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BFS Capital Blog

Tips for Increasing Your Restaurant’s Value

February 9, 2017

Not that you started your restaurant for any reason other than your love of food and serving others, but the day may come when you say to yourself, “You know, I’m a little tired of emptying grease traps. Maybe I should think about selling.”

And if you’ve managed to survive long enough and your restaurant makes enough money that you can sell it, then congratulations. That market is booming. The median sale price of a restaurant rose from $149,500 to $160,000, from the third quarter of 2014 to the third quarter of 2015. Which means if you’re in the market to sell, you will want to make your restaurant as valuable as you can. And that takes a lot more than just cash flow.

Sure, running a profitable restaurant is probably the best way to increase its overall value. But it’s also the most obvious. Here are some other things you can do to maximize your restaurant’s value.
Make the Menu Cost Effective

Revamping your restaurant’s menu is one way to stay cost effective while pleasing your customers. Though you should be constantly examining your menu to spot cash cows and duds, doing this in a systemized manner shows potential buyers that you don’t have fat on your menu. Figuratively. Take a look at which items perform best, but more importantly how they impact overall sales. An item might be a huge seller by itself, but not encourage any other purchases. However a seldom-ordered entrée that always invites drink and dessert orders should stay too.
Build Strong Customer Loyalty

You probably know it costs 5-10 times more money to attract a new customer than to keep an existing one. And existing customers also spend 2/3 more than new ones. Potential buyers know this, and demonstrating that you have a strong repeat customer base makes your restaurant very attractive. Utilizing as much data collection as you can shows you’re putting numbers behind keeping those customers. Developing a strong rewards program shows you’re actively showing your appreciation, which keeps your restaurant customers coming back.
Make Your Vendors Valuable

Obviously, get the best prices from your vendors. But keep every vendor in your supply chain in line with your company philosophy. Things like local farmers, sustainable agriculture, and other “green” food initiatives are hot right now. And strong relationships with vendors who supply these products and services creates value for your restaurant.
Create Happy Employees

Happy employees equal good service. And good service equals a valuable restaurant. In valuating your restaurant, potential buyers may try and gauge employee satisfaction. Make sure you are offering ample training and opportunity for development, as well as making every effort to accommodate schedule requests. This, combined with paying your employees well will ensure you can maintain high standards for who you hire.
Leverage Technology in Your Restaurant

Deloitte estimated that by the end of next year nearly half of all retail transactions will have some sort of digital component. That doesn’t mean you need to develop an app for your restaurant (though it might not hurt) but you should leverage technology in your restaurant by adding online ordering capabilities, digital menus, up-to-date POS systems, and streamlined digital ordering. Also, a website that is regularly updated. The National Restaurant Association found that 79 percent of diners think technology makes restaurants more convenient, and 70 percent think it improves order accuracy.
Remodel Your Restaurant

Nothing screams “this place needs cash” more than a restaurant whose décor that hasn’t been updated since the Clinton Administration. If your restaurant looks like it could be a pretty solid contender for “Bar Rehab,” it’s time to spend some money to fix it up. If your cash flow is lacking, BFS Capital can help you remodel your restaurant with flexible business funding solutions. Then once you have, sign a long-term lease, as those also increase value.
Add a Delivery Service

Maybe your concept doesn’t particularly lend itself to hiring teenagers on mopeds to speed your food around the city to hungry customers who don’t want to leave their couch. But if you don’t sell to those couch-dwellers, then you’re missing out on a huge chunk of the market share. GrubHub – an online ordering service that picks food up at restaurants and delivers it to clients – found a 50 percent increase in overall sales among small restaurants that signed up to use their service, and 20 percent increases in takeout orders. There are dozens of these services available, and the more you’re aligned with, the more valuable your business will become.

Like anything in life, when it comes to the value of your restaurant, you get what you give. So while some of these value-adding propositions won’t cost you much, some will require serious capital investment. It will pay off, should you decide to sell, but if the money just isn’t there right now don’t wait to do it. Contact BFS Capital and we’ll get you on your way to increasing your restaurant’s value almost as fast as GrubHub can bring you dinner.