Lesson 9: Exit Strategy

Every journey comes to an end eventually. Whether you’ve run your restaurant for a year or 30 years, there will be a time when you will want to retire, sell or close your doors. This lesson will walk you through the different options when “closing time” finally rolls around.



Exit Strategy


In the business world, there are few guarantees. In the restaurant world, it’s even more of a dog-eat-dog world. Your unique concept may find new competition from others who want to copy and cash in on your brilliant idea. You may come to find that you can’t keep enough workers on your team to fill a shift, let alone two or three. Or you may find that developers are planning a new housing unit, and your restaurant is right in the middle of its planned lobby.

Turning the page can be a very emotional experience. It doesn’t matter if you’re a local institution celebrating its 25th anniversary or you opened your doors with big dreams a few months ago, and customers never had the chance to discover your amazing food.

In an ideal world, you built an exit strategy into your business plans. With proper planning, you can start a restaurant knowing that whatever happens, it will end up in good hands. Even if it doesn’t, you can at least walk away with some extra money in your pocket or leave knowing that its demise won’t affect you personally because you separated your business from your personal life. While you hoped for the best, you planned for the worst because that’s what smart business people do.

Let’s look at a restaurant and how two different exit strategies can affect the outcome…

Scenario 1

A restaurant owner and his wife have been in business for 20 years. He works as the head cook, and she is the manager. The restaurant is popular with locals and is turning a profit. They finally decide to retire. They initially considered selling the restaurant, but there wasn’t much to sell outside of the name. They were the business, right down to the recipes that drew customers in nightly. So they decide to close when they retire. All the work they put into their business of 20 years ends with little to no fanfare.

Scenario 2

Ten years into running the business, the same owner and his wife look at options for eventually leaving the restaurant business. To make the restaurant more attractive to buyers, they bring in another chef to learn the recipes and an assistant front-of-house manager to learn its ins and outs. Eventually, they added a couple more assistants to understand the business. A decade later, the business is ready to sell. The business is far more valuable because there is continuity in the menu and operations. The buyer has a turnkey operation that already has a loyal customer base and an established reputation. Because of this, one of the managers ends up buying the restaurant. The owners walk away with a tidy profit, and the legacy of their restaurant concept lives on.


Developing a strategy

There are many strategies that don’t require you to close your doors forever or empty your personal bank accounts in an effort to keep the restaurant open at all costs.

Each strategy has implications for you and your business, including control of the intellectual property, capital gains taxes due, transfer of assets and whether or not you stay on for a time as a consultant in a staged transfer.

Even if you’re just starting out and are years away from facing these decisions about the future of your business, you want to consider your options while building your business plan. You just never know what the future holds.

As you consider various exit strategies in the next section, consider:

    • The length of time you plan on being part of the business.
    • The financial status of you and your business.
    • Tax implications of various exit scenarios.
    • Entities that may need to be compensated, such as investors and creditors.


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Academy Staff