The Complete Checklist For Selling Your Restaurant In 2024: Pre-Sale, Sale & Post-Sale

Selling a restaurant can be a major decision for many reasons. One of the main reasons is to cut losses due to financial challenges, with 52% of restaurant owners saying high operating and food costs are really cutting into their profits.

Other possible reasons include wanting to retire or find new business ventures. No matter the cause, selling a restaurant requires careful preparation and strategy to ensure you get the best price and attract the right buyer.

How to compute your restaurant’s value

An accurate valuation sets a solid foundation when selling a restaurant. If your business is priced too high, buyers may overlook it. Too low, and you risk leaving money on the table.

With the restaurant industry being highly competitive, setting the right value allows you to stand out from other listings. Moreover, a correct valuation reassures buyers that your business is financially healthy, even with the restaurant costs that come with it.

Determining your restaurant business’ worth

There are a few key methods used to estimate a restaurant's value accurately. The method you choose depends on the size and financial structure of your business.

Seller’s Discretionary Earnings (SDE)

The SDE method calculates the total financial benefit the future owner will receive from the business.

To compute your restaurant’s SDE, start with the net income shown on your profit and loss statement. Next, add back non-operating or discretionary expenses that the new owner would not have to incur, like the owner’s salary and benefits, one-time expenses, taxes, depreciation, and amortization.

The goal is to determine the total amount of cash flow that will be available to the new owner after accounting for these types of expenses.

For example, if your net income is $50,000 per year and you add back $60,000 for the owner’s salary, $20,000 for one-time renovation costs, and $10,000 for the interest expense, your SDE would be $140,000.

If restaurants in your area sell at a multiple of 2.5 times SDE, your restaurant could be worth $350,000. Take note that the actual multiple can vary significantly based on factors like location, industry trends, and the specific buyer's criteria.

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)

EBITDA is often used for larger restaurants or those with professional management in place, where the owner isn’t involved in day-to-day operations. It provides a clear picture of the business’s profitability by excluding certain expenses like interest and depreciation.

You calculate EBITDA by taking your net income and adding back interest, taxes, depreciation, and amortization. So, if your restaurant’s EBITDA is $100,000 and similar businesses in the area are selling for three times EBITDA, your restaurant could be valued at $300,000.

Asset-Based Valuation

In some cases, the value of your restaurant’s assets, like equipment, furniture, and leasehold improvements, might be the best way to determine its value.

Most restaurants that haven’t been profitable for a while use this method since their physical assets still hold value. For example, if your restaurant's equipment and fixtures are worth $50,000, that would become the base value for the sale.

4 key factors that affect a restaurant’s value

Several factors impact the final value of your restaurant. These include location, profitability, market trends, and more.

1. Location

If your business is in a prime spot, such as near homes, offices, shopping areas, or tourist destinations, you can command a higher price. Being accessible to your target demographic is important, with 85% of customers residing within just 3 to 5 miles of its location.

2. Profitability

Showing consistent profits and positive cash flow can increase the perceived value of your restaurant. Buyers are more likely to invest in a business that demonstrates a history of generating income since they won’t have to exert much effort into getting a return for it.

3. Market Conditions

The demand for certain types of restaurants, like quick-service or delivery-focused businesses, might be higher than fine dining establishments. Keeping up with market trends can help you position your restaurant better and possibly increase its value once you’re ready to sell.

4. Restaurant Size and Concept

The size and type of restaurant also play a role in its valuation. A full-service restaurant with liquor licenses and a well-trained staff may be more valuable than a small café.

Buyers might also be interested in niche concepts that stand out in the market, while generic concepts may fetch lower prices.

Pre-sale checklist for selling a restaurant

Before you find a buyer, you should be ready to provide potential buyers with your business’s financial and legal documents. Preparing your restaurant’s interior and exterior, as well as enlisting the help of a broker, accountant, and attorney, can also help you prepare for the sale.

Assess your restaurant’s financial health

One of the first things potential buyers will ask for when you’re selling a restaurant is a thorough review of your financial statements. These documents provide insight into how well your restaurant has performed financially.

Start by reviewing your restaurant profit and loss (P&L) statements from the past two to three years. The P&L statement breaks down your revenue, costs, and profits, giving buyers a snapshot of how much money the restaurant is making or losing.

Next, check your balance sheet, which shows the overall value of your restaurant's assets, liabilities, and equity. It helps buyers understand what the restaurant owns (like equipment and inventory) and what it owes (like loans or outstanding bills).

Check your cash flow reports as well, which show how much money is coming in and going out of the business. Buyers are interested in consistent cash flow because it indicates financial stability and a lower risk of failure after the sale.

Aside from reviewing the documents, you should organize the data in your restaurant financial statements. Make sure your expenses are categorized properly, and your tax returns are up-to-date. 

