Restaurant For Sale In California
What makes a restaurant for sale in California more desirable than another? What exactly is the appeal?
What drives business value are timeless factors such as consistent earnings, good reputation, customer loyalty, and stable staff. Additionally, certain elements are unique to the restaurant industry and further enhance the appeal to restaurant business buyers.
In California, the kind of restaurants are limited only by imagination. The range is staggering. Still, there are key factors that stand out which will not only drive the value of the restaurant but also the speed at which the business sells.
What are those key factors? From our experience, the following 13 key factors are part of every successful and quick restaurant sale.
1. The Restaurant Is In A Great Location
When a California restaurant for sale is in a highly trafficked, prime area, the value added to the restaurant can be substantial. Like residential real estate, location matters significantly. Moreover, the curb appeal is important as well. A well-lit restaurant with appealing design, clear signage, and ample parking make a restaurant highly desirable.
2. The Restaurant Is Managed Well
Good management is essential. We have sold some restaurants and fast food places several times. Turnstile businesses tend to occur due to bad management. With good management, however, a restaurant can thrive and prosper.
It’s important to assure in a business sale that key effective managers will stay on with the restaurant to keep running a tight ship.
3. Excellent Lease Terms and Reasonable Rent
Lease terms, such as type of lease (NNN or gross), lease amount, provisions for assignment, rent as a percentage of gross revenues, options to renew, are essential to the value of a California restaurant for sale.
4. Good Working Equipment
The better the condition of the restaurant’s equipment, the greater the perceived value by buyers. Buyers have to determine whether they will need to make capital improvements in addition to buying the restaurant. The less upgrades and capital expenditures required, then the greater they will value the restaurant. business.
5. Earnings Consistency
A restaurant for sale in California that shows financial records that are accurate, complete and verifiable have a HUGE leg up over other comparable restaurants. The value of the business is enhanced when the seller can prove stable earnings and growth.
Buyers look to the past 3-5 years of earnings to determine profitability in order to determine their offering price. Accurate financial records showing consistent cash-flow proves the benefit of owning the restaurant for sale and validate the buyer’s intentions to buy the business.
6. Potential to Convert
When buyers look at a restaurant for sale in California, they more often than not consider how to put their unique stamp on it. It may be simple upgrades in decor or it may involve a conversion to a new concept.
Buyers will consider whether the concept competes with other local restaurants. They will consider whether they have the all the necessary permits and licenses and equipment for their concept.
7. Affordable Food & Labor Costs
Food and labor costs are substantial factors in the restaurant business. These costs will vary based on the kind of restaurant, the type of service (i.e. full service, fast food), percentage of liquor sales, number of employees required, hours of operation, etc. These operational costs should be within acceptable margins as a percentage of gross revenue for the restaurant industry in California.
8. Appearance Counts
Everyone knows that a restaurant appearance is pivotal for success. Customers will simply walk out of a dirty, shabby restaurant. Cleanliness and appearance is essential for a restaurant’s success.
A clean, well-appointed establishment with ambiance makes the restaurant appealing to potential buyers. They want to invest in a restaurant that is inviting and appealing.
9. Stable Staff – Low Turnover
Staff attitudes and customer service are highly intertwined. Positive, upbeat employees show that the restaurant is being managed well. On the other hand, rude and abrupt employees can reflect that the restaurant has problems.
When a restaurant has high staff turnover, it hurts the value of your business and may impede a successful sale. Consider developing staff training programs to increase efficiencies and morale.
Also request employee feedback on what and how improvements can be made. Consider promoting highly motivated and effective service staff to assure retention. Management bonus programs tied to business performance and profits can enhance performance, morale and profits.
Keep in mind that the buyer will likely want to retain most of the employees. Consequently, problem employees should be replaced before the restaurant is marketed for sale.
10. Online Presence
When a buyer finds out the restaurant name after signing a Non-Disclosure Agreement, typically the first thing they do is do an online search. They will check the restaurant’s website. Then they will check Yelp and Google reviews to evaluate the restaurant’s reputation.
Prior to marketing your business for sale, make sure your website is fresh and modern. Assure that it presents your restaurant in the best light with flattering images of your cuisine, facilities and events. Make sure your website is promoted via search engine optimization (SEO).
Also have your website reflect any special awards or recognition. Special distinctions contribute to reputation and goodwill, which increases the buyer’s perceived value of the California restaurant for sale in the small business marketplace.
Respond to any negative internet reviews politely and diplomatically. Online presence that delivers name recognition on the restaurant’s website and social media is an important aspect of value.
11. Legal Compliance
You will want to assure that the restaurant meets all applicable health codes and that all relevant licenses are current. Any licensing or permit issues could jeopardize a successful restaurant for sale in California.
For most restaurants, liquor markings are key profit drivers. Therefore, make sure the liquor license is up to date and preferably with no infractions by the Alcohol Beverage Control (ABC).
Is the concept amenable to being franchised? Can catering or delivery service be added? Is there room to add outdoor expansion? Can advertising, marketing, or promotions increase the customer base? Presenting a solid growth strategy to buyers can be an important element in persuading ambitious buyers about the potential for growth for your restaurant for sale in California .
13. The Seller’s Reason for restaurant for sale in California
One of the first questions we always hear from buyers is why the seller is selling. Optimally, we want to answer that the seller is retiring after 30 years.
Buyers do not want to hear that the seller is disenfranchised by the business. They do want to hear that the seller is still excited about the restaurant and its future but there is a good reason that the sale must happen now (I.e. moving, family issues, etc.)
Since the buyer will pose this question directly to you, be prepared to respond truthfully and explain your reasons. An honest, forthright response can assure the buyer that the restaurant is worthwhile and your need to leave does not reflect on the merits of the business.
Selling Your California Restaurant
Interested in learning more about selling your California restaurant? Check out our series on How To Sell Your California Restaurant: