Selling a Restaurant During the Pandemic

Empty restaurant during pandemic, symbolizes challenges in gastro real estate sales

Selling a gastronomic property was already quite challenging before the Covid-19 era, but for the past 2 years it has been a real task. Supply exceeded demand even in the years before Corona. Some were already talking about a consolidation of the gastronomy sector, as more and more gastro businesses were often giving up operations due to a lack of successors.

Closed restaurant with closure notice, shows effects of Covid-19 on gastronomy

But why is there a shortage of successors?

We have been observing for several years now that the younger generation in families with a gastronomy business do not want to follow in their parents' footsteps. The gastronomy business involves a lot of work at times when friends and acquaintances are enjoying their leisure time. Of course, this doesn't appeal to everyone and puts young relationships and families to the test. Moreover, they have experienced firsthand how difficult it was for their parents and how challenging a gastro business can be for a family. Work-life balance has been at the top of the priority list for young families for years. However, a gastro business can rarely offer this.

Young gastronome under pressure with long working hours in restaurant, work-life balance issue

But not only the family-unfriendly working hours, but also the pay in the industry has been a major issue for years. As a result, it is very difficult to recruit or retain staff. These points, along with the well-known factors, are crucial in determining whether young gastronomes want to acquire their own restaurant.

Especially during the pandemic, many skilled and service workers have left the industry and sought new tasks and positions. And only a few return to gastronomy. So if a gastronome today is considering buying a restaurant, they must especially pay attention to personnel planning in their business plan.

Which brings us to the topic. The business plan is increasingly coming into focus. Since the outbreak of the pandemic, banks have only been granting financing very selectively for the acquisition of a gastronomic property. Before the outbreak, an equity share of approximately 20% was sufficient; now many banks demand up to 50% equity share in the purchase price. Some institutions no longer grant loans for such ventures at all.

Banker discusses strict credit approval and increased equity capital requirements with interested party

What does this mean for the sale of a gastronomic property?

It is definitely not easier nowadays to sell a restaurant. Of course, this immediately raises the question: Should you do it yourself or use a broker?

Well, of course everyone has to answer this question for themselves, but of course we have good arguments in favor of using a broker and even more for using a specialized gastro broker.

Valuation: Valuation alone is very specialized for a business operation and particularly for gastronomy, and many factors must be considered that often only the specialist broker knows. And only they can use these positively in the sales process.

2. The right selling price: Once you have determined the value, this does not automatically mean you have found the right selling price. Of course, the pandemic situation means that demand for gastronomic properties has been and continues to be noticeably declining. All the more reason you need a purchase price in the sales process that is neither too ambitious nor too low. This requires market expertise. After all, you only get one "first shot" with your offer on the market. A price correction during the sales process is never good.

3. Playing the right channels: Where do I advertise my restaurant sale, my listing? Of course, anyone can use the major portals and create listings. However, only a few gastronomes are actively searching right now and are rarely active on portals. Databases, gastronome networks, and social media in general are what's needed here, along with the know-how to use them. These are the USPs—the features and services that only a specialist broker can offer and that very often lead to success. We have been observing for some time now that the major real estate portals no longer play a major role in the sale of gastronomic properties.

Specialist broker presents gastro real estate online, alternative to standard real estate portals

4. Financing for the buyer: Once you have found a willing buyer and completed negotiations, most potential buyers will need their bank to finance the purchase price. In addition to the increased equity share mentioned above, banks of course want assurance that the borrower will generate sufficient monthly capital requirements and can also live off the gastro business. This is where forward-thinking business planning comes into play. Not all buyers know all the key figures and can integrate them into a business plan. This is where we help as specialist brokers, or create the business plan entirely for the buyer. This very often helps with a positive assessment from the bank and a corresponding credit decision.

In summary, it can be said that the sale of a restaurant or gastro real estate in general is certainly not a self-runner. In addition to valuation, the resulting perfect selling price with which you approach the market, and the know-how to use the right channels to reach the right potential buyers, since the outbreak of the pandemic, forward-thinking planning for the buyer has become even more important.