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Food and Beverage Businesses that have SOLD in 2019

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Food and Beverage Businesses that have SOLD in 2019

The landscape for selling restaurants, bars and clubs continues to become more challenging in California due to the high costs of doing business in the state. Spiraling minimum wage and other payroll costs, the continued rise of occupancy costs and other operating costs including utilities, insurance, food and beverage costs, etc. continue to reduce and/or eliminate the profit margins for many operators.  The market won’t allow operators to pass on all these increased costs to the customer if the operator wants to be competitive and continue to provide price/value to their customers.

Additionally, many of the younger generations (Millennials, Gen Z and Generation X) prefer eating at home driving online ordering and proliferation of third party delivery services.  This results in a reduction of the number of customers occupying seats in restaurants and increases operators’ costs as the delivery costs are expensive and exceed any front of the house labor savings.

Please see below the types of food and beverage operations that have sold in 2019.

Going Concern Transactions
(businesses that are reasonably profitable)

1)  Breakfast/Lunch Restaurants – These are popular as the owners can usually be checked out by mid-to-late afternoon daily and food costs on breakfasts are relatively low compared to other types of food.

2)  Food Service Businesses with the Real Estate Included – Operators want to control their future and by owning their own building they are more able to do so as they can control their occupancy costs while realizing the benefit of the real estate appreciation.

3)  Brewpubs & Craft Beer Businesses – These businesses are desirable as a high percentage of their sales are beer and hard liquor sales which have lower cost of goods which results in higher profit margins.  However, there have been a number of failures of these businesses as this niche has been oversaturated in many parts of the state.

4)  Franchises – Well established franchises that are not oversaturated are in strong demand as they have a higher probability of success versus an independent non franchised business.

5)  Restaurants and Bars with a high percentage of alcohol sales – Sports bars, Mexican restaurants and other types of ethnic restaurants that enjoy a high percentage of alcohol sales to total sales usually generate a stronger profit margin due to the lower cost of goods for alcohol sales versus food sales.

6)   Bars with Type 48 Licenses (hard liquor) – These are always in high demand as they are much easier to run then restaurants as they don’t require as many employees and the profit margins are higher as pouring costs run approximately 20% or less versus food costs than run approximately 30% depending on the concept.

7)   Mini Chain Operations – We sold a 3 – unit Indian fast food chain in Los Angeles earlier in the year and recently sold a 2 – unit Breakfast & Lunch chain in Silicon Valley and are currently in escrow on a 3- unit Sushi chain in San Francisco.  All of these transactions were well established and had a strong history of steady and/or increased sales and were consistently profitable.  These are attractive to buyers as they have proven to be multipliable and profitable.

Assets in Place Transactions
(businesses that are either not profitable,
marginally profitable and/or the name, menu
and proprietary items are not included in sale)

The following business types are in demand as buyers feel they have a concept that can capitalize on as they are purchasing businesses for cents on the dollar. For example, we recently sold a business that cost approximately $3 million to recently build out that was sold for $500K and the buyer who owns several successful locations is putting in their concept which normally costs them over $1.5 Million to build out.  So, with the additional $250K they need to spend on remodeling they are getting a business for 50% of their normal investment.

1)  Underperforming non profitable franchises – Frequently franchises have a tendency to cannibalize areas and these opportunities work well for converting to another concept that is needed in the area.

2)  Smaller square footage venues in strong neighborhoods – Family run businesses like these type of opportunities as they are able to keep the rent at a reasonable level and have family members staff the unit to minimize their labor expense.

3)   Commercial kitchens – The younger generations like food delivered to their homes so delivery services are gaining popularity and some restaurant operators are leaving their brick and mortar businesses and moving to commercial kitchens to handle online delivery demand and branch into catering services.

4)   Larger restaurants and bars with banquet facilities and large kitchens that lend themselves to catering business sales – Although the buyer pool for this type of opportunity is smaller than the other type of opportunities mentioned there are some operators that have a proven success with these type of venues that purchase these opportunities for cents on the dollar of the original investment

5)  Restaurants with long term below market leases that are assumable – These types of opportunities gives the operator the ability to keep their margins at a reasonable level.

6)  Brewpubs, wine bars and craft beer operations – A number of operators get in these businesses because they have a passion for craft beers and wine and make big investments to build out these operations and don’t have the past experience to operate them.  Consequently, experienced operators purchase these businesses for cents on the dollar.

To learn about the over 230 Restaurant, Bar and Club opportunities we have available please go to our website at www.restaurantrealty.com or call us at 888-995-9701.

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