There is a reason why buying a restaurant, bar, or club is called buying a “process.” Each transaction has its own unique personality, and each of them has new problems. There are a significant number of steps and many things to consider, especially for those who have never bought food and drinks in the past.
This is an important decision and investment, because it is very important to prepare and get an education for this trip, and to take the necessary steps to make sure that all the right decisions are made on this path.
According to industry statistics, nine out of ten people who start a search to buy a business never complete a transaction. Perhaps the biggest reason for this dismal statistics is that most people simply do not understand what it is. Another reason is poor brokerage services and the lack of qualified brokers in the market to help the Buyer in this process.
Part of the problem is that many restaurant shoppers are “first time shoppers.” Faced with a critical decision after a critical decision, Buyers are overwhelmed and frustrated, only to interrupt the project. This is where a good broker can help relieve stress and guess work.
WILL FIND FOOD AND BUSINESS BUSINESS TAKES TIME
If you do not know where you are going, any road will lead you there! As with all projects, planning is the most important step. Define the goals and detail the objectives for achieving these goals. Knowing exactly what type of food and drink (F & B) to buy, otherwise the search becomes an endless path of dead ends. Know your strengths and weaknesses. If your career is in the fast food business, then a full service restaurant is probably not a good choice. If a full-time job prevents you from full effort on a project, then blocking from 5 to 10 hours a week to work on it. But make time anyway. This is probably the second largest investment a person makes. Therefore, invest at this time and think.
One of the most disappointing parts of an F & B business search is business brokers. In the industry, as in the real estate industry, there are good brokers and bad ones. So manage your expectations from the industry, do not expect too much, and everything will be fine. Business brokers are overwhelmed by the daily demands for non-responsiveness. Most brokerage companies have few, if any, experience in selling F & B businesses. F & B firms are the most complex enterprises sold by many government agencies involved in the process and few banks willing to finance the deals. Therefore, if a good broker is found, contact your broker and be patient to find the right F & B business.
PURCHASE FINANCING
Speaking of financing, if obtaining a loan is part of a plan, then the Buyer should have at least 5 years of F & B management experience, a good loan and 20% down payment in cash - some banks will even make 10% down loans. If the Buyer owns the property with a share of 20% or more, expect the bank to provide the property. And, of course, the restaurant should have 3 years (some banks can only request two years) of tax returns, and the adjusted net profit is at least 33% of the sale price. In other words, the sales price of $ 300,000 will give an adjusted amount of $ 100,000 or more. Consult with the CPA to analyze the real cash flow of the business.
SEARCH START
95% of all F & B businesses for sale are advertised online, so it makes sense to start a search by surfing the net. If the computer is not available at home, go to your local library. They will have one. There are two types of websites: (1) websites that advertise all types of businesses for sale by all types of brokers and individuals, and (2) brokerage and managed websites, on which these lists are exclusive to the broker. Both are good sources for finding F & B companies. Sign up on all sites to receive automatic email alerts. Obviously, advertising sites have the largest selection.
Limit your search to F & B companies matching the target. Do not pursue a business that does not meet the goal! Do not compromise because your patience ends. If this happens, stop looking! It takes time to find a match.
SEARCH FOR LEGAL AND ACCOUNTING ADVICE
Do not be fooled into thinking that a lawyer or CPA will make decisions for you. Finding professional advice is very important, but remember that lawyers and CPAs are naturally at risk - they protect their clients. Look at it in your own way; if the transaction is not executed, they risk nothing and get a good pay. They will tend to overprotect against remote problems and kill deals. Find professional deal-maker advice. These are professionals who know where to make problems and where not to create problems. Contact your CPA attorney with the answer in your mind and see what the professional's answer is to answer, and then change as needed.
Moreover, learn the basic legal and financial aspects of buying a business, such as leasing, mass sales, basic due diligence requirements, profit and loss analysis, and lessee obligations. Find out the difference between the assignment and subletting, the personal guarantee and the UCC-1 financing statement.
HURDA CLOSING DEAL
Depending on the complexity of the transaction, there are many obstacles that the buyer must go through to close the transaction. There can be as many as three major obstacles: (1) Landlord, (2) Lender and (3) Franchisor and several minor barriers. At a minimum, each major obstacle requires personal financial statements, a business plan and a financial plan, a summary and authorization of a credit check. Obviously, everyone could get substantial information. A good broker will help the Buyer to prepare these documents.
LESSOR
In our experience, if the Buyer prepares a professional package for the landlord containing the above items, the chances of success increase many times over. Similarly, if the Buyer cannot prepare a good package, the probability of failure increases many times. The buyer and the broker should carefully review the lease, carefully examining the issues related to trade transactions, such as limited menus and hours of operation, signs and contracts for use, are personal rental options for the Seller, significant increments of rent between the periods of the option, etc. .
