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GBQ Webinar Breaks Down Valuation Drivers, Deal Red Flags, & How To Get Your Restaurant Transaction-Ready
The restaurant M&A market is sending mixed signals. Deal discussions are everywhere, yet the wave of activity many expected has not arrived. So how should owners read the moment, and what separates a smooth sale from one that stalls or collapses?
The GBQ webinar, From Kitchen to Close: Navigating Restaurant M&A in Today's Market, brought together Kaz Unalan, Partner, Tax & Advisory, and Co-Leader of GBQ’s Restaurant Services team; Kyle McKee, Director, Transaction Advisory Services, GBQ; Chris Mumm, Partner, Monroe Moxness Berg; and Brent Elsas, Partner, C Squared Advisors, LLC to answer complex questions around today’s restaurant M&A environment. The conversation covered where the market stands today, what drives value, the red flags that sink deals, and what it really means to be “transaction-ready.”
Keep reading for the highlights.
For the full discussion, including real-world examples, watch the on-demand recording.
What Does The Restaurant M&A Market Look Like Right Now?
The panel described a market that has plateaued rather than collapsed. Deals are still closing, but for roughly a year and a half, the expected surge in restaurant mergers and acquisitions has not materialized. Economic variables, from interest rates to food costs and menu pricing, are keeping many sellers on the sidelines.
A clearer pattern is split into two very different segments. On one side sit distressed or financially depressed deals, sometimes involving legacy brands selling under pressure. On the other are premium and emerging concepts drawing fierce competition and aggressive valuations, often from experienced franchisees moving into hot new brands.
One counterintuitive trend: even as deal volume softened, the number of Quality of Earnings (QofE) engagements rose. That reflects how much more scrutiny buyers are applying before they commit.
What Drives The Value Of A Restaurant Business?
When a buyer evaluates a restaurant, a few factors consistently move the needle:
- Sales. Proven, recurring top-line revenue remains the starting point and the biggest factor in both valuation and the size of the buyer pool.
- Margins. Profitability above roughly 10% tends to attract strong interest, though brand and segment play a large role in what is achievable.
- Unit economics and scalability. Buyers want to know what it costs to build a location and whether there is room to grow, whether through open territory or brand strength in new markets.
- Geography. Sunbelt and high-growth regions command more attention than harder operating markets, which shows up in both multiples and buyer interest.
- Brand selection. Good operators can improve financial metrics, but getting into a winning brand is what drives outsized multiples.
The panel also stressed transparency. The cleaner and clearer your profit and loss picture, especially the split between in-store and third-party delivery channels, the faster and stronger your deal is likely to be.
What Red Flags Can Reduce Your Valuation Or Kill A Deal?
Several warning signs surfaced repeatedly:
- Murky data. Intercompany transactions that do not reconcile, or unclear margins, slow diligence, and erode buyer confidence.
- Suspicious deferred maintenance. Repair and maintenance costs that suddenly dip in the months before a sale tend to draw scrutiny rather than credit.
- Broken trust. Once a seller's numbers do not hold up, valuation suffers, or the deal ends. As one panelist put it, time kills deals, and rebuilding lost trust is rarely quick.
- Inexperienced deal counsel. A trusted general attorney is not always the right M&A attorney. Nobody wants someone learning on the job mid-transaction.
- Overlooked franchisor consent. In franchise deals, franchisor negotiations and consent should run in parallel with the deal, not get left until after the purchase agreement is signed.
When Is The Right Time To Go To Market?
The strongest theme of the day was timing on your terms, not someone else's. Sellers forced to act under pressure, whether from a lender or franchisor, tend to land less favorable outcomes.
The panel encouraged owners to give themselves a 12-to-18-month runway when possible. That window allows time to align on valuation, document add-backs, address tax structure questions early, and, ideally, go to market when sales are stable or trending up rather than during a distressed stretch. Deals that once took roughly six months now often stretch to nine months, 12 months, or even longer.
Tax structure also deserves attention well in advance. A seller arriving six months out with an inefficient structure, such as a C corporation facing double taxation, may have few options left to protect their walk-away number.
What Does 'Transaction -Ready' Actually Mean?
Getting the house in order is more involved than many first-time sellers expect. The panel pointed to several practical steps:
- Clean up intercompany payments so they net to zero and exclude units outside the deal.
- Understand your same-store picture and build supportable run-rate adjustments for newly opened locations.
- Resolve state and local tax exposure, including proper treatment of sales and use tax on third-party delivery, before diligence uncovers it.
- Keep up with remodels and capital expenditures, since depressed R&M numbers are highly visible and rarely earn seller credit.
- Review franchise agreements and lease terms, including renewal options and potential rent escalators.
Consider a seller-side quality of earnings engagement before going to market to validate your valuation and identify underperforming stores you might close to strengthen your EBITDA multiple.
What Surprises First-Time Sellers The Most?
New operators are often struck by the sheer complexity. A single transaction can involve sellers, franchisors, multiple lenders, a range of landlords, management teams, employees, and, in some concepts, liquor licenses and municipal approvals. A 20-unit operator is effectively running diligence on 20 separate businesses.
Owners also tend to underestimate the workload. Pulling together the data buyers' requests is substantial on its own, and many owners must manage it while still running the day job that makes their business valuable.
The Panel's Parting Advice
Asked for one piece of advice for owners considering a sale or acquisition in the next year or two, the panelists offered complementary takes. Sellers should not treat diligence as all-or-nothing; even an early snapshot can surface fixable issues ahead of a full process. Buyers should assemble their team early, align on strategy and brand thesis, and build plans A, B, and C for financing. Finally, both sides were reminded that restaurants are ultimately about people, so understanding the teams involved matters as much as the numbers.
Watch The Full Conversation
These highlights only scratch the surface. The on-demand webinar includes detailed deal stories, the panel's back-and-forth on valuation, and a deeper look at preparing for a sale.
Watch "From Kitchen to Close" on demand, and if you're considering a sale or acquisition, contact GBQ's national restaurant team for a conversation tailored to your situation. You can also explore our restaurant industry insights for more on planning your next move.
