With an estimated 10,000 baby boomers turning 65 each day,1 restaurant sellers will increase as boomer franchise-owners retire. How will you find a buyer in a crowded market?
“Like selling a house, upgrading a restaurant or string of franchises can help owners get top dollar,” says Chris Addison, senior relationship manager in the Restaurant Group at Bank of America Merrill Lynch. “Improvements can range from menu updates and electronic order-taking and payments, to full-blown property remodeling and renovation.”
Some investors prefer low-cost “fixer-uppers” while others identify savings in properties that have already been spruced up. Why? Depending on the financing, most improvements will be amortized into the purchase price, making them less expensive for the buyer in the long run.
A purchaser unprepared to manage a new business, or unwilling to hire a full-time manager, might propose putting you on the payroll on a consulting basis. That could ease your own retirement transition and help ensure the business’s ongoing success.
FINDING A BUYER
As you consider your options, consult a financial institution with restaurant expertise for insights and specialized resources, including:
- Industry research
- Introductions to potential partners
- Credit and deal-term analysis
- Credit options for major transactions
- Wealth management services
After assessing your financial position, you might consider self-financing. If your buyer has funds to pay for most of the business, you could be the sole lender and convert a portion of the sales price to an attractive income stream.
STOCK OR ASSET SALE?
A stock-sale buyer assumes all liabilities. In an asset sale, the buyer must retitle all assets (which can be cumbersome) and might also be subject to transfer taxes. But if the sales price exceeds the aggregate tax basis, the transaction will receive a step up in basis— minimizing your buyer’s capital gains.
The trouble-free sale of a restaurant at a good price can be the ultimate reward for many years of hard work. Says Earl Meyers, senior credit products officer for franchise restaurants at Bank of America Merrill Lynch, “Working with an experienced financial institution can help make a complex process manageable and successful.”