Commercial business/restaurant appraisals in the LA area.

[Jeremy Lee]

Hey all,

My in-laws have their [Chinese] restaurant listed in the Los Angeles area (they own the business but are leasing the space they're in currently) and don't really seem to have a valuation of their restaurant. I was wondering if anybody has references or contacts for a reputable business appraiser in the Los Angeles area who could help them out. They are primarily Chinese-speaking (Mandarin) so it would be nice if the appraiser or someone at the company could speak/translate. If not, also not that big of a deal either though. I think they just need to get an idea of what the actual value is for the restaurant instead of considering offers based on some number they came up with that may or may not be accurate. 

Any info would be greatly appreciated. TIA!

[Joel Owens]

Have you looked at bizbuysell.com  ?

That is where a bunch of businesses are sold. It is a sister site of Loopnet.

You can check by area. Generally what affects a business price is if owner will finance part of the sale or they want all the money upfront. Also if the place is worn down and needs re-imaging along with new equipment that can be expensive. If you have a long term lease in place with lower rents that can be attractive to a business buyer. If lease is fixing to expire or jump to higher rent it can be seen as a negative as sales would have to increase a bunch with food cost inflation coming to offset to maintain the same profit as before.

What is in the lease is important as well that could obligate the buyer to guarantees and other provisions they do not agree with. The lease could stipulate the business seller stays on the hook personally for any subleasing etc.

Generally buyers look at profit earnings before taxes as a gauge on price. Most sellers try to get 3 times earnings for a restaurant so it makes 100k after expenses a year profit then ask 300,000. Especially if it is a national brand or chain in a system. Buyers like to pay 1 to 2 times profit or 100,000 to 200,000. Below about 150k profit is usually all owner/operator type single businesses unless there are many stores owned for scale. Owner operator makes up about 75% of the market.

I like larger businesses where full management is in place and you can be absentee owner and still make money. That is scale able versus the one restaurant you constantly have to be at to keep it going.

The bizbuysell has business brokers on there so might want to look there for contacts.