How to Sell a Restaurant: 12 Tips to Maximize Profit

You’ve worked hard to build a successful restaurant business, but that doesn’t mean you want to own it forever. You might be ready to retire. Or you’re ready to start a new venture in another industry. Maybe you just want to capitalize on your restaurant’s current growth. 

Whatever the case may be, selling a restaurant is a complicated decision. You need a strong strategy to do it correctly. In this guide, we'll walk you through how to sell a restaurant efficiently and profitably, while avoiding common pitfalls that can disrupt the deal. Let's dive in. 

How to Sell a Restaurant: Start with a Clear Valuation 

Restaurant owners sell their restaurant businesses for a variety of reasons. No matter your reason, begin by determining a clear and accurate valuation of your restaurant. How much is your restaurant really worth? 

Gather the Right Financial Documentation 

First, gather all relevant financial statements for your restaurant business. This includes profit and loss statements (P&Ls), tax returns, and balance sheets for the past three to five years.  

It should also include inventory counts, vendor agreements, and lease terms. If a document affects your restaurant’s revenue, profitability, or operational consistency, include it in this process 

Understand What Your Restaurant Is Really Worth 

Your restaurant is composed of tangible and intangible assets. Both categories contribute to the value of your business. As such, both should be factored into your restaurant’s valuation. 

• Tangible Assets: This category includes physical items, like equipment, restaurant inventory, and leasehold improvements 
• Intangible Assets: This category includes brand equity, customer loyalty, and location value 

How to Calculate Restaurant Value 

There are different methods to calculate restaurant value. Here are four popular ones: 

1. Asset-Based Evaluation: This method assigns value by subtracting liabilities from assets. So, if your restaurant has $50k worth of equipment and $20k worth of debt, the asset-based evaluation of your business would be $30k. This evaluation method is usually best for struggling restaurants, especially when the owner wants to get out fast.   
2. Seller's Discretionary Earnings: This method takes the seller's discretionary earnings (SDE) metric and multiplies it by industry benchmarks. To find your SDE, analyze your profit and loss statement to determine your pre-tax income after expenses. Now multiply your SDE by industry benchmarks. In the restaurant industry, it's usually between one and three. For example, if your SDE is $100k and the benchmark multiplier in your industry is 2, your restaurant's estimated value is $200k. 
3. Revenue from Restaurant Sales: This method takes a restaurant's annual revenue and multiplies it by industry benchmarks. To find your annual revenue numbers, analyze your financial statements. Once you determine your restaurant's annual revenue, multiply it by the benchmark multiplier. For example, if your restaurant produces $300k in revenue and your benchmark multiplier is 0.5, the estimated value of your restaurant is $150k. (Note: you can take the average of your SDE and Revenue from Restaurant Sales metrics to settle on a solid sales price.) 
4. Discounted Cash Flow: This method estimates future cash flow and discounts it to present value. So, if your restaurant business generates $100k in revenue per year, you use a discount factor of 10%, and you look three years into the future, the value of your restaurant would be about $250k. (Discounted Cash Flow is tricky. This article explains the concept in more depth.) 

Prepare Your Restaurant for Sale Like a Pro 

Now that you know your restaurant business' worth, you should prepare it for prospective buyers. To do this, optimize key elements of your operation. 

Clean Up Financials and Operations 

Do you have outstanding debts? What about liens? If possible, address these things before selling a restaurant, as they can scare potential buyers and reduce the asking price. 

Next, look to streamline operations. What can you do to make your restaurant more efficient? The less owner-dependent the business is, the easier it will be to sell. To this end, consider new software, staff processes, and even hiring provided the financials support it. 

Increase Curb Appeal and Guest Experience 

The physical appearance of your restaurant matters. Invest in curb appeal to make your restaurant more attractive to buyers. Consider minor renovations and make necessary repairs. These things will make selling your restaurant easier and help you earn the highest sale price. 

What happens inside your restaurant is obviously important too. Consider ways to improve your menu, increase customer loyalty, and better engage with your community. While these tips require effort, they'll drive positive cash flow now and earn you the best price when you sell. 

Pro Tip: Make sure you highlight popular menu items, a loyal customer base, and so on. when talking to qualified buyers. These things might not be common knowledge. 

Decide What’s Included in the Sale 

What are you actually selling? Restaurant buyers will want to know. In many situations, the new owner will acquire your brand IP, recipes, staff contracts, and vendor relationships. However, this isn't true if you're selling a franchise. Do your research! 

Will the new owner acquire a piece of real estate too? Or does your existing restaurant lease its location? This is important information that needs to be disclosed. 

Build Your Sales Strategy and Find Potential Buyers 

You've put in the work. Now it's time to build a sales strategy, find the right buyer, and cash in on your restaurant business. Here are three tips to help you make it happen. 

Choose Between a Broker and Selling Direct 

There are two ways to sell a restaurant. You can hire a restaurant broker or sell directly to buyers. Each has its own pros and cons that you need to know about:

• Hire a Restaurant Broker: You want to sell your restaurant, but you don't want to handle the marketing, buyer qualification process, and legal obligations by yourself. Hire a restaurant broker. These people know the restaurant industry inside and out and can streamline your sale. But you'll have to pay your broker 5% to 10% of the sale price. 
• Sell Directly to Buyers: You've been in the restaurant industry for a while. You might have even sold restaurants in the past. As such, you know how the process works and have potential buyers in mind. In this case, you might want to sell direct. It will be a lot more work, but you won't have to pay a broker and will therefore make more money. 

Identify Your Ideal Buyer 

Who do you want your new buyer to be? You should decide this before you sell your restaurant as it will determine who you market to. For example, do you want to sell to owner-operators, investors, or multi-unit chains? 

