The A&W restaurant franchise is a well-established brand, and it is seen by many investors within the fast food space as a sound investment. This is good news for A&W franchise restaurant owners who are planning their exit strategy. Sigma Mergers and Acquisitions discusses how to determine the worth of your restaurant, the steps that are involved in the sale process, and the role the business broker plays in your sale in this review. Here’s how you can sell an A&W restaurant franchise.
About The A&W Restaurant Franchise
There are approximately 520 A&W restaurants. They offer food services, which include dine-in, take-out, and delivery. They are also categorized as a fast food restaurant and offer drive thru services at many of their locations. A&W has also become famous for their 1919 Root Beer recipe, which is made fresh in their locations. This signature recipe makes them unique for individuals who are interested in investing in a fast-food franchise.
How Much is My A&W Restaurant Worth?
The first step to any business sale is a valuation. Specifically, you will need a market-based valuation approach for your A&W restaurant franchise business. This approach seeks to determine the fair market value (FMV) for your restaurant. Your valuation includes the use of industry or acquisition multiples (also called rule of thumb data). The acquisition multiple for the A&W restaurant franchise includes:
- A&W restaurants sold between 2.16 and 3.91 times the Seller’s Discretionary Earnings (SDE)
- A&W restaurants sold between 2.73 and 9.85 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
- A&W restaurants sold between 0.57 and 0.73 times the annual net sales
Other factors may have a strong impact on your valuation, such as your reason for selling your franchise, growth potential, and local reputation. Your broker should personalize the valuation and ensure all intrinsic value of your franchise is recognized and factored in when determining your worth.
You should also check: TRYING TO TIME THE MARKET
A Step-by-Step Guide to Selling an A&W Restaurant Business
Although the process may seem complex, you can sell with confidence and stay in control by following a structured process and working with an experienced business broker. The notable steps that are included in the sales process for A&W restaurant franchise owners include:
- Prepare your sales strategy
- Find a buyer in a confidential manner
- Complete the due diligence process
- Attend closing and sign the purchase agreement
Below is a brief overview of each step. We ask that you speak with a business broker for more specific details about the sales process you may experience.
Step 1: Prepare Your Sales Strategy
As discussed, your valuation is the first step of the sales process as it determines your entire sales strategy, including when you sell, how much you ask for in the sale, and more. Your business broker can help you plan your strategy. You will also need to prepare all documents you will need. Notably, this includes your:
- Franchise agreement
- Three years of tax returns
- Profit and loss (P&L) statements
- Balance sheets and cash flow statements
- Employee lists
Step 2: Find a Buyer in a Confidential Manner
You will need to find a buyer in a confidential manner to avoid unnecessarily causing a disruption to your business operations or influencing the offers you receive. Your broker ensures you are able to sell discretely by utilizing private and confidential sales channels. As you receive offers, you and your broker can review them, negotiate with potential buyers, discuss contingencies, and end the marketing stage with a signed letter of intent (LOI).
Step 3: Complete The Due Diligence Process
The buyer will need an opportunity to review all information before they officially purchase your A&W restaurant. This may involve a detailed review of your company’s financial information and legal information, along with a review of the franchise agreement and a visit to see the daily operations of your restaurant.
Step 4: Attend Closing and Sign The Purchase Agreement
Lastly, you will schedule a time for closing. During closing, several things will take place. First, your attorney will review the purchase agreement a final time; the buyer’s attorney will likely do the same to ensure all information is accurate according ot the discussions that took place and the LOI. Secondly, after review, the purchase agreement is signed. Next, the franchise (A&W) may be notified and all requirements as established in the purchase agreement are fulfilled. The seller also will transfer access to the business over to the buyer. Lastly, employees are notified of the new ownership.
Contact The Business Brokerage Team at Sigma Mergers and Acquisitions
Sigma Mergers and Acquisitions help business owners sell successfully and in a stress-free manner. If you own an A&W restaurant and are planning your exit strategy to retire or pursue other business ventures, then schedule a consultation to discuss your 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!