Prepare your restaurant’s exterior and interior for sale

First impressions are all the more important when selling a restaurant. Buyers often make quick decisions based on how your establishment looks inside and out.

The first thing a buyer will see is the outside of your restaurant, so it’s important to make sure it looks neat and well-maintained. Trim any overgrown landscaping, clean up trash or debris, and make sure your signage is clear and well-lit. If your restaurant has a parking lot, make sure it’s clean and free of potholes or other issues.

For the interior, one of the simplest yet most impactful things you can do when preparing to sell a restaurant is to declutter the dining area, kitchen, and storage spaces. You should also deep clean everything, from floors to ceilings, and pay extra attention to high-traffic areas like the entrance, restrooms, and bar.

Another way is to apply a fresh coat of paint and repair any damages. Fix broken tiles, patch up holes in the walls, and make sure all lighting fixtures are working properly.

A clean restaurant gives buyers confidence that the business has been well-maintained. It also makes it easier for potential buyers to envision themselves taking over.

Inspect appliances and equipment for repairs or replacements

Take the time to inspect all kitchen equipment and make necessary repairs or replacements. Do a full inspection of all your kitchen equipment, from ovens to refrigerators to dishwashers.

Buyers will want to know that the equipment included in the purchase is reliable and functional. If any appliances are damaged, outdated, or not functioning efficiently, it’s time to make repairs, consider replacements, or deduct their value from the total cost.

For example, if an appliance like an oven or refrigerator has a minor issue, such as a faulty thermostat or seal, repairing it may be the best option.

On the other hand, if an appliance is significantly outdated, energy-inefficient, or has major mechanical problems, replacement is likely the better choice. For safety-critical items like the fire suppression system or walk-in cooler, replacement also makes sure the new owner can depend on the equipment they inherit.

However, if the cost to repair or replace a piece of equipment is high, it may make more sense to simply deduct its value from the overall sale price. Specialty equipment, like wood-fired pizza ovens or draft beer systems, can be expensive, especially when you’re already operating on the red.

Check your restaurant’s legal documents  

Make sure you have all your legal documents in order. This shows potential buyers that they’re purchasing a restaurant business that complies with all legal regulations and won’t face any legal issues after the sale.

Check your restaurant’s business licenses, permits, and insurance policies to confirm they’re current and in good standing. Make sure your food service licenses, liquor licenses, and health permits are all valid as well. If any of these are close to expiring, renew them before listing your restaurant for sale.

Also, prepare to hand over contracts, lease agreements, equipment warranties, and any employment agreements with staff. These provide buyers with a clear understanding of the restaurant's legal obligations and operations. 

Find business experts to help you

Selling a restaurant is a complex process that requires the right team of experts to ensure a smooth transaction and help you get the best price. A broker, accountant, and attorney each play an important role in making sure the sale goes as planned.

Choosing the right broker is essential because they have deep knowledge of the restaurant industry and know what makes a restaurant appealing to buyers. They also act as a buffer between you and the buyer, negotiating the sale on your behalf and helping finalize contracts.

Meanwhile, an accountant ensures that all documents involving restaurant bookkeeping are accurate and transparent, giving buyers confidence in the business’s profitability. Plus, they can help you understand the tax implications of selling a restaurant.

For instance, selling a profitable restaurant might trigger capital gains taxes, and having an accountant will help you plan for these costs.

Lastly, you’ll want an attorney by your side to review and draft legal documents like non-disclosure agreements (NDAs), sales contracts, and lease transfers. They can make sure the contract covers all necessary terms and that you’re protected from potential liabilities after the sale is completed.

How to sell your restaurant

Creating and posting your listing will let you reach the right people. You can also spread the word through your professional network and by attending industry events. Additionally, determine your minimum acceptable terms and double-check the contract before finalizing the sale.

Create an engaging listing

Once you’re ready to sell, you should create your listing. Grab potential buyers’ attention by highlighting what makes your restaurant special, whether it’s your cuisine, ambiance, or location.

For instance, a restaurant known for its farm-to-table dining experience in an area with limited healthy food options would appeal to health-conscious buyers. Highlighting the aspects that make your restaurant unique lets you boost its perceived value in the eyes of potential buyers.

You should also include high-quality visuals in your listing. It should showcase both the interior and exterior of your restaurant. Professional photos help potential buyers get a clear idea of what the space looks like and how it could suit their needs.

Post your listing online

Posting your restaurant listing online is one of the most effective ways to find potential buyers. There are specialized platforms designed to help business owners sell a restaurant, providing a way for sellers to reach buyers who are actively looking for a business to purchase.

BizBuySell and LoopNet are two online marketplaces where you can post your listing. You can also check your state’s restaurant association's website to see if there’s a way to inform their followers or members about your listing.

Make sure you include all the key information buyers are looking for. Be clear about the asking price, what’s included in the sale (such as equipment, inventory, and assets), and important details about the lease. 

