The second half of 2016 was filled with change, from the election of Donald Trump to the injunction of the widely debated new overtime regulations, permeating the small business environment with uncertainty. Anticipating major regulatory and economic changes, many small business owners spent the past year preparing to sell their companies—and the restaurant industry was no exception.
In 2016, the restaurant sector saw an 8 percent increase in for-sale listings, with plenty of owner-operators hoping to finalize a deal before year’s end. For many, time is of the essence: less than half (48 percent) of small business sellers feel they could receive a higher price for their company in 2017 than in 2016, according to BizBuySell research.
Despite concerns about how impending legislation, financial pressures, and customer preferences will impact transactions going forward, there are proactive steps restaurant owners can take to set themselves up for a successful sale in 2017, including:
1. Stay a step ahead of the overtime rule
At the eleventh hour, a federal district judge blocked the Department of Labor’s new overtime final rule—a change that would’ve raised the salary threshold for earning overtime pay to $47,476—from being enforced. The DOL has appealed the injunction, with arguments in front of the Fifth Circuit Court likely to extend into February. Though a definitive ruling is months in the making, restaurant owners should have a well-documented compliance plan in place that new buyers can quickly put into action should the new overtime threshold go into effect. Now is the time to consult with an accountant or employment law attorney to determine the best compliance strategy for your business, whether it’s bumping certain employees’ salaries over the threshold, changing scheduling practices or hiring more part-time staff.
2. Highlight the housemade
Restaurants are already swept up in the local sourcing craze—buying and showcasing ingredients from local farms, co-ops and bakeries. But in 2017, restaurants will be challenged to tackle a new frontier: hyper-local sourcing. Diner loyalty is trending toward restaurants that do more in-house, from brewing beer on-site or using herbs and produce from gardens in their backyard to concocting condiments from scratch. To make your restaurant more attractive to buyers in 2017 (and justify a higher asking price), consider investing in infrastructure that transforms your business into its own supplier. If hyper-local sourcing is already a part of your operations, be sure to highlight those details in your for-sale listing and during early conversations with prospects.
3. Embrace mobile payments
Between Apple, Samsung, and numerous other tech and financial services vendors, mobile payments are moving from a consumer novelty to a new standard. Almost half of consumers have used a mobile payments app, but less than one-third of restaurants currently accept the technology. Restaurant owners planning to sell in 2017 have a chance to boost the value of their businesses (and stand out from the competition) by supporting mobile payments. Aside from making the dining experience more convenient for customers, some mobile payments programs—such as Chase’s new partnership with LevelUp—give restaurants added exposure to drive take-out order volume and revenue.
4. Upgrade your kitchen
For many small business buyers, looks matter. Fortunately, 2017 is an opportune time to finally invest in the new kitchen equipment and interior improvements you’ve been putting off. The Protecting Americans from Tax Hikes (PATH) Act, passed in late 2015, extends business owners’ ability to claim bonus depreciation on property and other capital expenditures through 2019. 2017, however, is the last year corporate taxpayers can take advantage of the 50 percent depreciation threshold before it drops to 40 and (eventually) 30 percent.
Depending on how certain political and economic developments play out, 2017 could present a bevy of new obstacles for restaurant owners looking to exit their businesses. As the supply of restaurants for sale grows, owners who take steps to augment the value of their businesses now stand the best chance of attracting suitable buyers sooner rather than later.