Bagel shops, along with pastry shops and bakeries, have fair values and excellent growth potential, especially the shops that offer an innovative and fun menu. This knowledge has led to excellent predictions and great valuations for established shops. In this review, we discuss how to sell a bagel shop, providing insights into determining your company’s worth as well.
About The Bagel Shop Industry
Bagel shops offer bagels and other food types to their customers. They are primarily breakfast-focused restaurants, but many offer lunch and dinner menus as well. This is typically a dine-in-style or takeout-style restaurant. Some also offer drive-thru services. Many experts view the bagel shop industry as one filled with growth potential. This is because the bagel industry has failed to innovate; many of the bagel concepts are still as basic as they were 30 years ago. Companies that are able to create new and fun ideas with their menu have excellent potential.
The Valuation Stage: How to Determine The Worth of Your Bagel Shop
It is essential to get the valuation right before you decide to sell your bagel shop. This ensures you are able to justify your asking price and receive fair offers. We recommend a market-based valuation that determines the amount that is considered fair on the market, also known as your “fair market value.” To do this, your broker will use your SDE, EBITDA, net sales, and gross profit to determine a starting point. This involves the use of rule of thumb data. Here is the rule of thumb data (acquisition multiples) for bagel shops:
- Bagel shops sold between 2.16 and 3.91 times the Seller’s Discretionary Earnings (SDE)
- Bagel shops sold between 2.73 and 9.85 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
- Bagel shops sold between 0.57 and 0.73 times the annual net sales
The best brokers also go beyond rule of thumb data, and they may apply adjustments based on unique factors of your business and your competitive advantage. Our location, growth potential, and reason for selling may factor into the valuation as well.
The Sales Process for Bagel Shops: Here is What You Should Know
It helps to break the sales process into steps. This ensures you do not miss important aspects that could make the sale more challenging. Although every sale is different and has a unique process, the basic steps that you should prepare for include:
- Determine Your Bagel Shop’s Worth
- Prepare Your Financial and Legal Documents
- Bring Your Bagel Shop to Market
- Select a Buyer and Sign a Letter of Intent (LOI)
- Follow a Due Diligence Timeline and Structured Process
- Schedule a Time to Close The Sale
- Finish The Transfer of Ownership
Below we discuss this sale process for bagel shops in greater detail, highlighting the specific documents you will need, the role of your business broker, and how long the process takes.
Determine Your Bagel Shop’s Worth
First, you will need to decide if it is worth selling at this particular moment in time. If your goal is to maximize your sale price, then it is important to time the sale properly and do all you can to improve your professional valuation. We recommend a market-based valuation, which determines the amount potential buyers are willing to offer based on recent sales data and the unique nature of your bagel shop. Based on your valuation, you may decide to go to market immediately and capitalize on the fair market or wait, improve your valuation, and sell when the market is more favorable.
Prepare Your Financial and Legal Documents
Next, you will need to prepare your financial and legal documents. This makes the sales process easier in the later stages (due diligence, closing, business transfer, etc.). Your attorney, CPA, and broker can help you collect the needed documents.
Bring Your Bagel Shop to Market
Once you are prepared and ready, your broker will start seeking a buyer. You may receive multiple offers, and your broker will keep you informed and negotiate on your behalf to ensure you receive a deal that best meets your sales goals.
Select a Buyer and Sign a Letter of Intent (LOI)
Once you decide on who you would like to purchase your bagel shop, they will verify their intent to purchase with an Letter of Intent (LOI). This is also the transition point from the marketing stage to the due diligence stage (see below).
Follow a Due Diligence Timeline and Structured Process
Due diligence is the buyer’s opportunity to review financial and legal details about your bagel shop, visit the shop and see behind-the-scenes daily operations, and talk with employees (among other potential steps).
Schedule a Time to Close The Sale
You then need to schedule a time to close the sale, particularly at a time that works for you, the buyer, attorneys, and anyone else who may attend. Your broker can help you prepare for this stage as well. During closing, you will attain the final signatures of the purchase agreement.
Finish The Transfer of Ownership
Lastly, you will transfer ownership of the bagel shop to the buyer. This may involve updating information and policies notifying employees and customers, and more.
Selling a Bagel Shop? Speak With an Experienced Business Broker
Here at Sigma Mergers and Acquisitions, we help find buyers for shop owners, along with guiding them through the sales process and providing consultancy services. If you would like to learn more about the sales process, schedule a consultation with us. During your call, we can answer your questions and discuss your free, no-obligation valuation and sales strategy.
Scot Cockroft is the Owner & President of the #1 ranked Business Brokerage, Business sales and M&A firm in Texas. Scot has been named Named Deal Maker of the Year by Dallas Business Journal.
He is committed to a “different” type of business brokerage firm, one that is NOT about a sales pitch but, rather, results! In short, a business brokerage firm that is committed to performance-based compensation. Scot believes in these principles as well as a candid honesty with clients. His candid style often takes buyers and sellers by surprise, but is often what assures successful connections between the two.
Feel free to reach out!