Restaurant : Buying a business

The restaurant business is an exciting and competitive environment that attracts many ambitious entrepreneurs in search of culinary success. But there's much more to opening and running a restaurant than just tasty food. In fact, the key to a successful establishment lies in mastering the operation of the business specific to this sector. 

In this article, we'll explore in detail the different aspects of restaurant goodwill and analyze its crucial role in the success of your establishment. Get to grips with the subject!

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Definition of goodwill  

First of all, let's find out what goodwill is.

What is goodwill?

A business includes all the tangible and intangible elements that make up a commercial or craft enterprise and give it economic value. 

It includes assets such as merchandise, equipment, movable and immovable property, as well as intellectual property rights (trademarks, patents, etc.). Intangible assets such as clientele, reputation, know-how, current contracts and licenses are also included.

In fact, goodwill encompasses everything needed to run a business and generate income. When a restaurant is sold, it is often the goodwill that is transferred, including all the assets and rights associated with the business.

Understanding the challenges of goodwill

From purchase to sale and takeover, find out what's at stake at every stage of the business process:

Goodwill for sale

When acquiring a business, the buyer is generally looking for an operational business with an established customer base, a solid reputation and recognized know-how. Business valuation is therefore based on potential profitability, customer value, tangible and intangible assets, and growth potential. 

The acquirer seeks to maximize business opportunities and benefit from a solid base from which to develop its business.

Buying the business

When you buy a business, you need to assess its value in order to achieve a fair transaction. Negotiations focus on the sale price, reflecting the economic value of the business, as well as the terms of sale, payment terms and any non-competition clauses. 

The seller's aim is to obtain a fair price for his business, while ensuring that the essential elements of his business will be taken over and properly operated.

Taking over the business

When taking over a business, the buyer must carefully assess the risks and opportunities associated with the existing business. It is essential to analyze the company's financial health, past and future profitability, and growth prospects. 

The buyer must also take into account the intangible elements of the business, such as the loyal clientele and the company's reputation, to ensure continuity and a smooth transition.

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What makes up goodwill? 

Find out exactly what goodwill consists of. 

Tangible assets

Physical assets include the furniture, equipment and supplies used in the operation of the business. These may include counters, chairs, tables, refrigerators, ovens, cutlery, cash registers, order terminals and any other equipment needed for your restaurant.

👉 To find out more: Restaurant supplies: the complete list!

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License and administrative authorization

Restaurant permits, liquor licenses, business permits... These licenses are an integral part of your business.

👉 Find out more about restaurant licenses

Goodwill contract

This is a contract that sets out the conditions of sale or lease of the business. It specifies the elements included in the transaction, the obligations of the parties and the terms of payment.

Customers

An established clientele is a valuable business asset. These are the regular, loyal diners who frequent your establishment and contribute to its profitability. The customer base can include data on customers, their preferences and purchase histories.

Right to lease

If your restaurant is located in rented commercial premises, the right to lease is an essential element of your business. It represents the right to occupy the premises, and can have a significant value depending on the location and lease terms.

Brand name

If your establishment has a registered trademark or distinctive trade name, it's part of your goodwill. The name of your restaurant can have symbolic value and contribute to its reputation.

👉 To find out more: How do you name your restaurant?

Accounting documents

Financial documents such as balance sheets, income statements and financial statements are also part of your goodwill. They provide information on the financial health of your restaurant, and can be used to assess its value.

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What should you consider when buying a business?

Valuation of goodwill

It's important to have a business appraised by a business valuer to determine its market value. This enables you to negotiate the purchase price and ensure that the investment is profitable.

There are 3 ways to price sales:

1. Sales-based estimate: The purchase price is estimated by applying a percentage, also known as a coefficient, to the annual sales of the business. This percentage is generally around 80% of annual sales.
2. Comparative estimate: The sale price is established by comparing the business with similar establishments in terms of location, sales, restaurant layout, etc. This method is based on observed sales prices for comparable businesses. This method is based on sales prices observed for comparable businesses.
3. Appraisal based on the value of the lease: The appraisal of goodwill takes into account the surface area and location of the restaurant, as well as the value of the assets included in it (equipment, brand, etc.), taking into account the value of the commercial lease. This method takes into account both the real estate value and the tangible elements of the business.

Document verification

The buyer should carefully examine all documents relating to the business, including contracts, licenses, leases and existing agreements. A lawyer specialized in commercial transactions is recommended to ensure that everything is in order.

Transfer of ownership

Once the agreement has been reached, ownership of the business must be legally transferred. This may involve drafting a sales contract, transferring existing licenses and contracts, and settling administrative and legal formalities.

What are the procedures for buying a business?

Seller's side

Before selling a business, the seller must fulfill two reporting obligations:

• Informing the town hall: If the business is subject to the right of pre-emption, the seller must inform the town hall of the planned sale, using the Cerfa 13644*02 form.
• Informing employees: For companies with fewer than 250 employees, the seller must inform employees at least two months before the sale is completed. This gives them sufficient time to make an offer to buy the business.

Drawing up the deed of sale

The sale of a business requires a deed of sale signed by the seller and the buyer.

This act must include the following elements:

• The sale price of the business.
• Existing liens and pledges on the business.
• Sales figures and results for the last three years.
• The name of the previous vendor and the purchase price of the business.
• Characteristics of commercial leases.

Buyer's side

Once the deed of sale has been signed, the buyer must comply with a number of reporting obligations:

• Register the deed of sale with the business tax department to determine the registration duties and additional taxes to be paid.
• Publish a legal announcement in an authorized newspaper within 15 days of closing the sale.
• Register your company on the guichet unique des formalités des entreprises website.

The one-stop shop then sends the application for publication of the notice in the Bulletin officiel des annonces civiles et commerciales (BODACC), the declaration to the Registre national des entreprises (RNE) and the application for registration in the Registre du commerce et des sociétés (RCS).

To find out more about goodwill: Buying goodwill

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And to keep your business running at its best, it's crucial to optimize your operations. How do you do this? By equipping yourself with digital tools to save time at every stage of your business!

Contact an Innovorder expert to develop your restaurant and focus on your core business.