I own a group of five restaurants which I am putting on the market. How can I groom my restaurant business for the best sale value possible?
The solutions
Paul Davey, Davey and Co
Consider whether or not your business is to be offered for sale as a group, each unit individually, or a combination of both. This is critical, as it will determine how your business should be prepared and offered - and, most importantly, the price you should ask.
A competent agent will advise you on this, but essentially this will be determined by the composition of your five units - relative locations, consistency in style of operation and trading performance.
If the advice is that they should be sold as a group, this is a straightforward matter for your appointed agent, as he should know precisely which corporate operators, both established and emerging, it should appeal to and how it should be presented. This is likely to be the most expedient and, if confidentiality is critical, the most appropriate option.
If, however, the business is more appropriately offered on an individual unit basis, then you must ensure the trading performance of each unit is isolated. This means preparing management profit-and-loss accounts for each unit separately, showing sales, operating costs, rent and staff costs for each site.
Grooming a business for sale means careful planning - I believe a good 12 months ahead of going to the market. If you have a management structure in place, ensure your managers are running a tight ship. Under TUPE, a new owner must take on all staff and provide them with continuity of employment. So, if your managers or any other members of staff represent weak links, deal with them early.
Don't worry too much about presentation, as a good agent will ensure that he, not you, presents it in the right way, to the right market in order to achieve the right price.
www.daveyco.com
Chris Lane, Kingston Smith
It is essential that you have a plan of action in place and consider who is going to buy your business. This will enable you to achieve a higher sale price. It may take some time, so you should start right away to make your business as attractive as possible.
A pre-sale "grooming" review of the business should be carried out by your professional adviser. The grooming process is a crucial factor in achieving the best price. It is important to consider the location, the style and the general economic climate, as well as the historic and future trading record of the company.
The key to maximising your sale price is to remain flexible in terms of what you would like to achieve. Depending on the type of restaurant, you could perhaps market it as a franchise opportunity. Alternatively, the freehold may hold a greater opportunity if it were redeveloped; or you may prefer to sell the business as a going concern.
If you intend to sell the business as a going concern, you need to work out who would be a potential purchaser; this could be a larger operator or a competitor. With any sale, you need to consider any liabilities that you cannot escape - for example, if you have a long lease on the site.
There are numerous tax pitfalls for the unwary, and it is essential that you speak with a professional adviser with experience in the hospitality sector before you sell.
www.kingstonsmith.co.uk
Andrew Burnham, MacIntyre Hudson
Getting the best price for your business is a matter of your position in the business cycle and finding the right buyer. Preparation can enhance the value considerably and make or break the deal.
To maximise your price and make sure the selling process runs smoothly you should:
- Compile detailed breakdowns of the gross and net profit margins for your restaurants to enable a buyer to plan for their future operation and to evaluate the acquisition. Well kept and prepared management accounts are the key to this information.
- Detail how you have invested in the restaurants over time - for example, in refurbishments and kitchen equipment. A balanced capital expenditure programme put in place a couple of years before a planned sale may be time and money well spent.
An established and effective management team is a far more attractive proposition to a buyer than a group with heavy reliance on the owner. Recruitment and appropriate rewards are key to attracting and retaining strong management and cannot be put in place overnight.
The buyer will carry out extensive due diligence to gain assurances about leases, asset ownership, health and safety compliance and trading names, and will seek warranties that national insurance contributions, PAYE, VAT and corporate tax payments are complete and up to date.
The more prepared you are when the sale process commences, the easier it is to negotiate from a position of strength. The earlier you start, the better prepared you will be, and your chances of securing the right price will be enhanced.
It is always advisable to consult with your accountants before implementing a programme of specific actions.
www.macintyrehudson.co.uk
Our experts andswer your questions
Do you have a business issue you want ot put before Caterer's panel of experts, drwn from all areas of the hospitality industry? E-mail@ benjamin.walker@rbi.co.uk