Buying a Restaurant Franchise in Atlanta Georgia Means Waiting for the Right Deal to Enter the Market at the Right Price

The hottest restaurant franchise delivers more hype than income to most Atlanta restaurant buyers. Read this article to get the exact timing on buying an Atlanta Franchise Restaurant.

Buyers for a restaurant franchise are often trying to avoid the risk posed by start-up restaurants. According to one study, that’s not likely to happen since 57% of all franchise restaurant start-ups fail by the end of year three. That was the finding of Dr. Parsa, an Ohio State University hospitality-management professor who authored a study on restaurant failure rates. Franchise start-ups only minimally outperformed independent start-ups. That doesn’t mean you shouldn’t operate an Atlanta restaurant franchise if you want the systems and continuity of a franchise, it means you should read this article to understand how to get a money making Atlanta restaurant franchise.

If you want to buy a franchise, you’re better served to focus your efforts on mature establishments with a track record. That means profit and loss statements that show earnings for consecutive years. Three year-old restaurants with established history are a safer option than starting a franchise restaurant from scratch. If you know all that and still want a franchise, then use our established Franchise Rule of Three to get the best deal and buy an Atlanta franchise restaurant at the right time. Franchise restaurants are re-sold every day and can represent a bargain to the savvy restaurant buyer. If you concentrate on these three elements you can get the most franchise for the least money.

A look into the life cycle of the typical franchise begins with the original owner. He or she builds the store from the ground up in a super Atlanta restaurant location spending up to $400,000 in initial costs. Buoyed by stories of restaurant franchise millionaires, he’s convinced he has a winner on his hands. Never mind that he’s paying $8000 a month rent, 10% franchise fees and his average ticket for sandwich is $7.95, it’s the sizzle not the substance that has him hooked. A year into operations he calls an Atlanta restaurant broker to sell and wants to know who will give him $400,000 for his business. Unfortunately, no one will. He goes on the market at $149,000 if he has a good location and up-trending franchise concept.

The cycle continues when an Atlanta restaurant buyer acquires the space. He has paid less so his cost of debt repayment is much lower. The sales line has begun to pick up so if he works diligently, he may get this operating profitably in a year or two. All the while the franchise has received a percentage of sales of every dime generated by the business while the unlikely owners have been losing money. After a year or two in the business, owner number two has had enough. He’s operating in the black but when he calculates his time, he’s making minimum wage for the time invested. He calls us to list and that’s when the pricing is right. By now sales have matured and costs have come into line. It goes on the market for less than three times earnings and the savvy Atlanta restaurant buyer picks up a deal.

Since it’s now priced based on an income valuation method, the pricing is no more than three times earnings on the books. Sales are now covering fixed cost and more so it’s operating in the black. The third buyer now has a real franchise deal on his hand. He gets every benefit from the sale and there are quite a few. First, he gets a good brand. Secondly, top line sales now satisfy fixed cost. Lastly he has a fair cost of entry. Buyer number one and number two took a bath but buyer number three is dancing all the way to the bank. That’s why everyone seeking an Atlanta franchise restaurant for sale should follow our Rule of Three.

Rule Number One: You should be the third (and hopefully final) owner of the Atlanta franchise restaurant.

Rule Number Two: The best deal is found near the beginning of year three. There’s still room to grow the sales but it’s priced based on current (still developing) earnings.

Rule Number Three: No matter how “hot” you think this Atlanta restaurant franchise is or how much you think you’ll make, the proof is in the numbers. Don’t pay over 3X earnings. Ever. The income valuation method should still be used.

Eric Gagnon is a designated industry expert in Restaurant Sales, Restaurant Valuation and Restaurant Business Brokerage. He is a frequent writer and speaker on the topic of restaurant brokerage and restaurant valuation. He is the president of We Sell Restaurants and wesellrestaurants.com an online resource for buying and selling restaurants in Atlanta, Georgia and across the southeast.

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