After a few bumpy years post-Covid, the restaurant industry is seeing some signs of – dare we say it – stabilization in the market. Along with it comes increased interest from potential sellers seeking exit strategies after taking concepts as far as they can, as well as buyers looking for growth and economies of scale. A recent report from Bank of America about the outlook for restaurant mergers and acquisitions in the remainder of this year and into 2025 said deals are on the upswing. Ted Lynch, managing director of Bank of America’s Global Commercial Banking’s Restaurant Group, says he is bullish about the next year, while Amy Forrestal, longtime managing director of the Atlanta-based investment bank Brookwood Associates, says the M&A activity she is seeing in the industry is “as robust as it was in 2016-17.” If you’re considering a possible sale or purchase, now is a good time to prepare. On the people side, make sure all owners are of a similar mindset on selling, consolidate owners if you currently have a lot of them, and hire a team of professionals who can guide you through the steps of a sale and help you find the best potential buyers. Then, review the strengths and weaknesses of your business. This should include assessing all stores to ensure there aren’t any that could negatively impact your sales price, tidying up your P&L records, and preparing answers to anticipated questions from buyers. Look for ways to make the transition as smooth as possible – by reviewing leases, reducing expenses where possible, streamlining existing processes and labor with technology, and being thoughtful about how and when to inform employees about your sale. Buyers should prepare in many of the same areas, in addition to understanding how the purchase would help them achieve strategic goals, knowing how much cash they have available for the purchase, and evaluating economic and legislative factors that could impact their ability to hire staff and operate profitably.

​The ongoing difficulties of the restaurant operating environment are paving the way for some movement in the market. While the high costs of construction are apt to dissuade restaurant companies from developing new projects, growth through acquisition is likely to rise. Potential sellers who have grown weary of pandemic-era supply chain problems, ongoing inflation and labor shortages may be more open to negotiation -- perhaps providing financing options to seasoned, qualified buyers eager to expand but balking at bank financing amid rising interest rates.

In the third quarter of this year, the median selling price of a restaurant dropped nearly 7 percent over the previous quarter. But as a recent article by the CEO of the restaurant brokerage We Sell Restaurants noted, that decline reflects a decrease in restaurant asking prices in recent months. Buyers are still paying close to asking price.

If you’re in the market to sell, that makes it especially important to price your business well in light of fluctuating economic conditions. Have a restaurant business broker conduct a valuation of your business so you have an indication of what your business is worth in the current market. Ensure you have the past three years of your restaurant’s income, balance sheet and cash flow statements – and be transparent about how your business has weathered the pandemic. Have a carefully vetted business plan, particularly if you’re seeking possible seller financing. Finally, keep your talks confidential so as to keep current staff from becoming disinterested in providing great service (or guests from disengaging from you). Both can impact sales and discourage a potential buyer from completing a sale.

Buyers looking for opportunities to expand through acquisition will need a thorough understanding of what they need to maximize efficiency. That includes what construction will be required to bring the business in line with the needs that emerged during the pandemic. There is likely a lot of inventory on the market that will need a revamp to accommodate the changes to restaurant footprints, layouts and features that will be necessary going forward.