Landowners have a bad reputation for a reason. Not everyone is bad, but these few can ruin a bunch. Some landlords are known to exaggerate their limits in an effort to improve their position and test the Seller’s determination to take legal action. In one recent transaction, the landlord arbitrarily increased the rent by 20% without a contractual basis for this. As the landowner's lawyer said, “WHERE TO ME!” The seller and buyer accepted the new conditions of the Landlord. Landlord 1, Tenant 0!
CREDITORS
The lending process is fairly paper, lengthy and does not begin until the signing of the purchase agreement. The two largest F & B lenders are CIT and Banco Popular. Completion of the initial application may take a couple of weeks, while it may take another month before the loan is approved by the underwriter. The bank will publish a long list of documents required to finance the loan. It will take another 30 days to collect these documents. A good broker will coordinate this process.
Keep in mind that the lender will require a contractual value, that they will rely on your home if the equity in the home exceeds 20%.
franchisors
Transferring a franchise is very similar to transferring a lease. In fact, the lease and franchise agreement looks and reads very accurately. Read the franchise agreement and under such key elements as hidden costs, transfer, training and remodeling, as well as franchise fees. Know what support to expect from the franchisor.
GET THE FAMILY TO TAKE IN SOLUTION!
Owning a business F & B has great rewards, but not without sacrifice. If management is not performed properly, the business can consume every waking moment of the owner. Ask your spouse to buy a deal. If there is no consensus, do not buy a business. Two minds are better than one. Respect the opinions and views of each other. But do not let the purchase become a burden for the relationship. It's not worth it!
HOW MUCH DO YOU WANT TO SEND?
Determine with absolute certainty how much cash you can invest. Do not depend on family and friends for money. The best way to break a family or friendship is to borrow money and lose it.
If you are given the choice between buying a profitable business setting of $ 150,000 for $ 400,000 and a loser restaurant for $ 75,000, I choose a profitable restaurant every time. Do not be so worried about taking on debt. The bank will not borrow money if the bank does not believe that you and the restaurant will succeed. The bank performs its due diligence. Even after debt servicing, there will be a lot of cash left over for a comfortable stay. But most importantly, there will be much less stress on the Buyer, and then trying to turn the restaurant around is a difficult task at best.
Using your money is good. With the same amount of cash, you can buy a profitable restaurant compared to a 100% cash deal for a disadvantaged restaurant. I was embarrassed by the way people spend $ 100,000 on a losing company, but they won’t spend the same $ 100,000 on a profitable one?
HOW LONG TO DO TO CLOSE THE CASE
Depending on the complexity of the transaction, it can take from 45 days to 120 days to close the deposit in the F & B business. There are methods used to get the restaurant's “early ownership”, that is, the buyer acquires ownership before closing the deposit, but this requires Qualified broker F & B to navigate the rugged waters to structure the transaction.
SPEAK BROKERS - Do you need?
It depends. Of course, I am a broker in a restaurant, and I have to say yes. But my company represents only sellers, and we do not sell anything except restaurants, bars and clubs. Our agents are well trained in closing deals and communicate with the Buyer honestly and prudently. Our forms, contracts and procedures are designed to do one thing - to sell and close restaurant deals - we close 90% of the contract we enter. We recommend Buyers to seek legal and accounting advice. We have simplified the purchase process than any other brokerage firm.
In any case, a good broker should:
o In the past, many food and beverage companies were selling.
o provide access to an extensive database of food and drinks for sale.
o understand financial performance and perform detailed financial analysis. And you can explain the numbers in plain English.
o keep the deal ahead when obstacles arise.
o identify solutions and agree on trade-offs.
o ensure that all documents are properly prepared and executed to close the transaction.
o Be honest in your transactions and maintain your integrity through a transaction.
SUMMARY
Take a deadline for buying a food and beverage business (and not just “search” for one).
1. Set aside time for daily work on the project, even if it is just an hour a day. Stay focused on the goal.
2. Organize your finances. Understand your financial strength and weaknesses. Do not exceed the goal of your financial goal and do not underestimate it. Determine how much you need to earn. Determine whether your cash can buy a business that earns so much.
3. Work on determining which type of restaurant will thrive on your strengths and not suffer from your weaknesses.
4. Ask for professional advice from a qualified accountant and lawyer during the purchase process. But beware, most lawyers are hypersensitive to protecting their clients until the transaction is murdered. Get an attorney for the deal, not a deal breaker.
5. If you do not have a wealth of experience buying restaurants, then educate yourself in the process. Learn as much as possible. When it comes to investing in your future, you can never know too much!
