Knowing how to sell a restaurant group comes down to an orderly process in four phases: preparing the company, valuing it with sector judgement, presenting it to qualified buyers with an information memorandum, and negotiating through to closing with legal, tax and financial support. How long it takes depends above all on how well organised the information is and how well the buyer has been chosen. A prepared process moves forward; an improvised one stalls at every question the buyer asks.
Phase 1: preparing the company before going to market
The sale begins long before you speak to the first buyer. The first step is to be clear about what you want from the transaction. Some owners are looking for a complete exit. Others prefer a partial sale, staying at the helm through a transition period, or bringing in a partner to finance the next stage. Each objective leads to a different buyer and a different structure.
Then comes putting the house in order. A buyer will ask for reliable accounts broken down by site, leases in force, licences, employment contracts, supplier agreements and proof of who owns the brands. If the trademarks are registered in an individual’s name, or if a site depends on a lease that expires soon, it is better to know and resolve it before opening the process.
This is also the time to separate the personal from the business. Owner expenses charged to the company, property mixed in with the business, or verbal agreements with long-standing partners are common in family groups. Sorting them out in good time avoids arguments later.
Phase 2: valuing the group beyond EBITDA
EBITDA is the starting point for almost every valuation conversation, but on its own it does not explain what a hospitality business is worth. A rigorous valuation involves five factors that the buyer will also analyse:
- Brand strength. Recognition, customer loyalty and the ability to draw a crowd without depending on one particular person.
- Site quality. Location, lease terms and the length of the contracts.
- Cost structure. The weight of staff, raw materials and rent, and how much room there really is for improvement.
- Management team. Whether the group works when the founder is not in the dining room.
- Ability to replicate the model. Whether the concept can open new sites, in the same market or in others.
Multiples vary with size, brand and how replicable the concept is, which is why the figures that circulate among colleagues in the trade are of little use as a benchmark. A valuation carried out by people who have run restaurants lets you set a defensible price and know which arguments support that price in the negotiation.
Phase 3: the information memorandum and the search for qualified buyers
The information memorandum (IM) is the document that presents the company to prospective buyers or investors. It covers the business model, the brands, the sites, the team, the financial information and the growth potential. A good IM answers in advance the questions a buyer would ask in the first meeting, and cuts down the back-and-forth that follows.
In parallel, buyers are identified and screened. They may be restaurant groups looking to grow by acquisition, financial investors, trade operators from the sector or international groups wanting to enter the Spanish market. Choosing the right counterparty determines the outcome of the transaction, in price, in terms and in the future of the team.
Confidentiality is protected in this phase. Detailed information about the business is shared only with qualified counterparties, after a confidentiality agreement and with the owner’s authorisation. If staff, suppliers or competitors learn of the sale too early, it can damage the very business being sold.
Phase 4: negotiation, buyer due diligence and closing
When a buyer shows firm interest, they submit a non-binding offer or a letter of intent setting out the price, the structure and the main terms. From there the buyer carries out their due diligence: a detailed review of the accounts, contracts, licences, employment position and the condition of the sites.
The sale and purchase agreement is negotiated on the back of that review. The final price, the payment terms, the warranties given by the seller and, where relevant, the owner’s role during the transition are all settled. This is the phase with the most advisers around the table, and someone has to coordinate the lawyers, tax specialists and financial advisers on both sides so that the timetable does not slip.
What slows the process down and what speeds it up
Every sale has its own pace, and putting a fixed timeframe on it without knowing the business would not be serious. What we do know is which factors slow it down and which speed it up.
These slow the process down:
- Financial information that is incomplete or does not reconcile across sites.
- Leases close to expiry or with clauses restricting assignment.
- Unregistered trademarks, or trademarks held by third parties.
- An asking price that the data cannot support.
- Negotiating with a single buyer and no alternatives.
- News of the sale leaking early and affecting the day-to-day running of the business.
These speed it up:
- Orderly accounts and a complete information memorandum from day one.
- A valuation the owner understands and can defend.
- Buyers qualified in advance, with genuine interest and the capacity to close.
- A single point of contact coordinating all the advisers through to closing.
Common mistakes when selling a restaurant or a group
Going to market without preparing the company. The buyer finds the problems in due diligence and turns them into price reductions.
Setting the price by comparison. What another group is said to have achieved is rarely comparable. Brand, sites and team change the value from one business to the next.
Choosing a buyer on the headline figure alone. Payment terms, the warranties demanded and the plan for the team weigh as much as the price.
Taking your eye off the business during the sale. If results fall while you are negotiating, the buyer notices and renegotiates.
Doing it without specialist advice. For many owners, selling a hospitality business is a decision they take once in a lifetime. The buyer usually has more experience of these transactions than the seller.
Before taking the first step
If you are thinking of selling your group, in full or in part, the place to start is a no-obligation conversation about your objectives and the state of the company. Our page for companies explains how we support the full or partial divestment of hospitality businesses. A Link Capital partner will review your case in the strictest confidence and contact you within two working days.