Tell your professional network that you’re selling

Another effective way to get the word out when selling a restaurant is to leverage your professional network.

Start by tapping into industry associations, local business groups, and restaurant owners you’ve worked with in the past. Let them know you’re selling a restaurant and ask them to pass the information along to anyone who might be interested.

If you prefer to keep the sale private, especially to avoid alarming employees or customers, consider working with a business broker to create a confidential listing. Confidential listings allow you to get the word out without sharing sensitive information publicly. 

Brokers will only share key details with pre-qualified buyers, keeping the sale process discreet.

Attend industry events

Trade shows, conferences, and networking meetups bring together investors and entrepreneurs seeking new opportunities. National and regional conferences give you direct access to people interested in the restaurant business.

Research upcoming trade shows in your area or niche and make sure you join. If your restaurant specializes in gourmet, wood-fired pizza, you could look into attending the International Pizza Expo. 

This is one of the largest trade shows in the pizza industry, attracting pizzeria owners, operators, and entrepreneurs from around the world.

Determine your minimum acceptable terms

Decide on the minimum terms you're willing to accept when selling a restaurant. The first step is to determine the lowest price you're willing to accept. To do this, consider factors such as your restaurant's value, current market conditions, and any debts or obligations you need to cover.

For example, if your restaurant has been appraised at $300,000, but you have a $50,000 loan to pay off, your minimum acceptable price might be $350,000 to cover all costs and walk away with some profit.

Currently, the restaurant sector has seen a 6% drop in median sale prices compared to the previous year, signaling a more cautious buyer market. In Q2 of 2024, revenue for restaurants fell by 9%, marking the first decline since Q4 of 2022. 

However, there is a silver lining as margins are improving, with median cash flow up 6% after a 4% gain in Q1.

Finalize the sale agreement

The sale agreement outlines all the important details of the sale, including the purchase price, assets included, and any contingencies. 

Before signing anything, carefully review the contract with your attorney or business broker. Check everything from the price to the payment terms to ensure there are no surprises.

If you notice any terms that aren’t favorable or don’t match what was discussed during negotiations, request changes before signing. Your attorney will help you identify clauses that may put you at a disadvantage or add unnecessary risk.

Post-sale considerations for restaurant owners

Assist the buyer by giving them access to necessary files and logins. Introduce them to your suppliers, employees, and customers as well for a smooth transition.

Coordinate with the buyer to transfer ownership smoothly

Help the buyer ease into the process of owning a restaurant. Start by handing over restaurant accounting statements, vendor contracts, employee records, and other important files.

Make sure the buyer also receives all necessary physical and digital access to the restaurant. This includes handing over keys, updating security codes, and granting access to any online accounts or platforms, such as point-of-sale systems, social media accounts, or reservation software.

If your restaurant has ongoing customer orders, reservations, or catering contracts, work with the buyer to manage these during the transition. The goal is to maintain the same level of service that your customers expect, so hand over all details related to upcoming events, pending reservations, and special orders.

Notify your suppliers, employees, and customers

It’s important to notify all vendors, suppliers, and service providers about the change in ownership. Provide them with the buyer’s contact information and make sure the buyer is fully aware of any ongoing agreements or standing orders.

As soon as the sale is finalized, notify your employees about the restaurant's change in ownership. Let them know how the sale will impact their employment, benefits, and job responsibilities. If possible, provide reassurance that their jobs are secure or explain any expected changes.

Loyal customers are an important part of your restaurant business, and they deserve to know about the sale. Use multiple channels like email, social media, or in-person announcements to inform them about the new ownership.

Reassure your customers that the restaurant’s core offerings, such as the menu, service, and ambiance, will remain the same or be improved under the new management. Address any concerns they might have about changes by emphasizing the value the new owner brings.

Fulfill your outstanding tax obligations

Before transferring ownership, file your restaurant's final tax returns, including federal, state, and local tax forms. You will need to indicate that this is the final return for your business, as the sale marks the end of your operation.

Include all income earned up until the sale date. If you’re unsure which forms to submit, consult a tax advisor to ensure you fulfill all your legal obligations.

Make sure all payroll taxes are up to date, such as federal income tax withholding, Social Security, Medicare, and any state-specific payroll taxes. Even though you may have sold the business, you’re still responsible for any taxes that were due before the sale.

Sell your restaurant successfully

Putting up your restaurant for sale is a big decision that requires careful planning and attention to detail. From understanding your restaurant’s value to finalizing the sale, each step plays a key role in getting the best deal. Make sure to prepare your financial records, spruce up your restaurant, and work with trusted experts for a seamless transition of ownership.

Getting your restaurant ready to sell means showing potential buyers that everything is organized and compliant. With 7shifts, you can easily store employee onboarding documents in one place while meeting labor laws. Buyers will feel confident knowing your restaurant runs smoothly.