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Some
of The Major Challenges In Closing
Your Deal
by Steven D. Zimmerman,
Restaurant Realty Company
April 2003
1. LANDLORD ISSUES – a)
landlords value their space at rates
that are higher than the existing
market rent, b) landlords won’t give
adequate time on the lease to give
the tenant enough time to obtain a
reasonable return on their
investment and to give them enough
security to make it worth their time
to build the business at the space,
c) landlords won’t give the tenant a
predictable future of what their
rent will be (i.e. on an option the
landlord has the rent tied to market
rent rather than a predictable
future rent such as rent based on
the Consumer Price Index or a fixed
rent schedule etc.), d) landlords
won’t give the tenant free rent
during the remodeling period which
ultimately results in improving the
landlords building at the tenant’s
cost and e) landlords won’t give
reasonable use clauses or reasonable
assignment rights for the sale of
the business.
2. SELLER’S BOOKS & RECORDS
ISSUES – Not keeping good books
and records frequently results in a
deal going south. Some sellers claim
that they are doing a certain level
of business while their books and
record show they are doing
significantly less than what they
are claiming. To minimize this
problem, we get the sellers tax
returns for the past two years and
sales tax returns for the current
year when we list the business for
sale.
3. HEALTH DEPARTMENT INSPECTION
REPORT ISSUES - Most sales
require that the seller give a buyer
a health department inspection
clearance. Most sellers assume that
this is no problem as their past
health department inspections have
been no problem. However most
sellers don’t realize that there are
more stringent criteria imposed by
the health department on a sale
versus a normal health inspection
during the course of operating the
business. The reason for this is
that there is new money coming into
the deal which gives the health
department the opportunity to have
the business brought up to current
standards (i.e. they require the
following on a sale: 3 compartment
sinks, mop sinks, hand sinks, smooth
washable surfaces on all floors,
walls and ceilings and replacement
of all domestic appliances with
commercial appliances, etc.)
An experienced broker should be
adept at working through these
situations and should guide you in
selling your business.
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