Tuesday, April 28, 2009

I use to say....

In recent times I'd say I was working twice as hard making half as much...now I say I'm working four times as hard making one-quarter as much. Not really, but it often feels that way.

Deals have gotten tough, but not impossible. It just seems like it takes patience and thought at every step of the way and if a beat is missed, the deal is lost.

As Steve McFarland so cleverly wrote today about the humorous video showing the man running after an antelope that was chased-down by a cheetah...

"Oh, I get it…it’s a mixed metaphor!! Let’s see, the forest represents a very hard way to make a living, not much food (deals) to forage, the Cheetah is the hungry agent finally tracking down a buyer/deal (the antelope), so close you can taste the money, when suddenly it’s snatched away at the last minute by an evil landlord or something of the like…am I close??"

Yes Steve you hit it on the head! But it all means we need to do better setup of our deals, better planning while in escrow, exercise patience during the process, and most important be thoughtful at every step. Lean on each other for advice and don't go it alone out there.

Things do seem to be picking up in April after a very slow February and March. But the big deal just are not connecting yet for two reasons: (1) buyers are not willing to pay the 2-3 times annual cash flow in these market conditions primarily because they believe the 2008 results won't show great earnings and because they believe the future of economy isn't promising and (2) the banks are still tight with credit standards and with making loans.

Those two points seem to be improving and perhaps in the next six months we'll see buyers gain confidence and the bank begin to start making loans. In the meantime, we MUST be prepared for the wave that will hit us because the one thing we've learned during these tight times is that there are plenty of folks out there with the 20% down payment to purchase a $300,000 business. So let's go after those businesses with good earnings and encourage them to sell. Pull out those old leads and find the nuggets of gold and let's SELL!

Check us out at www.sellingrestaurants.com

Friday, April 17, 2009

IT Only Takes One

Every deal has one buyer, one seller, and one good broker to close it. It only takes one listing to find one buyer for one broker to make one deal happen.

In the world of brokering, any product sales will boil down to this simple concept of one seller, one buyer and one broker to make a deal happen and the broker that has the best tools to quickly and effectively identify the "ones" will do deals and make money. And the broker that can attract a large pool of buyers and has the tools to identify the "one" will win.

The disorganized broker who has bad habits, fails to followup on all leads, doesn't use the available tools effective, will fail and many have already left the business.

As the agents of SellingRestaurants and SellingStores know, we are doing things with technology that brokers haven't even dream of doing let alone are doing. No one has better buyer management tools then we do. No one tracks buyers better than we do. No one has more relationships with buyer than we do, no one!

But unless the agent diligently follows through with each buyer contact, all those great things SellingRestaurants and Sellingstores internet engine does becomes worthless.

The agent's job is to find the one and use the tools. And My job is to give the agents the best tools in the industry to do so.

It only takes one! Now find the one.

Check us out at www.sellingrestaurants.com

Tuesday, April 7, 2009

I Feel a Breeze in the Air - Get Those Sails Out!

There seems to be a breeze in the air around here. Some of these buyers who have been sailing around the bay are pulling their boat into the dock. Joe and I put two deals into contract today and I know have have several more on the verge of getting into contract. Perhaps this is the sign we need to see out there and perhaps the winds will start to pickup and drive more boat into dock.

Of course, the tough part is still to come in getting these deals closed. But nevertheless, any sign of the potential breakout of sale is good. I suppose all markets behave in similar ways. When the stock market starts to drop like a rock, people stop buying stocks and wait on the sidelines watching carefully for the time to jump back in and then we get a rally.

Take the housing market for example. Only until recently have we seen multiple offer situations grasping the marketplace. So when people start to jump-in, they do so like herds of cattle going to get fed.

I know I have at least 3 other deals in the works besides the one today. What do you have going on? Let's all pray this it the uptick we've been waiting for and let's hope you have the inventory for it!

Check us out at www.sellingrestaurants.com

General Business Discussion Around Buying and Selling Businesses: DON’T GUARANTEE THAT LEASE!

General Business Discussion Around Buying and Selling Businesses: DON’T GUARANTEE THAT LEASE!

Check us out at www.sellingrestaurants.com

Monday, April 6, 2009


Leases can be huge liabilities for restaurant owners. Most leases are personally guaranteed by the tenant. This means, the tenant guarantees the rent will be paid through the whole term of the lease, even when the business is closed and not making money.

All too often tenants are shocked to find out the landlord is pounding on their door asking for the rent and foreclosing on their home in order to collect past due rents. Or worse yet, they sold the restaurant and the new owner has failed to pay the rent so the landlord is asking the old owner to cough-up the monthly rent or else.

Yes, the reality of the situation is when a tenant defaults on a lease, most leases give the landlord the right to literally take every thing they own to pay the rent as long as the landlord follows the legal process.

