How to Prepare a Restaurant Concept for Sale
A successful sale depends on creating value in the company.
By Jim Parish, Guest Columnist -- Chain Leader, 9/3/2008 11:37:00 AM
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| To prepare a restaurant concept for sale, create value in the company, says financial guru Jim Parish. |
Rule #1 Hire, motivate and develop the very best people you can afford.
If you can deliver to a new owner a qualified team--one with tenure, commitment to your concept and culture, and plenty of go-power to manage your brand in the future--the odds of a successful sale improve dramatically.
Even if you agree to stay on after a sale, most buyers will view your commitment as one of transition only. But your team is another matter. If they are happy with their roles and committed to the company and their future in it, that message becomes obvious to the buyer and adds value to your enterprise. And be sure the new owner takes care of the employees after the sale as well--after all, you are selling their livelihood, too.
Many investors boast that they can parachute a team into a fresh acquisition. But no one wants the heartache of a learning curve, especially if they can inherit a qualified and energized team already in place.
And, of course, following this rule helps you build an outstanding business along the way, whether you want to sell it or not.
Rule #2 Fly the Plane!
The most important lesson pilots learn is, no matter what, Fly the Plane! Operators who plan to sell their concepts should follow the same advice. In this case, keep operating the business as usual.
You'll be amazed at how fast a deal will fall apart if you become distracted from running your business during the deal process. If your attention wanders from managing your business, sales can fall off, cost controls may lapse, and decisions only you can make don't get made. As a result, valuation will suffer and the sale may even be lost altogether.
Rule #3 Get help (the corollary to Rule #2).
While you are "flying the plane," have someone on board to work with investment banker and manage the sales process. It may be a trusted No. 2, a friend or associate with experience in the transaction environment, perhaps your attorney and/or paralegal. Only someone who is affiliated with the company can adequately represent it.
Select an adviser early and cultivate a candid relationship. He or she should give you unbiased guidance and counsel along the way, not just pacing through the process. I'm not suggesting you ignore the deal process. Let your adviser manage the deal mechanics, while you stay in reserve for the critical decisions and intensify the performance of the business right up to the close.
Whoever you choose, odds are the adviser will manage the transaction more efficiently than you will. It's false economy to claim you can "save fees." The cost of a reduced price or a busted deal due to your distraction from running your business makes any fee payment or cost savings pale by comparison.
Rule #4 Manage your expectations and know your limitations.
Be realistic about your expectations. Be coldly clinical about what your company is worth. Bankers and brokers may fill your head with wildly optimistic projections when they solicit your business. The reality is that the buyer will learn about your company's good and bad points during the due-diligence process. Know what the buyer needs, and adjust your expectations accordingly. It's much better to be realistic and close a deal than to hold out for a valuation your business may not be able to sustain.
Rule #5 Protect your brand identity.
Have your service marks "system" in place. Obtain trademarks or copyrights up front to ensure you can operate in new locations. Nothing chills a deal faster than when the buyer discovers a conflict with your service marks, signage or trade name in the very markets he or she wants to expand into next.
Rule #6 Have your systems in place.
Quality, timely operating and financial information is readily available today. You will be at a competitive disadvantage if you can't generate virtually any requested information in a matter of hours. Slow, cumbersome accounting or computer systems, manual reports, constant revisions to data, period-end closes 30 to 45 days after the fact--these are all marks of an ancient attitude about management.
Invest in the systems now. Use the information every day until it is second nature. You will have a stronger company when a sale possibility comes along, and you'll be in a stronger position when the buyers or bankers come calling.
These suggestions will result in a smoother and more efficient process, and give you the chance to maximize the value of your business. In addition, if you run your company according to these guidelines, you will have a smarter, more productive business even if you decide to keep it.
Jim Parish is president of Parish Partners Inc., an investment and advisory firm that provides executive-level strategic expertise to a wide range of restaurant companies. Parish serves on the board of directors or advisory boards of four public and privately held restaurant and restaurant service-provider companies. Prior to 1991, he was executive vice president, chief financial officer, director and member of the executive committee of Chili's Inc., the predecessor company to Brinker International.
Check out how restaurant operators prepared their concepts for sale. Read "Going to Market."
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