How to Buy a Restaurant

1. INTERVIEW

Initial Phone Call 
You make an initial phone call to Florida Restaurant Brokers inquiring about purchasing a restaurant, bar or club and describing your criteria for purchase.

Background Information
You will provide FRB with your personal background information including your financial history and sign a confidentiality agreement. FRB will in turn provide you with information on various restaurants, bars and/or clubs that most closely meet your criteria. You will then drive by or investigate business as a non conspicuous customer  

1. SHOWING
   
   Meeting
   FRB will set up an appointment for you to tour the business you are interested in and talk to the owner. At this time you may ask the seller specific questions about the business. This appointment is generally scheduled during non-business hours so as not to interrupt or alert the employees or customers.
    
2. VALUATION

There are two basic methods for valuing a restaurant, bar or club which are as follows:

1. Assets In Place Method
   This method means that only the lease, leasehold improvements and fixtures and equipment are being sold. The name, menu, concept and goodwill are not included as part of the sale. With this method little or no emphasis is put on the financials of the business and the major factors in determining the value are the value of the lease, leasehold improvements and the fixtures and equipment. There is no standard formula in determining value using this method and valuation is somewhat subjective based on the brokers knowledge of the marketplace and comparable sales sold using this method.
    
2. Going Concern Method
   This method means that the lease, leasehold improvements, fixtures and equipment, name, menu, concept and goodwill are all included as part of the sale. The primary valuation method used for a going concern valuation is the yearly adjusted cash flow method. This means that the net profit on the tax return or on the year-to-date income and expense statement is adjusted by adding back the following items to the net income: one working owners salary and payroll taxes, any personal expenses the owner is charging the business (food for consumption at home, life, health and disability insurance premiums, auto expense, entertainment and vacation expense, etc.), depreciation, interest and amortization expense on any loans the buyer will not be assuming, net operating loss carry forward charges and any other expenses which are personal and will not be applicable to the buyer. Once the yearly adjusted cash flow is determined a multiple ranging from 1 to 3 is used to determine the value of the business. The multiple to be used is determined by several factors which include lease value (whether the lease is at market, below market or above market), the potential upside of the business (i.e. the current operation serves dinner only and has only a beer and wine license and there is potential for a strong lunch business and liquor sales), the quality and quantity of the leasehold improvements and fixtures and equipment, whether the operation is a franchise and whether the operation is a full service or self-service operation. For example, if the yearly adjusted cash flow of the business is $75,000 and the multiple to be used is 2 1/2, the value of the business would be as follows: $75,000 multiplied by 2 1/2 which equals $187,500 sales price.
    
3. OFFER
   
   Writing the
   With our assistance FRB will submit an LOI with a deposit to acquire the business. Your offer will be contingent upon your physical inspection of the business, your inspection of the financial records, the assignment of the premises lease or negotiation of a new lease and any other necessary contingencies (i.e. alcohol license transfer or other special licenses, financing, etc).

Presentation
FRB will present your LOI. We give the seller background information on you, your previous experience, your perspective on how you arrived at your price, terms and conditions, etc. We also present your financial statement, credit report, resume and business plan.

Response
The seller will either accept, reject or counter your offer. FRB will notify you of the seller's response. At this point you may either accept, reject or counter the seller's response.

Mutual Acceptance
When both parties agree to all of the terms and conditions of the sale and sign all amendments and counteroffers, the offer then becomes a purchase agreement which either broker or attorney wil prepare for signatures. At this time there may be contingencies or conditions that still need to be satisfied prior to closing.

Advisors 
FRB encourages you to include your CPA and/or your attorney in reviewing the transaction should you feel the need to do so.
 

1. ESCROW

Deposit
You deposit check (made payable to the escrow company) is deposited and this opens the escrow holding account. Restaurant Realty Company will provide the escrow officer with copies of all documents relating to the sale.

Inspection
You will be given copies of the financial records of the business for your review.

Contingency Removal
As your requirements are met existing contingencies in the purchase agreement are removed. Once all contingencies are removed the purchase agreement becomes a binding agreement and the deposit is increased and the escrow is opened.

Closing Date
The closing date or the close of escrow is the date when title to the business and normally physical possession of the business is transferred to the buyer..

Inventory
Arrangements are made for you and the seller and/or inventory service to take a physical inventory as it applies to the value of the salable items (food, beverages, etc.) and non-salable items (fixtures, equipment, etc.) usually one or two days prior to the close of escrow.

The Closing
All parties meet at an office to sign the closing papers or the closing papers are sent to the parties to be executed prior to the close of escrow.

Fees 
You will generally be responsible for your own accountants and attorney's fees, security deposit for the premises lease and sales tax on the value of the fixtures and equipment that you allocate as part of the purchase price.