information, or
  • You are 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 business 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 of 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 hood system
  • Cost to install grease interceptor
  • Cost saving in time for permitting and construction
  • Cost of new liquor license if available
  • Time and cost of Conditional Use Permit for Liquor License
  • Below market lease. How much rent will buyer save over 5 years?
  • Value based on 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 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.

Lighting Tips

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. Skitch is a simple to use product that offers a “blur” feature to remove easily remove your restaurant’s name from a photograph.

Download Skitch Here

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 restaurant in this high demand neighborhood
  • Below market lease provides 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 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. I have had the best response with Loopnet.com and BizBuySell.com

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

Loopnet.com

BizBuySell.com

Bizben.com

Restaurants-for-Sale.com

RestaurantforSaleorRent.com

Restmart.com

Bizquest.com

Businessmart.com

Businessesforsale.com

Note: Except for Loopnet.com, the majority of sites listed above are focused on businesses for sale. Loopnet.com attracts many potential prospects looking to lease existing restaurant space. Many of these prospects will consider buying an existing restaurant, but often need to learn of the opportunity.

For this reason listing on both Loopnet.com and one of the business sites can attract potential buyers that may not be using the other sites.

Should you cooperate with Brokers?

Brokers can be a good source of leads. The higher the sales price, the more likely the buyer will be represented by a broker.

This decision comes down to how much money you need to achieve from the sale. Commissions are negotiable by law, but you can expect to pay 5% to a real estate agent or business broker if they procure a buyer.

You should sign a single party commission agreement with the broker which limits the payment of a commission to a specific registered buyer.

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 hood system
  • Cost to install grease interceptor
  • Cost saving in time for permitting and construction
  • Cost of new liquor license if available
  • Time and cost of Conditional Use Permit for Liquor License
  • Below market lease. How much rent will buyer save over 5 years?
  • Value based on 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 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 single party commission agreement with each broker which limits the payment of a commission to a specific registered buyer.

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.

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