Running your own restaurant is an exciting adventure, but whether you’re enjoying it or not, the harsh reality is that it’s bound to end at some point. You could be preparing for your retirement, moving on to other endeavours, or simply trying to cut your losses. Whatever the case, you’ll find it much easier to step away from your restaurant business if you have an exit strategy -long before you need it.
With a well-thought-out restaurant exit strategy, you can maximize the value of your business, attract more qualified buyers, and complete the sale process with the utmost ease and efficiency. You’ll face fewer headaches and minimize the chances of facing critical issues that could prevent you from selling your establishment.
Read on to find out the ins and outs of restaurant exit planning so you know how to develop a bulletproof exit strategy.
Exit Strategies for Restaurant Owners
Whether you’ve achieved your professional and personal goals with your restaurant and want to sell, or you’re no longer satisfied with being a business owner and want to move on to other things, there are several different options you could go for when you’re ready to exit the market.
Most restaurant owners choose to sell to a qualified buyer, liquidate the restaurant and all restaurant equipment, or merge/franchise. Take a closer look at each of these exit strategies below.
Selling a Restaurant
If you no longer want to deal with all the nuances of running a restaurant and can’t wait to cash out simply, it makes the most sense for you to sell your restaurant for a fair price to a qualified buyer.
You could choose from a wide range of potential buyers. Depending on your specific exit plan, your buyer could be a family member. Many small restaurant owners, more interested in keeping the business in the family rather than getting any money out of it, simply transfer ownership to their children or loved ones.
Another excellent option for businesses is selling to employees. You could sell directly to one of your employees or opt for a management buyout. In either case, this can be beneficial as you’ll know who you’re leaving the business to.
It’s similar to when you transfer ownership to a family member. The benefit, however, is that you’ll likely get more money by selling to employees rather than loved ones.
Of course, you can also decide to go for independent buyers. In most instances, going this route will maximize your profits. The downside, however, is that finding an independent buyer can be a time-consuming, complicated process.
Whatever type of restaurant buyers you sell to, all business processes will likely continue as normal. Your restaurant would still be in business, most of your employees would be likely to keep their jobs, and it’s possible that the name and overall branding would remain the same – though you shouldn’t always count on it.
Liquidation
If you’re not interested in keeping your business operational and are more interested in getting money out of your restaurant quickly, you can opt for liquidation.
In a nutshell, liquidating your restaurant means putting everything on sale. You would be closing the doors of your business permanently, exiting the industry, and selling all assets, inventory, and equipment.
By “all,” we do mean all. You would sell everything your restaurant has, from kitchen appliances to furniture, dishes, utensils, and wall decor.
While liquidation is an emotional decision for most sellers, it has its merits. If your restaurant has yet to succeed, you have a lot of debt you need to pay, or you simply need money on hand right away, liquidation is your best course of action. You can exit the industry quickly and cash out.
The problem is that this exit strategy is generally the least lucrative. Liquidation is all about the quick sale, not about getting a high return on your investment. In most instances, you would need to sell all assets at a discount, so you won’t get as high of a pay as you would when going the traditional route and selling your business to new owners.
Merging or Franchising a Restaurant
Not all restaurant owners who are preparing their exit strategies want to exit the industry altogether and say goodbye to their businesses.
If you need help with your financial management, want to increase your cash flow, become more competitive, or find new growth opportunities instead of selling, you might want to merge with another owner or franchise.
Merging with other restaurant owners can take many different shapes and forms. You can keep some control over your business, keeping the same business model, for example, retaining your employees and more. However, you also have a different option.
If you want to ensure that you retain control over your business and brand, franchising might be a better solution. As a franchisor, you would sell the right to others to use your brand and intellectual property.
The downside of this exit strategy is that it’s only suitable for some restaurants. Only those restaurants that are big and successful already could be franchised. If you have poor revenue and are struggling with expenses, selling is a more realistic option.
What to Consider When Building a Restaurant Exit Strategy
Regardless of the specific exit strategy you decide to use, you must carefully prepare for it. Some of the things you’ll need to consider include timing, your books and records, transferability, and succession planning.
