Know the answers
Mistakes proved a good teacher for Dan Simons, now a co-owner of Founding Farmers and Farmers Fishers Bakers restaurants in the Washington, D.C., area. Simons tried to sell his first restaurant in 2008. He strived for months to find a buyer but was unsuccessful, and ended in foreclosure.
“As I went through the process, I saw a lot of flaky buyers—people who did not have the financials, who couldn’t get funding, who didn’t know the questions to ask,” Simons recalls.
Now, he advises sellers to compose a list of the top questions a buyer will ask, and to be prepared with answers. For example, have a restaurant’s profit and loss statements printed in a handout or a PDF that can quickly be sent by email, he says. Have maintenance records handy, and know quarterly food and labor costs. A list of employees willing to stay also helps.
Another issue to address is what Simons calls “no ghosts.” A seller should be prepared to show potential buyers that the rent is current and that property, liquor and retail taxes are paid. Buyers want assurance that there are no liens against the business, licenses are not encumbered and there are no pending lawsuits. If there is a problem, address it upfront and be prepared to take the cost off the sale price, he says.