Selling a Café or Restaurant in 2024

Before listing your business for sale, ensuring your financials are in top shape is crucial. Buyers want to see a clear picture of your business’s profitability and performance. This means having well-organised financial statements to prove trade, and income over the past few years. If your records aren’t up to date, now’s the time to work with your accountant to clean them up. Without solid financials, potential buyers may walk away or offer a lower price than expected.

The current hospitality sector is flooded with businesses for sale, giving buyers plenty of options. This high volume of available businesses means it’s a buyer’s market, so vendors need to be prepared for a competitive landscape. To stand out, ensure your business is well-presented, financially sound, and accurately priced.

One key factor buyers will focus on is your business’s annual profit. To make the numbers look more attractive, make sure to include “add-backs” such as the owner’s salary, personal expenses, and one-off costs that won’t carry over to the new owner. These can significantly improve your bottom line, making the business more appealing to buyers who want to see strong profit margins.

In today’s economic climate, many buyers are cautious about taking on businesses with high rents. The cost of living has impacted many hospitality businesses, leading to lower profits and less attractive financial figures. If your café or restaurant has a high rent, be prepared that it may offput some prospects and could impact time to sale.

A major factor for buyers is the lease agreement, particularly when landlords are involved. Landlords are now more cautious about signing leases with inexperienced buyers, so if your potential buyer lacks experience in hospitality, they may struggle to secure a new lease. Be prepared to work with buyers who can demonstrate experience.

In 2024, hospitality businesses are valued primarily based on their annual profit. Sellers with a typical café or offering that is can typically expect to receive between 1 to 2 times their annual net profit in a sale.

Not all hospitality businesses face the same challenges. Certain types of businesses and locations are still in high demand. For example:

• Takeaways and chicken shops remain popular, offering quicker turnaround times and lower operating costs.
• Five-day industrial cafés are highly sought after, especially those with limited hours, offering buyers a better work-life balance.
• Cafés and takeaways near hospitals or transport hubs continue to attract strong buyer interest due to consistent foot traffic.

On the flip side, hospitality businesses in large shopping centres may be harder to sell due to high rent and significant bond requirements, which can range from 4 to 6 months. Not all buyers have the ability to take on these additional financial burdens.

Selling a café, restaurant, or takeaway in 2024 requires careful preparation, realistic expectations, and a solid understanding of the current market trends. While it’s a buyer’s market, there are still opportunities to achieve a good sale price by ensuring your financials are in order, presenting a strong profit figure, and targeting the right buyers.

If you’re ready to explore your options or need expert advice on preparing your hospitality business for sale, SBX Business Brokers is here to help. With over 35 years of experience, we understand the unique challenges of selling in this sector and can guide you through the entire process.