Your answer will depend on how involved you are in the business. Do you run operations or have you hired new management professionals to handle this for you? If you run operations, an owner-operator is probably the best fit. If you don't, an investor might pay the best price. 

Market the Sale Without Disrupting Business 

It's time to list your restaurant for sale. Just make sure you don't disrupt normal business operations. You still need to satisfy guests and make money while you negotiate a deal. 

First, list your restaurant on sites like BizBuySell and BizQuest. Or, if you want to keep your exit strategy confidential, list it on a different site that allows confidential listings. Either way, we suggest asking prospective buyers to sign an NDA during the buyer qualification process. 

Also, consider current market trends and market conditions to create an engaging listing. What do other listings say to grab attention? What fears do potential buyers have and how can you alleviate them? You'll generate more interest in your establishment if you consider these things. 

Negotiate the Deal and Close Smoothly 

You probably won't get everything you ask for when selling a restaurant. You'll have to negotiate with potential buyers and get the most important things. Then you'll need to lock down details and facilitate a smooth transition between you and the new owner. 

Understand the Terms Beyond the Sale Price 

The sale price is just the tip of the iceberg. You also need to understand terms like transition period, earn-out, seller financing, and training period. Here's a quick primer: 

• Transition Period: Also known as the handover period, this term refers to the time the current owner remains with a restaurant to help the new owner assume daily tasks.  
• Earn-Out: A kind of purchase agreement in which the final price is determined by post-sale performance. In other words, you could agree to sell your restaurant for $500k if it maintains $1M in revenue for two years. If it doesn't, the price drops to $400k. 
• Seller Financing: When the person selling the restaurant allows the new owner to pay for the business, plus interest, using the restaurant's cash flow. Put simply, the previous owner becomes the bank for the new owner, which often simplifies the sales process. 
• Training Period: The amount of time the current owner agrees to train the new owner after closing. For most businesses, the training period is one to two months. 

Work with Legal and Financial Professionals 

Legal and financial professionals are often worth their weight in gold. You just have to make sure you hire trustworthy individuals. Do your due diligence before you hire anyone. 

For example, a CPA can help you determine an accurate valuation for your restaurant. A business attorney can handle the many legal documents required to make the sale. After all, contracts, licenses, and transfers of ownerships won't create and sign themselves. 

If you don't hire professionals to help you with these tasks, you'll have to do them yourself. It's definitely possible. But it requires more work and stress, potentially leading to legal issues. 

After the Sale: Setting Everyone Up for Success 

You've sold your restaurant business. Now you just need to complete the final step and prepare your establishment for a transition of ownership. These two tips will help. 

1. Communicate with Staff, Vendors, and Guests

Tell your staff, vendors, and guests that you've sold your restaurant. Let employees know how the transition will work, introduce them to the new owner, and notify staff members who will be let go, if applicable. Then contact vendors and keep them up to date too. 

Finally, reassure guests that while you won't own the restaurant anymore, you're confident the new owner will continue to serve the great food and environment they've grown to love. 

Pro Tip: Maintain "business as usual" until the deal is finalized! Don't plan a vacation or slack on your duties until ownership of your restaurant is officially transferred. This could ruin the sale. 

2. Plan Your Next Move as a Seller

You've prepared your staff, vendors, and customers. Now you need to prepare yourself. Answer questions like, "What do I plan to do next?" Do you want to retire? Invest profits from the sale into the stock market and live off the returns? Launch more restaurants in different locations? Whatever you decide, leverage the sale of your restaurant to support future goals. 

Frequently Asked Questions About Selling a Restaurant 

Still have questions about how to sell your restaurant? We've answered a few FAQs to help. 

What is the best way to sell a restaurant? 

There is no "best way" to sell a restaurant because every situation is different. That said, the basic process is as follows: appraise your establishment, find a qualified restaurant buyer, negotiate a deal that reflects the value of your business, and help the buyer transition into ownership. 

How much should I sell my restaurant for? 

The average restaurant sells for $150k. But the price you sell yours for will depend on a variety of factors. How much net income does your establishment earn? Do you own or lease your building? How many people do you employ? What's your restaurant's reputation in the community? How much competition does it face? Each of these things can impact a deal. 

How much do restaurant owners make per day? 

The average restaurant owner makes $82,566 per year. If you divide this number by 365, you get $226.21. But every restaurant owner is different. The amount of money you earn depends on location, quality of experience, food costs, marketing savvy, and many other things.  

Can a restaurant owner be a millionaire? 

Absolutely! Though, the vast majority of restaurant owners are not millionaires. To reach this incredible milestone, you'll need to buy or build an extremely profitable restaurant.

Or, take an alternative approach and buy or build multiple, somewhat profitable restaurants. Or own a restaurant for many years and invest the profits in other opportunities. In all honesty, there are many ways to become a millionaire in the restaurant industry. Find the right one for you. 

What kinds of restaurants make the most money? 

Generally speaking, bars, fast food eateries, pizzerias, ghost kitchens, and food trucks are the most profitable kinds of restaurants. That said, entrepreneurs can make large sums of money with any kind of establishment, from cafes to fine dining restaurants. It all comes down to location, quality of food, staff training, marketing expertise, business savvy, and other factors. 

Sell Smart, Maximize Profit, and Move Forward with Confidence 

Selling a restaurant successfully takes preparation and positioning. Don't rush the process! Instead, follow our tips, hire the right people if needed, and listen to your instincts. 

Remember, by taking your time, optimizing your restaurant's value, finding the right buyer, and negotiating for a fair price, you'll set yourself up for great success in the future. 

Speaking of future success, tools like Paytronix can help streamline operations, increase guest engagement, and boost revenue for your restaurant. These things will improve your financial outlook right now, and make your restaurant more attractive to buyers. Book a demo today.