South Africa’s continuing urbanisation means city populations are always expanding.
This growth also adds to the increasing numbers of aspirational middle-class citizens who will be looking for opportunities to eat out amidst pleasant surroundings.
As a result, this could be an opportune moment for any restaurateur looking to sell a business.
So, let’s consider the process of selling a restaurant in South Africa:
Because the Rainbow Nation is a melting pot of languages and cultures, South Africa’s restaurant sector is extremely diverse.
Most cities offer a broad range of tastes and a choice of facilities at all price points.
Though business remains vibrant, owners are conscious of the need to supply good quality food and drink at sensible prices.
This generally means that, even at the top end of the culinary scene, South Africa’s restaurants are seen as good value for money.
“Though South Africa lost its position as Africa's biggest economy to Nigeria earlier this year, it is still seen as the springboard into the rest of the continent by many multinationals.” (BBC, Business News)
“South Africa’s restaurant, fast food, and catering sector revenues totalled more than R57.25 billion in 2016.” (PR Newswire)
According to Euromonitor International, in the current economic climate, most industry players continue to offer value – “[often in] the form of promotional pricing, targeted mealtime deals, weekly specials and loyalty programmes to entice consumers.”
An accurate valuation is critical to your prospects of selling your business.
You should always approach valuation professionals who have expert knowledge of the restaurant sector alongside good contacts and a track record of successful sales.
Their advice will help you decide whether to opt for an assets-based, income-based or market-based strategy when valuing your business.
An assets-based assessment will tally assets such as equipment, furniture fixtures and fittings, and inventory as well as accounts receivable, to arrive at a valuation.
If you are the owner of the property, then your business location will significantly influence the final figure also.
Income-based valuations will use your verified sales and income receipts to calculate the worth of your business. A professional will advise whether or not the income data should be shown as net of allowances for depreciation, interest, and tax.
When applying a market-based valuation formula, you should source a range of similar businesses which have been recently sold.
This live data will then inform a realistic assessment of the marketable value of your business.
There is a list of things that you can do to prepare for the sale of your business.
The visual appeal of your premises will strongly influence your sale prospects. So make sure everything is clean, painted, and in good repair.
This includes any external areas, landscaping and floral features, as well as neat and effective signage.
What goes for the visuals applies equally to your financial records: Your professional team will advise you to have your business trading records in order long before you ever consider listing your restaurant for sale.
Potential buyers will expect to see a validated financial history which traces and accounts for your profits, proving that your business is stable and will be a sound investment.
In addition, there is every advantage in detaching yourself from the business by building a strong team who can run things in your absence.
Prospective purchasers will then be assured that the worth of the business lies in its intrinsic value and that its success is not solely due to your continued personal involvement.
Serious buyers will also want to see documentation and details of your trading and liquor licenses, together with consistent evidence of how your restaurant performed in health and safety inspections.
Details of your contacts and suppliers, together with information about any major customers, will all help to create a picture of a well-run, profitable business.
Find a buyer
What kind of buyer personality and background would be a good fit for your business? This kind of profiling has a further advantage likely to give any new owner a head start when taking over your business.
Beyond the practical outcome of completing a successful sale, knowing your business is in good shape and has been handed over to someone who has all the attributes needed to continue trading successfully will also bring you peace of mind, and a great deal of personal satisfaction.
And perhaps best of all, you will then know the fortunes of your trusted staff and loyal customers remain in good hands.
You could decide to use a broker for the sale to help you find the perfect buyer for your business. if you do decide this, then finding the right one will be important!