5 Costly Mistakes Restaurant Owners Make When Selling Their Business
After facilitating 200+ restaurant transactions, I have seen the same mistakes cost owners hundreds of thousands of dollars. Here is how to avoid them.
Michael Chen
Restaurant Industry Consultant
The Expensive Lessons I Learned
When I sold my first restaurant in 2008, I made nearly every mistake on this list. It cost me over $150,000 in value I should have captured. Since then, I have helped hundreds of restaurant owners avoid these same pitfalls.
Mistake #1: Waiting Until You Are Burned Out
The best time to sell is when your business is thriving and you still have energy to present it well. Buyers can sense desperation, and burned-out owners often accept the first offer just to escape.
**What to do instead:** Start planning your exit 2-3 years before you want out. This gives you time to optimize operations, clean up financials, and find the right buyer.
Mistake #2: Ignoring Your Lease Terms
Your lease is often your most valuable asset—or your biggest liability. Many restaurant owners do not realize their lease has transfer restrictions, personal guarantees that survive the sale, or unfavorable renewal terms.
**What to do instead:** Review your lease with an attorney at least 12 months before selling. Negotiate lease modifications if needed. Some buyers will walk away over lease issues alone.
Mistake #3: Underestimating Liquor License Complexity
In most states, liquor licenses cannot simply be transferred. The new owner must apply for their own license, which can take 60-120 days. During this gap, your restaurant cannot serve alcohol.
**What to do instead:** Understand your state's liquor license transfer process. Structure the deal to account for the transition period. Consider whether a temporary management agreement makes sense.
Mistake #4: Not Preparing Financial Documentation
Buyers and their lenders need clean, well-organized financials. Restaurant owners who mix personal and business expenses, deal heavily in cash, or have inconsistent record-keeping scare away serious buyers.
**What to do instead:** Work with an accountant to prepare 3 years of clean financials. Eliminate discretionary expenses from your P&L. Be prepared to explain every add-back.
Mistake #5: Going It Alone
Many restaurant owners try to sell their business themselves to save on broker commissions. But without experience, they underprice their business, attract unqualified buyers, or let deals fall apart in due diligence.
**What to do instead:** Work with advisors who specialize in restaurant transactions. A good broker will more than pay for their commission in deal structure and negotiation.
Michael Chen has facilitated over 200 restaurant transactions and built a 12-location restaurant group before selling to private equity. Book a consultation to discuss your specific situation.