Selling a Restaurant: Preparing for the Sale

Selling a restaurant is similar to cooking: For the best results, follow a proven recipe.

The French phrase mise en place, “Putting everything in its place,” is just as relevant when selling a restaurant as it is in your kitchen. Careful preparation and order are key to a smooth transaction.

In this first stage of the sales process, you’ll:

1. Complete a Seller’s Disclosure Statement
2. List your assets
3. Review your lease for important clauses that could impact your sale
4. Gather and prepare all vital documents
5. Establish a confidential way for buyers to contact you

This is the most time-intensive part of selling a restaurant, but following these steps now will save you a lot of time later. By the end of this section, you’ll have your documents prepared and you’ll be ready to begin the search for a buyer.

Let’s get started.

Selling a Restaurant-Step 1

Seller’s Disclosure Statement

The Seller‘s Disclosure Statement provides a summary of all assets included and excluded, the lease terms, and summary information about the business and property.

This statement will gather most of the information you need onto one document. Completing the Statement will clarify what representations you’ll make regarding the sale and included assets, and it’ll save you time later when you’re preparing the Purchase Agreement.

Action Plan

Complete the Seller’s Disclosure Statement.

Selling a Restaurant-Step 2

List of Assets

The first step is to itemize which assets will be included and which will be excluded from the sale. Buyers always ask for a list of assets, so it’s best to get this out of the way upfront. This also helps you avoid tense last-minute renegotiation’s over assets that the buyer believed were included in the sale.

You don’t need every little detail, but a simple description of each item and its make or model is helpful. This list is also useful if you need to justify the value of the assets — you can quickly contact equipment vendors to price similar new and used equipment.

Check your Seller’s Disclosure Statement to make sure you’ve included or excluded all of the assets. Items like email lists, artwork and trademarks are often overlooked.

Action Plan

Complete your Asset List.

Selling a Restaurant-Step 3

Review Lease for Important Clauses

While completing your Seller’s Disclosure Statement in Step 1, you should’ve reviewed your lease to complete the information regarding lease terms and property. This step requires special attention, because the lease agreement is one of the most important items considered by buyers, and one of the biggest reasons sales fall apart.

There are a few important lease clauses that can impact your ability to sell and the price you receive.

Lease Assignment

Review this clause carefully. Do you have the right to assign the lease? Can the landlord deny your request for any reason? Is there a clear formula describing the landlord’s criteria for approving or disapproving a buyer?

Options to Extend

Many sellers list their business near the end of their lease term and tell potential buyers they have a number of options to extend their lease. Unless your lease was reviewed by a savvy attorney or restaurant real estate broker, your lease may include a clause that states “Options are Personal to Tenant.”

If your lease includes this clause, the landlord can void the options if you sell your business. It’s extremely important to know this prior to marketing your restaurant.

Use Clause

Most leases spell out the permitted uses allowed per your tenancy. If your use clause is very specific and you occupy a space in a larger shopping center with many other restaurants, this may limit the type of restaurant a potential buyer will be allowed to operate. You need to know this upfront so you don’t spend weeks or months negotiating with a potential buyer to later determine their use is not allowed.

Red Flags

If you run into any of the red flags listed above when reviewing your lease, you will need to take action in advance to see if you can resolve some of the issues.

At this stage if you are confused about your options, you may want to hire an experienced restaurant real estate advisor or commercial real estate attorney to review the specific clauses and advise you on your options.

You can also approach the landlord, explain that you wish to sell and ask if they will amend the lease and work with you if you secure an acceptable buyer.

WARNING

There are many landlords that will try to renegotiate other lease terms such as the rent. You may need to make some concessions to receive their cooperation.

Action Plan

Double-check your lease for important clauses. Do not skip this step! You need to know in advance if any items in the lease will prevent the sale of your business or impact the price.

If you would like to receive a professional lease review contact us.

Selling a Restaurant-Step 4

Prepare Documents

Just like the steps above, a little preparation on your part will greatly increase the speed of the transaction. Gather all of the following documents:

• Lease and any amendments to lease
• Licenses
• Permits
• Architectural plans
• Certificate of occupancy
• Conditional Use Permit

Photocopy or scan any documents that may be requested by a potential buyer or transfer with the sale. Scanned documents are preferable.

Nobody wants to search through their garage or old file cabinets for hours when a potential buyer requests a vital document. Copy all your documents ahead of time, so you can provide them quickly and easily.

Note: Do not provide original architectural plans, licenses or permits to any prospective buyers. If requested, make copies and keep the originals until the close of escrow.

Selling a Restaurant-Step 5

Contact Information

You need a confidential way to communicate with potential buyers, without disclosing the name or location of the business until you give your approval.

Do not use your work email address or phone number.

If you do not have one already, set up a free email account. Do not include your business name in your email address. If you plan to include a phone number, use your cell phone.

Summary

Seller’s Disclosure Statement

The Seller‘s Disclosure Statement provides a summary of all assets included and excluded, the lease terms, and summary information about the business and property.

List of Assets

The first step is to itemize which assets will be included and which will be excluded from the sale.

Review Lease for Important Clauses

While completing your Seller’s Disclosure Statement in Step 1, you should’ve reviewed your lease to complete the information regarding lease terms and property.

Prepare Documents

Gather all of the following documents and make copies or scan into digital documents:

• Lease and any amendments to lease
• Licenses
• Permits
• Architectural plans
• Certificate of occupancy
• Conditional Use Permit

Contact Information

You need a confidential way to communicate with potential buyers, without disclosing the name or location of the business until you give your approval.

If you do not have one already, set up a free email account. Do not include your business name in your email address. If you plan to include a phone number, use your cell phone.

Congratulations!

If you’ve completed all prior steps, you’ve already finished the most time-intensive part of the sales process. Let’s move on to Part 2: Marketing Your Restaurant for Sale.