Don’t Wait Until It Is Too Late! – Part II
I originally wrote an article titled “Don’t Wait Until It Is Too Late” in March 2003 and because this topic is so important in today’s economy I have rewritten it to make it relative to the realities of running restaurants in today’s environment. I believe over the years it has become more difficult for restaurant owners to make a reasonable profit due to the spiraling operating costs operators are experiencing which are being out paced by the necessary increase in sales to offset these costs.
If you have a business that is not performing satisfactorily and are having financial problems, it is best to be proactive and try a get a negative situation under control sooner rather than later. We at Restaurant Realty are receptive to giving you advise on how to get your business ready for sale so you can maximize your investment. Some of the things we can advise you on include the following: 1) getting your physical plant in shape so it is marketable to buyers, 2) getting your financial statements together so they are presentable and easily understood by buyers, 3) getting your premises lease positioned so it can be assigned and/or modified or renegotiated as a potential new lease and 4) dealing with any other problems that may create an obstacle to a future sale of the business.
It is better to sell your business when things are stable and profitable and are running smoothly before the business becomes unprofitable. When businesses experience challenging cash flow problems the businesses food service quality, staffing and maintenance levels frequently deteriorate which further alienate its customer base and accelerates the demise of the business.
Many of our agents, brokers and myself have experienced being contacted by owners that want to sell their business but are too late in contacting us. These owners have businesses that are losing money or are marginally profitable and the prospects for them turning around in the near future are minimal. As time marches on these businesses will most likely deteriorate and their owners will accumulate increased debt and there is a strong chance that they will go out of business. It is important that if your business is not financially sound and you’re experiencing cash flow issues and you have exhausted your sources for additional funding that you quickly evaluate your options before you go out of business and lose potentially everything.
The factors that are making it extremely challenging for operators to survive in today’s competitive environment include increased costs across the board including wages, food costs, other operating expenses and spiraling occupancy costs. Additionally, in many areas throughout the San Francisco Bay Area and parts of Southern California it has been difficult for owners to find employees as they can’t afford the skyrocketing housing costs in these areas and the traditional food service worker is being lured away to work in food service operations at high tech companies where they receive higher pay and benefits and more desirable working hours. Many of our clients have had to reduce their operating hours and/or close off part of their restaurants as they can’t find the employees to staff them. All of this has resulted in operator’s profit margins being reduced and/or eliminated.
Unfortunately, the challenging economy has not allowed operators to offset these increased costs as most people’s disposable income has been reduced over the years as real wages have not kept up with inflation and the average person’s disposable income has been reduced. Consequently, consumers have less money to spend for food away from home and if they do go out to eat they are more likely to look for food service options that provide a strong price value experience.
So don’t wait until it is too late to be able to recoup your investment. Please contact Restaurant Realty Company at 415-945-9701 or email steve@restaurantrealty.com to help you evaluate your situation and if appropriate price your business properly to meet the demands of the market.
