SELLING OUT

Want to sell your pizzeria? Here’s how to position it for maximum value.

BY BRYAN VITAGLIANO

The demand for pizza has never been higher, but that’s not necessarily making life easier for pizzeria owners. The labor crunch and supply chain issues are creating headaches that make some operators want to get out of the business entirely. But selling a pizzeria can be a complicated process because of the emotional attachment the owner feels toward the business. Owners often treat their restaurant like an extension of themselves, so they generally look to sell to a party who can and will operate the business at the same level they did. They also want to take care of the employees and customers by transitioning the business to someone who will care for them in the same way. And some veteran operators have been in the business for so long, they know the ins and outs of running a pizzeria but are just plain clueless about how to sell one.

I have helped countless entrepreneurs and restaurateurs sell their businesses, so here are a few tips to position your pizzeria to sell at its highest price.

Get Expert Advice

The process of positioning your restaurant for sale can never start too early. But, regardless of when the process begins, your business will be valued based on the prior year’s financial performance. So, if the goal is to maximize the payout on the sale, then you will want at least two years of financials and, ideally, a positive gross-revenue growth trend. This will make your restaurant more appealing to potential buyers. Simply put, a pizzeria that makes money is easier to sell than one that does not.

Unfortunately, selling your restaurant is a full-time job. Between marketing the business with a level of confidentiality and vetting the financial position of the buyers, there is not much time to spend actively running your pizzeria. As an owner, you can’t let your business suffer because your time has shifted to selling it rather than running it. You may want to ask a professional business broker to provide an opinion of value and offer guidance, so you can focus on the restaurant’s continued success while your agent works to bring in qualified buyers.

Think Like a Buyer

It’s rare to find an owner who can objectively price their business, especially since they are not actively selling different types of pizzerias regularly, and it’s difficult to remove one’s emotions from the valuation. Like all economics, the market sets the price at which the business will sell, and there are a number of variables that either add value to or reduce value from your business.

As a helpful exercise, put yourself in the position of a prospective buyer. Ask yourself the tough questions and look objectively at your role as the owner, the number of hours you put into the pizzeria each week, your duties and responsibilities, and the net income. If you have a sale price you believe you “should” get for your business, ask yourself: Would you pay that amount to have to do all the work you currently do to make your level of net income?

For example, if you wanted $250,000 for your pizza shop and you consistently make $80,000 a year working 40-plus hours a week, ask yourself: “Would I pay $250,000 to buy myself a job that pays $80,000 a year?” This is the first question any buyer will ask themselves when presented with the asking price and cash flow amount of a business on the market.

Determining Sale Price

As mentioned above, the value of your pizza shop depends on several variables. These include, but are not limited to:

• Your restaurant’s financials

• The owner’s role and number of hours per week spent in the business

• Organizational structure

• Presence or absence of management or key employees

• Quality of the financial bookkeeping

• Level of cash flow

• How the business is trending year over year

Ideally, financials should consist of the last three years of income statements and balance sheets, along with corresponding tax returns. A profitable pizzeria is valued based on the seller’s discretionary earnings. These earnings are the pretax and pre-interest profits before noncash expenses, one-time investments and any unrelated income expenses. The higher the discretionary earnings amount, the greater the multiple of that number the market will bear, thus allowing you to sell for a higher price.

Maintain Your Equipment

You should maintain high quality standards throughout the period you are actively trying to sell your pizzeria. No one wants to purchase a pizza shop they would not eat in themselves. Keeping a clean restaurant shows that you care about the business, and this attention to detail will also strengthen the buyer’s belief in the accuracy of your financial representations.

A buyer will also be hesitant to spend top dollar to purchase a business that requires immediate repairs to the equipment. Either replace the equipment or be prepared to be asked to adjust the sales price following due diligence. I am not advising that you spend money to upgrade your restaurant with the sole purpose of getting a better price— something that is common in residential real estate. Just maintain your equipment and keep both the front and back of the house clean.

Maintain a Strong Online Presence

Smart buyers will do their due diligence in researching your business. They can easily see the public’s perception of your pizza shop through online reviews. Maintaining a good reputation while getting new five-star reviews is important. Good reviews go a long way in solidifying the goodwill associated with your pizza shop.

• Bolster your positive reviews while driving down any old negative reviews. You drive down negative reviews by asking happy customers to post positive reviews. Pizzerias with negative reviews are often unappealing to buyers, since a majority of what they are purchasing is the goodwill of the business.

• Familiarize yourself with common complaints, such as cold food or slow delivery or service, and fix those issues before a potential buyer sees them. Being familiar with the complaints will prepare you to answer questions relating to these complaints from prospective buyers.

• Respond politely to negative reviews about your pizza shop. This shows you take an interest in all aspects of the customer experience. Improving these issues today will help your chances of selling your pizzeria for the highest value in the future.

These situations perfectly demonstrate why planning an exit is so important. A two-year gap since your last negative reviews will make it easier to sell your pizza shop.

Selling your pizzeria can be a complex and personal process. You need to develop a plan based on expert advice to position your pizzeria in the best possible light—and you’ll end up with more money in your pocket.

Savings up to $7,000 monthly per store

Makes 100-300 pizzas per hour

Supported pizza sizes: 8”–16”

Makes a 16” pepperoni pie in under 50 seconds