Selling a restaurant is not like selling a house. There is no MLS. Most buyers are not pre-qualified. The transaction depends on a lease assignment the landlord has to approve, financials a lender has to underwrite, and a buyer who has to convince a franchisor, a bank, and a landlord that they can run the business.
The average restaurant sale takes 6 to 12 months from listing to close. Many take longer. Some fall apart at the finish line because of a lease problem or a financing gap that nobody caught early enough.
Here is the process, in order.
Step 1: Get your financials in order
Before you talk to a broker or a buyer, you need three years of clean financial statements and tax returns that tell a consistent story. If your tax returns show losses and your P&L shows profit, a lender will use the tax returns. If you have been running personal expenses through the business, you need to document every add-back with receipts.
SBA lenders -- who finance the majority of independent restaurant acquisitions -- require three years of business tax returns, a current balance sheet, and a profit and loss statement for the trailing 12 months. If your records are not in order, you are limiting your buyer pool to cash buyers, who pay less.
The normalization process -- adjusting your financials to reflect the true economic performance of the business -- is the step most sellers skip. A qualified accountant or business broker can help you prepare a seller's discretionary earnings (SDE) calculation that presents your financials in the format buyers and lenders expect.
Step 2: Know what your business is worth
Restaurant valuations are based on SDE or EBITDA multiples, not revenue. A single-unit owner-operated restaurant typically sells for 1.5 to 3.0x SDE. A profitable independent with consistent margins and a strong lease might reach 3 to 5x SDE.
The two factors that most affect your multiple are lease quality and owner dependency. A lease with 10 or more years of remaining term, including options, supports the top of the range. A lease with fewer than 5 years remaining reduces the valuation significantly or eliminates SBA financing eligibility entirely.
For a detailed breakdown of how valuations work, see How Much Is My Restaurant Worth? Valuation Guide.
Step 3: Prepare the business for sale
Buyers pay for what they can verify. Before you list, address the things that will come up in due diligence: deferred maintenance, vendor relationships that depend on your personal relationships, staff turnover, and any legal or regulatory issues.
If you are the primary operator, consider whether you can document your systems and train a manager to run the day-to-day. A business that can operate without the owner is worth more and is easier to finance.
Step 4: Decide whether to use a broker
A restaurant broker earns a commission of 8 to 12 percent of the sale price. For a business selling at $300,000, that is $24,000 to $36,000. In exchange, the broker provides market exposure, buyer screening, and transaction management.
Brokers are worth the commission when the business has real value and you need access to a qualified buyer pool. They are less useful when the business has limited value and the primary transaction is a lease assignment or an asset sale.
If you decide to sell without a broker, you will need to handle buyer screening, document preparation, and the lease assignment process yourself. The We Sell Restaurants platform and similar marketplaces allow owners to list without a broker.
Step 5: Qualify buyers before you share financials
Not every inquiry is a serious buyer. Before you share your financial statements, require a signed non-disclosure agreement and a buyer qualification form that includes their restaurant experience, available capital, and financing plan.
A buyer who cannot demonstrate $50,000 to $100,000 in liquid capital and a credible financing plan is not a buyer -- they are a competitor doing market research. Protecting your financials protects your business and your employees.
Step 6: Negotiate the letter of intent
The letter of intent (LOI) is a non-binding agreement that outlines the key terms of the sale: purchase price, payment structure, due diligence period, and exclusivity. Most LOIs include a 30 to 60 day exclusivity period during which you agree not to negotiate with other buyers.
The LOI is the right time to establish the allocation of the purchase price between goodwill, equipment, and the lease. The allocation has tax implications for both the buyer and the seller, and it affects how the transaction is financed.
Step 7: Navigate the lease assignment
The lease assignment is the most common point of failure in a restaurant sale. The landlord must consent to the transfer. The landlord has their own criteria for evaluating the new tenant. And your personal guarantee on the lease may survive the assignment unless you negotiate a release.
Start the landlord conversation early -- ideally before you have a signed LOI. Prepare a complete buyer package including the buyer's financial statements, business plan, and restaurant experience. Give the landlord time to evaluate without creating pressure that pushes them toward a no.
For a detailed walkthrough of the assignment process, see Restaurant Lease Assignment: What Owners Get Wrong When Selling.
Step 8: Manage due diligence
Due diligence is the buyer's opportunity to verify everything you have represented about the business. Expect requests for: three years of tax returns, monthly P&L statements, vendor contracts, employee records, equipment lists, health inspection reports, and the lease.
Organize your documents before due diligence starts. A seller who cannot produce requested documents quickly signals disorganization and gives buyers leverage to renegotiate the price.
Step 9: Close the transaction
The closing involves signing the purchase agreement, the lease assignment, the bill of sale for equipment, and any financing documents. In most states, a restaurant sale does not require an attorney, but using one is advisable for any transaction above $100,000.
At closing, you will transfer the lease, the equipment, the inventory, and any licenses that are transferable. Liquor licenses in most states require a separate transfer application that takes 30 to 90 days and may require the buyer to operate under a temporary permit.
What to do if the sale falls through
Most restaurant sales that fall through do so because of a financing gap, a lease problem, or a buyer who was not as qualified as they appeared. If your sale falls through, assess which of those three caused it before you relist.
If the lease is the problem, the Restaurant Lease Renegotiation page covers your options. If the valuation is the problem, How Much Is My Restaurant Worth? will help you recalibrate. If the business is not sellable at a price that makes sense, Sell vs. Close Your Restaurant walks through the decision.
For a look at the valuation process, see How Much Is My Restaurant Worth? Valuation Guide. If you are not sure whether selling or closing makes more sense, Sell vs. Close Your Restaurant: How to Make the Right Call covers the math. If you want a second opinion on your specific situation, book a call with Rod.