The decision to sell a business is one of the most important decisions a business owner will ever have to make and for many franchisees it is an unknown area. Having invested a considerable amount of time and effort in building the business, its sale probably holds the key to a comfortable and secure future.

To minimize pressure and maximize the value of your business, it’s best to start planning for the sale well in advance of the time you actually decide to exit the business. But sometimes that’s not possible.

Here are a few items to consider if you have decided to do a “quick” sale of one of your restaurants.

• Make sure you fully understand how much money you will be walking away with after completing the sale. The prospective buyer may buy the restaurant for the price you are asking, but how much of the money do you get to keep?
  • You need to consider how much “tax basis” you have in the assets you are selling
  • You need to consider how much “tax gain” you will have by selling the restaurant
  • You need to consider the amount of payoff of the loans you have on the restaurant
  • You also need to consider whether the bank will be charging you a breakage fee due to paying off the loan early
• There may be opportunities on your P&L Opportunity Report, but keep in mind that a prospective buyer will have to spend time and money to convert these opportunities into cash flow. Just because an opportunity is there does not mean the prospective buyer is going to pay you for it.  If the cost control problem was that easy to fix, you would have already done it!!
• Consider the cost and timing of future reinvestment into the property. This can have a major impact on your selling price if there is a rebuild or MRP on the horizon. The sooner the major reinvestment occurs, the more impact it will have on your selling price.

If you have questions about any of these suggestions or would like additional information, contact Bruce Berry, director, who works closely with franchise restaurant owner/operators. In the spring/summer issue of this newsletter, we provided suggestions for long-term planning for a sale, in the article Factors to Consider in Selling a Restaurant.

• Category: Whalen & Company