But there is a growing trend SellingRestaurants has developed and initiated with several landlords that eliminates the need for a personal guarantee. And in this economy it could takes years to fill a restaurant space with a new tenant costing the tenant possibly hundreds of thousand of dollars.

To a landlord there is nothing worse than having a restaurant space go dark and having the tenant strip it. Restaurants have vast and expensive infrastructures in place that often cost 10’s and in some cases 100’s of thousands of dollars to build. From plumbing to electrical to sewer and all the special permits required in-between, a restaurant has some great value even when it is closed and longs as it is turn-key, ready to open the next day. In addition, it is far easier for the landlord to lease a turn-key restaurant than it is to lease a stripped facility.

To a restaurant tenant there is no less value in a restaurant sale than the liquidated value one gets from striping a restaurant and selling it piecemeal. A turn-key restaurant could sell for $50,000+ but piecemeal the restaurant and one may fetch $5,000 to $10,000 for the equipment. And don’t even think about stripping it and storing it. The cost to store it will quickly exceed the price one can receive for the equipment.

SellingRestaurants works with hundreds of landlords each year. In recent months SellingRestaurants has spearheaded negotiations with landlords to eliminate the personal guarantees and replaced it with a reversion default clause whereby the tenant hands the landlord the restaurant keys and title to the property and walks away from the lease with no further obligation to the landlord. No more rent, period! This doesn’t eliminate a tenant’s right to sell the property per se, the tenant can always do that. But it significantly reduces the tenant’s lease obligations and personal risks.

So one may say that’s a lot to give a landlord. The truth is it isn’t. One can blow through $10,000 in rent in no time. And all one may get for the equipment is $10,000. And the liability for a lease could be huge.

So would one give-up $10,000 to be relieved of all liabilities relating to the lease. Well, this author certainly hopes so!

Check us out at www.sellingrestaurants.com

Sunday, April 5, 2009

California Leads...

There is an axiom in our nation that says California leads the nation into economic hell as well as economic heaven simply due to its size of consumption of goods and services. And it is also said that residential housing leads an economy into hell or heaven.

The housing market in California started its decline in mid-2006 with an apparent peaking by late 2008 and early 2009. I speak to real estate agents all the time and I'm told that transaction rates are dramatically increasing from Southern California to Northern California. I know in my own backyard that the housing market in the Roseville/Rocklin area has seen dramatic increases in activity. In fact in my neighborhood track of some 60 upscale homes, there is not one home for sale. And in a neighborhood just down the street with probably 300 homes, there is not one for sale.

Given the Sacramento housing market was one of the hardest hit in California I see this as a great sign of good things to come. As the housing market takes shape and forms a solid bottom consumer confidence increases and home equity begins to grow again. With this folks start to eat out more often and restaurant sales increase. We're already seeing the restaurant sales increasing across the state. But I'm cautiously optimistic about these signs as the tax refunds could be driving a major portion of this increase - amazing what happens to an economy when the government gives the people back some of their own hard earned money! Oh, that's right the old ways don't work any more according to our politicians of today.

Nevertheless, the signs are finally looking good and the smart buyer will start his move soon otherwise they will miss these low priced asset sales and low earning multiples.

Check us out at www.sellingrestaurants.com

Thursday, April 2, 2009

The Turn Around in Restaurants is Here

As with any economic contraction, each industry goes through a contraction period where businesses fail in large numbers while the strong businesses get creative at reducing costs and turning a profit. There is a point where the contraction begins to end. This point is identified not when restaurants stop closing; rather when the sales of the surviving restaurants begin to increase. This is the leading indicator. It doesn't mean restaurants won't continue to shut-down, it means the shutting-down trend will slow in the coming months followed by a flattening period for a year.

In recent weeks I have spoken to dozens of restaurant owners and the tone in all my conversations is sales are up. Perhaps this is in part due to tax refunds hitting the bank accounts this time of year and in part due to consumer confidence increasing. Whatever is causing it, it is good. But is it sustainable? I don't know. But it certainly is better than what's been happening in the past 18 months.

In terms of restaurants purchases we should see this translate into buyers finally jumping into the market place and buying those jobs. We're seeing buyers making offers, albeit low ball offers right now; but nevertheless offers. The smart buyers will see the current price levels as absolute bargains and start picking up these steals as people are picking up those home bank repos.

The brokerage industry is no different than any other industry during an economic contraction. In 1997 real estate agents tried to get into our business. In 2008 they all died. In 2008 business brokers started to die as well; in part because the real estate agents, who knew nothing of this business and under priced their commissions and understated the work and risks, cut into the business brokerage commission pie hurting the existing business broker base.

So the broker with the most inventory will start to shine once the turn-a-round comes. Those brokers who cut back marketing and advertising and have low listing inventories will die on the vine just like all those restaurants that have died in the past 2 years.

Creativity, problem solving and perseverance will guarantee success.

Check us out at www.sellingrestaurants.com