Timing
It’s always a good idea to get your timing just right, as that will ensure that the value of your restaurant is as high as possible. Unless you’re forced to sell when your business is struggling, you’ll want to start looking into selling only when it is at its peak.
When your revenue is stable, you have great relationships with your suppliers and a loyal customer base with plenty of new customers coming through your doors.
After all, most professionals avoid investing in failing businesses. Therefore, it’s in your best interest to first increase the value of your restaurant and then start looking for potential buyers.
Books and Records
To simplify all processes when you’re ready to exit the industry, you’ll want to ensure that all your books and records are well-kept from day one. Whether you’re selling, liquidating, franchising, or anything else, you’ll always want to have all your paperwork in order long before you follow through with your exit plan.
You’ll need your tax records, payroll information, and financial records if you hope to go through with your exit plan without any hiccups.
Transferability
Depending on your specific business model, transferability could potentially be problematic when you’re ready to leave the industry.
For instance, if you are not simply the owner of the restaurant but its main chef, transferring your business to another owner could be problematic as they would be losing access to the main asset – the chef responsible for attracting customers to the establishment.
Succession Planning
Of course, you’ll also want to start succession planning well in advance. Whichever route you go for—selling, franchising, or anything in between—the better idea you have of who will take over your business once you’re out of it, the easier it will be to prepare for your exit.
You’ll have many options, from family members to employees and independent buyers. Consider carefully all your choices and start preparing for your successor from day one.
The Importance of Building a Solid Exit Strategy for Your Restaurant Business
Proper exit planning doesn’t mean preparing for the “worst-case scenario.” It means preparing to leave your business at the best possible time. At a time when you’ve met your financial goals and established a business you’re proud of.
Thorough exit planning can increase the value of your restaurant and ensure that it’s left in good hands once you’re ready to move on to other things.
FAQ
When is the best time to sell my restaurant?
While it’s always best to create your exit plan as soon as possible (even before you officially start in the industry), the best time to sell your restaurant is at its peak.
When your establishment is popular, has a large pool of loyal patrons, an experienced staff, all the necessary equipment, and a recognizable brand, you’ll get the best bang for your buck.
Moreover, you’ll be able to attract more qualified buyers as they can invest with the utmost confidence.
Is it better to sell or liquidate my restaurant?
Whether it’s better to sell your restaurant or liquidate depends on your unique situation and preferences. Selling is usually a long, time-consuming process that can get complicated. However, it will allow you to get the most money from your establishment.
Alternatively, liquidating can be a great choice for owners needing immediate cash access. Liquidations are quick and breezy, but the downside is that all your equipment and assets must be sold at a discount. Therefore, the overall value you’ll get will be reduced.
What are the benefits of having a restaurant exit strategy in Canada?
A restaurant exit strategy in Canada allows for business continuity, financial security, and peace of mind for restaurant owners. A well-crafted exit strategy reduces liability and ensures a smoother transition during the sale of the business.
What are the risks of needing a business exit strategy for restaurants?
Not having a business exit strategy poses significant risks for restaurant owners. Meeting personal and business goals becomes challenging without a plan, potentially reducing business value. Additionally, being mentally prepared to exit can help the smooth ownership transition.
How can I find qualified buyers for my restaurant?
Finding qualified buyers can be quite a hassle, even if your restaurant is at its peak. If you want to simplify finding buyers and selling your restaurant, your best course would be to list your restaurant on Find Businesses 4 Sale.
Find Businesses 4 Sale is a growing marketplace where owners of businesses across industries can easily get in touch with qualified buyers, brokers, and franchisors and make a sale without any obstacles.
Resources
https://www.businesstransitionacademy.com/maximizing-the-value-of-your-business-before-selling
https://eatsbroker.com/exit-planning-for-restaurant-owners/
https://www.restaurant-hospitality.com/staffing/smart-exit-strategy-your-restaurant-business
https://hiltonsmythe.com/exit-strategies-for-cafes-and-restaurants/
