Spinning Problems into Opportunities for Your Restaurant

In these challenging economic times we see a number of successful operators capitalizing on other operators problems and turning these problems into opportunities. There are a number of operators that are in trouble as they are losing money, have had their credit maxed out and are not capable of paying their bills.

There are a number of buyers that are interested in buying businesses that are in trouble and can be turned around and made profitable. Normally the buyers that focus on this type of business opportunity are experienced operators with a successful track record of operating profitable restaurant, bar and/or night club businesses. The major benefits these buyers seek in this type of turnaround situation are as follows:

1) Negotiating More Favorable Lease Terms With the Landlord
We see many situations where operators can no longer afford to pay their rent and/or have had a history of late rent payments and are susceptible to being evicted. Needless to say an operator has nothing to sell if he no longer has physical possession of the premises. These challenging economic times frequently provide the buyer of a troubled business the opportunity to renegotiate more favorable lease terms and conditions than the former operator as the landlord is more sensitive to the needs of the buyer to succeed and wants to assure himself that he’ll be paid timely without any hassles. Specifically the new operator can sometimes negotiate lower rents, some free rent and in some cases have the landlord make a financial contribution to the new buyer for remodeling. Also the landlord is motivated to work with the new buyer of a troubled business as he doesn’t want to incur attorney’s fees, loss of rent as well as to have to pay a leasing commission if the space goes dark.

2) Negotiating a Good Deal with the Seller
The buyer will in many cases be able to purchase the business more reasonably for well below the replacement cost. A seller in a troubled business is motivated to sell the business quickly and will frequently reduce the sales price far below the asking price which enables the buyer to get a very good deal. There have been situations where buyers pay very little cash and has the seller carry back the balance of the purchase price in the form of a seller carry back note paid over several years with no interest or at a very low interest rate. There are also situations where the seller would rather get an all cash price and not carry a seller carry back note in which case the seller will discount the price even further to get all cash. In some cases the seller will include at no extra cost to the buyer the alcohol inventory or other saleable inventory such as food, paper products or cleaning supplies to help sweeten the deal for the buyer. There have been some situations where there is little or no cash paid to the seller and the buyer merely assumes the sellers debt which may include the buyer assuming the sellers accounts payables and/or assuming the buyers equipment lease, etc. Also is some cases the business is sold in an AS IS condition which means the seller does not give any governmental clearances such as health department, building department or fire department clearances to the buyer in exchange for a discounted price.

If you are an experienced operator and are looking for an opportunity to turn a seller’s problem business into an opportunity for yourself please contact us as we have currently have many of these opportunities available.

Written by Steven Zimmerman - Restaurant Realty Company

Disclaimer: The information in our articles has been provided by Restaurant Realty Company in collaboration with Restaurants For Sale Online. Restaurant Realty Company and Restaurants For Sale Online assumes no responsibility for decisions made by buyers, sellers or other parties to any transaction. Information has been provided based on experience and research. The results of various articles and studies reflect such information. Restaurant Realty Company and Restaurants For Sale Online assumes no responsibility for pricing or recommendation of pricing to any of our users. If you are interested in buying a business, Restaurants For Sale Online, LLC recommends you do your own due diligence to verify the source of any information provided to you by a seller and/or intermediary. If you are interested in selling your business, Restaurants For Sale Online recommends you contact an intermediary that specializes in transactions similar to the respective business.

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