BUSINESS BROKERING

Buying & Selling an Existing Business

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Asset sales are valued using the Replacement Value Method.  The replacement value technique assumes a buyer pays the seller some amount based on the opportunity to benefit from the existing investment in the restaurant facility, leasehold improvements, equipment, lease, and location of the restaurant.  In other words, the buyer will pay for the right to avoid spending time and money to build and comply with city regulations, impact fees, and delays in building a new restaurant. 

 

There are rare cases, depending on market conditions, whereby someone gets a premium price for a location.  When a second generation restaurant space goes on the market because the concept is failing, it becomes an asset sale.  The seller ends up selling for pennies on the dollar based on the cost of his or her original build-out.  Assets sales are valued using the replacement value method only when the assets are available for sale without demonstrated earnings.  The advertising on this type of listing should state it is an asset sale only and that no books and records are available.  You are purchasing the business for the furniture, fixtures, equipment, and location.

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