How to Sell a Restaurant in Los Angeles

Selling a restaurant is different from selling most businesses. The margins are thin, the lease is critical, and the buyer pool has unique characteristics. Here's what LA restaurant owners need to know.

Restaurant Valuations Are Different

Most businesses sell for a multiple of earnings. Restaurants often sell based on a combination of:

• A multiple of SDE: Typically 1.5x to 2.5x for smaller restaurants
• Asset value: Equipment, furniture, fixtures
• Lease value: A great lease in a hot location has real worth
• Liquor license: In California, this is a transferable asset with real value

For restaurants doing under $1M in revenue, you're often looking at $100K-$400K sale prices. Larger, more established restaurants can go higher.

The restaurant industry has some of the lowest valuation multiples of any sector. This reflects the risk — restaurants fail at higher rates than most businesses, and margins are tight.

The Lease Is Everything

In LA, your lease may be the most valuable thing you're selling. A below-market lease in a prime location can be worth more than the business itself.

Buyers will scrutinize:

• Remaining term: How much time is left? Are there renewal options?
• Rent relative to market: Are you paying below market?
• Assignment rights: Can the lease be transferred to a buyer?
• Personal guarantee: Will the landlord release you?
• Exclusive use clauses: Protection against competing tenants

If your lease is expiring soon or has unfavorable terms, address this before going to market. A new buyer won't pay much for a business they might lose.

Liquor License Considerations

California liquor licenses are valuable and transferable, but the process takes time.

Type 47 (beer/wine/liquor for on-site consumption) is the most common for full-service restaurants and can add $50K-$100K+ to your sale price, depending on location.

The transfer process typically takes 45-90 days through the ABC (Alcoholic Beverage Control). This affects deal timing.

Some buyers will want to apply for a new license rather than transfer yours. This has pros and cons for both parties that your broker should navigate.

What LA Buyers Are Looking For

The LA restaurant market attracts different types of buyers:

First-time restaurateurs: Often immigrants or career-changers with restaurant experience. They want turnkey operations they can run themselves. SBA financing is common.

Existing operators: Restaurateurs adding a second or third location. They want proven concepts in good locations.

Concept converters: Buyers who want the location and infrastructure but plan to change the concept. They care more about the lease and equipment than the existing brand.

Investor groups: Less common for small restaurants, but groups do acquire successful concepts for expansion.

Knowing your likely buyer helps you position the sale correctly.

What Kills Restaurant Deals

Declining sales: A restaurant with a downward revenue trend is very hard to sell. Buyers assume the trend continues.

Lease problems: Short remaining term, above-market rent, or landlord issues kill deals.

Health/safety violations: Unresolved issues with the health department are deal-breakers.

Equipment condition: Buyers expect significant maintenance needs, but major equipment replacements coming due reduce your price.

Staffing concerns: If key staff (especially kitchen leadership) won't stay through transition, buyers worry.

Undocumented revenue: If you claim revenue that doesn't match your reported sales, buyers can't finance based on numbers they can't verify.

Preparing Your Restaurant for Sale

If you're thinking about selling:

Stabilize or grow revenue: Even modest growth makes a huge difference in sellability.

Lock in your lease: Get favorable terms in writing before you go to market.

Address deferred maintenance: Fix what you can. Get quotes for what you can't.

Document everything: Recipes, vendor contacts, employee information, processes.

Clean up your books: Make sure reported revenue matches reality.

Handle staff thoughtfully: Key employees need to be part of the transition plan.

The Reality Check

I'll be honest: many restaurants are worth less than their owners think. After years of hard work, it's disappointing to hear that your business might sell for $150K.

But the market is the market. Buyers base offers on what they can verify and what they can finance. Emotional value isn't transferable.

The good news: LA has a strong buyer pool for restaurants. If your fundamentals are decent and your lease is solid, there are buyers out there.

Next Steps

If you're considering selling your LA restaurant, start with a realistic assessment:

• What are your verifiable earnings?
• What's your lease situation?
• What's the condition of your equipment?
• What's your liquor license worth?

These factors determine your buyer pool and likely price range.

Want to talk through your specific situation? Schedule a call for a free assessment.