3. It’s time to be the numbers person.

You may tout a persuasive economic model, but sellers need to know what revenue and cost numbers really represent. What’s the impact of seasonality? Were there sales spikes from online daily deal participation, such as Groupon and LivingSocial, or are these offers scheduled? Internet coupons are treated as gift cards under some state laws, meaning that restaurants may be required to redeem the coupons long after their expiration date. Are a handful of units or certain locations driving high or low margins? Buyers will want to see same-store sales analyses, year over year.

As a seller, you need to understand why some units consistently outperform others. A nearby, newly built corporate campus may help sustain new sales levels. Did/will a lengthy road construction project impact business? Does the management or some other factor play a role?

4. What’s new or improved can be vital to pricing.

Resets, openings and closings play a significant role in restaurant negotiations and accurate cash flow projections. This is where a good deal of money is left on the table. If a new unit earned only $100,000 in its first year, but is on its way to earning $200,000 annually, you may request credit for that higher run-rate. A remodeled restaurant may have a history of strong sales, but earned no profit for several months due to construction. Sellers will want to add back that profit and normalize revenue and earnings for it.

Buyers will not give the seller credit for closed restaurants’ earnings. Historical profits from units that no longer exist should be excluded from normalized earnings.

Reset, remodel, refresh: All crucial steps to remain competitive and grow guest traffic and sales volume, especially in the quick-service and fast-casual sectors. Updating units may require major capital expenditures and remodels, betterments and restorations can have different tax implications. Buyers will want to know the projected cost of repairs or remodels, the sales impact during the work and the remodel schedule. Has the seller updated restaurants as expected? How much will have to be spent to keep up post-acquisition?

5. Get started on the paperwork.

Every restaurant needs to keep current and accurate financial and legal records. A surprising number of small business transactions fail because the financial statements do not support owner income, operating expenses and future earnings potential. Organizing the following information for a would-be buyer will make the sale process go much smoother (this is not a comprehensive list):

• Monthly P&Ls and balance sheets (preferably downloaded in Microsoft Excel),
    
• Detailed trial balances,
    
• Bank statements to support revenue,
    
• Reconciled vendor reports to confirm food, beverage and labor costs, and
    
• Leases to account for any control provision changes that may have been triggered

A note on franchise agreements: A buyer will compare franchise, royalty and advertising expenses to the franchise agreements, so make sure all costs are reconciled. In addition, large multiunit franchisee systems require consent from the franchisor prior to sale, so plan for that process.

Communication is an important prerequisite for a successful transaction. It’s critical that there be transparent communication between the buyer and the seller. Provide information on an ongoing basis and handle important issues in a timely manner to reduce any uncertainty.

You need a thorough understanding of how your business operates to anticipate and answer questions. By following these tips, you’ll approach a sale with an independent eye, fully prepared for a buyer’s scrutiny. With this information at hand, you’ll be better able to connect the dots for would-be buyers, outlining growth potential, identifying synergies and closing the deal.

Wade Kruse is partner, transaction advisory services, at Grant Thornton LLC. He can be reached at 704-632-6881 or wade.kruse@us.gt.com.