buying a restaurant or business

 

Buying a Restaurant or Business

 
Please download the following documents:
(to download, right-click the link and select Save Target As...)
Confidentiality Undertaking...
Confidential Buyers Profile...
 

1. FIRST CONTACT

Make That Phone Call
Pick up the phone and call us at BC Franchising Consultants. Inquire about purchasing a restaurant, coffee shop or business and tell us what you’re looking for. We’re friendly and will welcome your call.

Your Information
Tell us about your background, why you want to buy a restaurant or business, tell us about your needs and dreams of your own restaurant or business. We will require you to sign a Non-Disclosure Agreement and complete a Confidential Buyers Profile. BC Franchising Consultants will in turn provide you with information on various restaurants, coffee shops and businesses that most closely meet your request.

2. FINANCING YOUR BUSINESS
Financial institutions are willing to lend money to assist in the purchase of the restaurant or business, but have certain processes and stipulations. Personal sureties, securities of immovable property, and your portion of the purchase from unencumbered cash.

· Personal suretyships – you will be required by your bank or lending institution, as well as the landlord, to provide personal surety

· Security – when borrowing for a business, a certain portion of the assets may be used as security for the loan, but the bank will require immovable property too in most cases

· Unencumbered cash – your contribution is to be free of loans or debt

· The split between borrowed and own contribution of the total purchase price is ideally 60% borrowed to 40% own cash. This will ensure your “gearing” on payments is affordable by the businesses profits

· Over and above the Purchase price, there are Other Costs to Consider


3. MEETING
We will set up an appointment to meet with you to discuss your needs and requirements and to discuss the businesses we will present to you. Our Business Presentations are comprehensive and will disclose most of the relevant information on the restaurant or business.

4. VALUATION
We value the business on historical figures and establish a Price Earnings ratio (P.E.) to calculate the selling price. Variables to this method include; length of lease, condition of assets, fixtures and fittings, profitability over the last 12-month period with cash flows, historic figures and length of trading history. Return on investment (ROI) is based on how long it takes you to pay back the purchase price from the profits of the business. i.e:
· 3 x P.E. ratio or a 33% ROI are the same thing – a 3-year payback on the purchase price.

· 2 x P.E. ratio, or 50% ROI takes you 2 years to pay back the purchase price

You buy everything in the business; lock, stock and barrel (this was in reference to how rifles were sold, by the way). You take ownership of the lease, all lease improvements (electrical, plumbing, tiles etc), fixtures, fittings and equipment, trading name, menu, concept and goodwill are all included as part of the sale.

5. LEGAL PREPARATION
Before you enter into the purchase of a business, first register a legal entity in which to trade, a Close Corporation, or (PTY) Ltd. There are various companies specialising in this, or online at www.cipro.co.za , or contact your accountant. This process usually takes three weeks.

6. OFFER
We will provide you with Agreement of Sale document, and after you sign it, is considered an Offer to Purchase. Your attorney is encouraged to read through this document for your benefit, to ensure your best interests are represented. After your offer is accepted, you will submit a deposit to your attorneys trust account to acquire the business. Your offer will have certain suspensive conditions for you to fulfil; a due diligence inspection on financial records, the assignment of the current lease or negotiation of a new lease, financing requirements and, if applicable, Franchisor approval.

Presentation of the Offer
BC Franchising Consultants will present your offer to the seller, if the price in within our mandate minimum. We discuss the offer and sell the offer to the Seller. Throughout the entire transaction, our client remains the Seller. We will present the offer we consider the best for the Seller, and one that will be accepted

Response
The seller will either accept, reject or counter your offer. BC Franchising Consultants will notify you of the seller's response. At this point you may either accept, reject or counter the seller's response.

Mutual Acceptance
When both parties, Buyer and Seller, agree to all of the terms and conditions of the sale and the Agreement of Sale is signed, the offer then becomes a purchase agreement signed both ways. At this time there may be suspensive conditions that still need to be completed prior to closing.

Legal Advisors
BC Franchising Consultants encourages you to include your accountant and/or your attorney in reviewing the transaction should you feel the need to do so.

7. DEPOSITS IN TRUST

Deposit
You deposit a sum of 10% of the purchase price to your or the Sellers attorneys trust account. This amount is held in trust until all suspensive conditions have been completed. You will also need to provide the attorneys with copies of all documents relating to the sale.

Due Diligence
You will be given copies of the financial records of the business for your review, or your accountant will have access to the Sellers accountant for verification of presented financials.

Suspensive Conditions
As your Suspensive Conditions are met, notification is supplied to the Seller in writing. Once all Suspensive Conditions are satisfied the purchase agreement becomes a binding agreement.

Effective Date
The Effective Date is the date when ownership of the business and physical possession of the business is transferred to the buyer. The balance of the purchase price is transferred to the Seller by EFT prior to Effective Date. No money, no keys.

Stock-in-trade
Arrangements are made for you and the seller to take a physical inventory/stock-take on the day before Effective Date, or on the morning of the Effective Date. The stock is valued and, on agreement of the total cost, payment is made within 7 days.

The Deposit
The attorney holding the Purchasers deposit transfers the full amount to the Seller on the Effective Date. Notification to release the deposit is given by both parties to the attorneys by BC Franchising Consultants.

Fees
You will generally be responsible for your own accountants and attorney's fees in relation to the documentation.

 
 
Copyright © 2007 BC Franchising Consultants