Selling Your Restaurant: What the Process Actually Looks Like

What Buyers Actually Pay For

Restaurant buyers pay for transferable cash flow, a transferable lease, and a business that does not depend entirely on the owner. They discount heavily for owner dependency, deferred maintenance, a lease with less than 3 years remaining, and any unresolved legal or tax issues.

The valuation is typically based on a multiple of Seller's Discretionary Earnings (SDE) for smaller restaurants or EBITDA for larger ones. The multiple ranges from 1.5x to 3.5x depending on concept strength, lease quality, and how owner-dependent the operation is.

The Selling Process

Step one is getting your financials in order -- 3 years of P&Ls, current balance sheet, and a clear add-back schedule for owner compensation and one-time expenses. Buyers and their lenders will scrutinize these documents. Gaps or inconsistencies kill deals.

Step two is deciding whether to use a broker. A good restaurant broker adds value in finding qualified buyers and managing the process. A bad one costs you 8-10% of the sale price and adds nothing. The decision depends on how much time you have and how wide a buyer pool you need.

Step three is the Letter of Intent (LOI). This is where price, terms, and contingencies get set. Most sellers do not negotiate the LOI hard enough, which means they give up leverage before due diligence even starts.

What Kills Deals

The three most common deal killers are: (1) a landlord who will not consent to the lease assignment, (2) financials that do not support the asking price when a buyer's accountant reviews them, and (3) an SBA lender who declines the buyer's loan application. All three are addressable if you identify them early.