There are many investors that are interested in purchasing a Burger King restaurant as it is one of the most well-established restaurant brands globally. If you are considering selling your Burger King restaurant, then this guide provides everything you need to know to get started. Specifically, we discuss how to value and sell your Burger King franchise restaurant.
About The Burger King Franchise
The Burger King franchise has stores in more than 100 countries. They have established more than 18,700 stores internationally. There are more than 7,000 locations in the United States alone. This makes Burger King one of the most well-known fast food brands in the world. The instant name recognition makes the Burger King franchise an appealing option for investors who are interested in entering (or expanding their presence within) the food and beverage industry.
A Market-Based Business Valuation for Burger King Franchise Restaurant Owners
A market-based approach determines how much buyers are most likely willing to pay on the market; this is also known as your fair market value or FMV. To determine this figure, your broker may look at recent sales data, including acquisition multiples (also known as rule of thumb data). They may also calculate your earnings, before, interest, taxes, depreciation, and amortization (EBITDA) and your seller’s discretionary earnings (SDE). The rule of thumb data for Burger King restaurants is as follows:
- Burger King franchise restaurants sold between 1.67 and 2.46 times the Seller’s Discretionary Earnings (SDE). Some of the largest locations sold for 4.98 times the SDE.
- Burger King franchise restaurants sold between 2.07 and 3.16 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
- Burger King franchise restaurants sold between 0.30 and 0.39 times the annual net sales
A Three-Stage Process for Selling a Burger King Franchise Restaurant
There are dozens of tasks and steps involved in the sales process for Burger King franchisors. In this review, we discuss each step. However, for simplicity, we have broken the various steps into three stages, which are:
- Plan and prepare
- Find a buyer
- Close the sale
Let us take a close look at each of the three stages. Although, keep in mind that your process may look different as every strategy should be personalized.
Stage 1: Plan and Prepare
The first step is to find a business broker that can best help you reach your exit strategy goals, which likely include selling for the highest value possible (among other non-financial goals). As discussed, your broker will first conduct a business valuation to determine your fair market value (FMV). This information can help you and your team formulate realistic exit strategy goals. Your goals may vary based on the purpose of your exit. For example, if you are planning a new business venture, then you may desire to find a buyer that is willing to not put into place a restricting no-compete clause. If you are retiring, then this may be far less of a concern.
You should also prepare your legal and financial documents during the planning and preparation (pre-marketing) stages as well. These documents include but are not necessarily limited to:
- Three years of your tax returns
- Three years of your profit and loss (P&L) statements
- Balance sheets and cash flow statements
- Copies of your insurance and lease policies
- A copy of your franchise agreement with Burger King
- A list of your employees
Your broker and attorney (and CPA, if applicable) can help you prepare for the sale by guiding you through the collection of necessary documents. Keep in mind, since you are a franchisor, you will also need to receive approval from Burger King to sell to your buyer. You may also need to contact Burger King later in the process to seek the final approval from the buyer you choose.
Stage 2: Find a Buyer
Finding a buyer is exciting. This is the time when you receive offers for your Burger King restaurant and make a large stride toward accomplishing your exit strategy goals. Keep in mind, selling a Burger King restaurant requires confidentiality. This means you are not utilizing private methods of advertising and marketing channels. Instead, all of your efforts take place in a discrete and private manner. Due to this, it is important to choose a business broker who has connections both in your industry and your local area.
Along with fielding and screening offers, your broker will also assist with the negotiation process as well. Negotiations often involve tense discussions as both parties seek to secure the best deal possible. Consequently, it is usually best to trust your business broker to handle this, ensuring all is completed in a professional and strategic manner. In addition to negotiations, your broker can also help ensure you have contingencies in place that protect you and no unreasonable contingencies are added on the buyer’s side.
Ultimately, the process ends when you select a buyer that is best for you. They will sign a letter of intent (LOI) that establishes the purchase terms and payment amount and method. As mentioned, you will need to keep Burger King notified throughout the process, and they may need to provide final approval before you close.
Stage 3: Close The Sale
After Burger King gives approval for the sale and transfer of ownership and the buyer signs a letter of intent, the buyer then has an opportunity for due diligence. This is the stage between the LOI and closing when the buyer reviews your business details to ensure the legal and financial documents match up with what was presented in the sales memorandum and throughout negotiations. The buyer may also request more information and provide a series of questions for you (the seller) to answer. In some cases, the buyer may also request a walkthrough of the restaurant and a behind-the-scenes look at business operations.
After due diligence, the closing visit is scheduled at a time that is convenient for all who must attend (the buyer, seller, attorneys, etc.). During closing, you and your attorney conduct a final review of the purchase agreement, after which you will attain the final signatures. The payment is also sent during closing. Lastly, you must transfer ownership of the Burger King establishment to the buyer and notify Burger King that the sale is complete.
Planning Your Exit Strategy? Contact Sigma Mergers and Acquisitions Today
With more than 600 businesses sold and over a decade of experience, our team at Sigma Mergers and Acquisitions understands how to value and sell companies for fair market value or higher. Moreover, we have experience navigating the complexities involved with franchise restaurants. Schedule a consultation today for a free, no-obligation business valuation.
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.
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