Steps Involved For Buying A Restaurant Business For Sale
Unless you've bought or sold a business in the past, you'll find that buying a restaurant for sale can be at times an overwhelming experience. That's why it is important for the prospective buyer to be knowledgeable about the process and to follow our simple steps outlined below when considering purchasing one of our restaurants for sale. Thoroughly understanding the process will assist even a veteran of restaurant business transfers in working with all parties involved.
Step 1: Non-Disclosure and Confidentiality Agreement. Before receiving sensitive confidential information, buyers must first sign a Non-Disclosure and Confidentiality Agreement. These agreements protect the prospective Buyer from having anyone such as an employer, employees, or the competition discover about the proposed acquisition prematurely. It also protects the Seller against unnecessary problems with customers, employees, vendors, competitors, landlords, bankers, creditors, etc.
Step 2: Financial Documentation. About 40% of the buyers we work with usually require some type of financing through creative means. Typically banks will not approve loans for restaurant businesses unless there is solid financial documentation and at least 3 years of tax returns. Fact less than 20% of businesses are approved in a stable economy. However Restaurants For Sale understands that in some cases there is a need for additional funding required to complete the purchase. Please be advised that our sellers have asked us to pre-qualify their potential buyers before delivering their financial documents or setting up a face to face meeting. Therefore it is necessary for us to verify that the prospective buyer has ability to purchase with cash and/or is pre-approved through a financial institution. We do not require you to send us sensitive information like bank statements or account numbers. In most cases we just need a letter from your bank stating you have the ability to purchase for the full amount or difference not financed by the potential lending institute. You can also review more Financing Options Here.
Step 3: Face To Face Meeting. After reviewing the restaurant for sale, and financial data, if the prospective Buyer determines that the business presents a desirable opportunity the Buyer should arrange a face to face meeting with the Seller to explore the restaurant in person, learn operating procedures, and gain additional insight.
Step 4: Making An Offer. After meeting the business owner and touring the restaurant for sale, the next step is to present an offer of purchase for the business. Making the offer can be made at any time during the above process, and should also be noted that it is not the final step. In fact, it should be viewed as the first of several steps, each of which bring the Buyer and Seller closer to completing the transaction. Note: It is the prospective Buyer's duty and obligation to verify the accuracy of the Sellerís representations.
Step 5: Purchase Agreement. Once there is a "meeting of the minds" (selling price and favorable terms have been agreed to) for the restaurant being sold, it is now time to execute a purchase agreement between the buyer and seller and place a good faith deposit into escrow. Next, there are a number of variables that effect how fast a restaurant can close as each state has different rules and regulation regarding the sale of a restaurant business. Variable factors include: applying for lease approval from an existing landlord (if applicable), consideration for liquor licenses requirements from the state, and loan approval (if financing).
Step 6: Good Faith Deposit. Also referred to as "Earnest Money" is required for generally 9% of the selling price or $9000, whichever is greater. This is usually placed in an escrow account or with a third party. The good faith deposit should be made at the time you sign the purchase agreement.
Step 7: The Closing. Once the checklist of the above mentioned items have been completed it usually takes 45 to 60 days to close the restaurant for sale. A final meeting time will be established for the simultaneous exchange of the restaurant business and money will take place between the buyer and seller in the form of a certified cashierís check. After a successful closing, the good faith deposit will be released from escrow.
Disclaimer: Restaurants For Sale is a Broker that brings buyers and sellers together. All agreements are made between the buyer and seller and not Restaurants For Sale. The above outlined steps are simply recommendations to make the buying and selling process go smoother. It is the prospective Buyer's duty and obligation to verify the accuracy of the Sellerís representations and if necessary retain attorneys, accountants, business appraisers, or other professionals.