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Some Of The Major Challenges In Close The Deal

By in 2003 - Volume 5

Restaurant Realty Company has sold over 265 restaurants, bars and/or clubs since 1996. There were a number of other businesses that we could have sold over those years but ran into the following major obstacles. Here is a list of specific challenges that can be stumbling blocks in closing your deal.

1. LANDLORD ISSUES – a) landlords value their space at rates that are higher than the existing market rent, b) landlords won’t give adequate time on the lease to give the tenant enough time to obtain a reasonable return on their investment and to give them enough security to make it worth their time to build the business at the space, c) landlords won’t give the tenant a predictable future of what their rent will be (i.e. on an option the landlord has the rent tied to market rent rather than a predictable future rent such as rent based on the Consumer Price Index or a fixed rent schedule etc.), d) landlords won’t give the tenant free rent during the remodeling period which ultimately results in improving the landlords building at the tenant’s cost and e) landlords won’t give reasonable use clauses or reasonable assignment rights for the sale of the business.

2. SELLER’S BOOKS & RECORDS ISSUES – Not keeping good books and records frequently results in a deal going south. Some sellers claim that they are doing a certain level of business while their books and record show they are doing significantly less than what they are claiming. To minimize this problem, we get the sellers tax returns for the past two years and sales tax returns for the current year when we list the business for sale.

3. HEALTH DEPARTMENT INSPECTION REPORT ISSUES- Most sales require that the seller give a buyer a health department inspection clearance. Most sellers assume that this is no problem as their past health department inspections have been no problem. However most sellers don’t realize that there are more stringent criteria imposed by the health department on a sale versus a normal health inspection during the course of operating the business. The reason for this is that there is new money coming into the deal which gives the health department the opportunity to have the business brought up to current standards (i.e. they require the following on a sale: 3 compartment sinks, mop sinks, hand sinks, smooth washable surfaces on all floors, walls and ceilings and replacement of all domestic appliances with commercial appliances, etc.)

Restaurant Realty is adept at working through these situations and can guide you in selling your business.

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About The Author
Steven Zimmerman, CBI, M&AMI, CBB, FIBBA

Steve is the Founder, Principal Broker and Chief Executive Officer of Restaurant Realty Company. Steve has personally sold/leased over 1,000 restaurant, bar and/or nightclub businesses and many related commercial buildings totaling 2+ million square feet of commercial space, collaborated with over 2,000 clients and completed over 3,000 valuations since 1996.His real estate experience also includes sales, acquisitions, management and ownership of numerous properties throughout California including restaurants, hotels, apartment buildings, single family houses, an office building and a multi-use retail building. Steve is also the author of Restaurant Dealmaker – An Insider’s Trade Secrets for Buying a Restaurant, Bar or Club available on Amazon. Prior to starting Restaurant Realty Company Steve had over 20 years of restaurant experience and was President and Chief Executive officer of Zim’s Restaurants, which was one of the largest privately owned restaurant chains in the San Francisco Bay Area. READ FULL BIO | HIRE EXPERT WITNESS - LEARN MORE