You financed the restaurant for a friend or relative, and now it’s run into financial difficulty. This could be due to a variety of reasons. Maybe the owner didn’t have enough experience, maybe it’s the wrong location, possibly the food isn’t that great, or maybe the prices are too high.
But, whatever the reason, there just aren’t enough customers right now to make it viable.
You decided to take over and that worked for about two weeks. You threw a lot of time and money into it, but “no real returns”. So, selling the restaurant is the next step.
Selling a restaurant as a “going concern” is the best route. here, but you really need a plan of action. Get a realtor who sells businesses. Many will take it on, but only a few are truly knowledgeable in the field.
Time is money! How much money are you going to lose month to month just to keep it afloat?
Don’t throw good money after bad. Lower the price and get it moving.
Remember, there were not enough customers, That was the PROBLEM in the first place. So, things have to change. It has to become a different restaurant than it was. Sure the ovens, appliances, fridges and stoves all work, but the environment needs to change.
Probably, it will be a different proprietor with a different vision for the restaurant who will be able to a make a go of it.
Let’s have another look at your security, and see what items here you may need should you decide to operate the restaurant as a going concern. The ones that you need for this purpose are noted in BOLD.
Here’s the security:
1) Chattel mortgage, upon specific chattels for major purchases, big ticket items, tools of the trade,
2) Assignment of Leases upon specific chattels for major purchases, big ticket items, tools of the trade,
3) accounts receivable,
4) assignment of book debts,
5) General Security Agreement,
6) Assignment of Leases upon business premises,
7) Assignment of Options to Lease upon business premises,
8) Assignment of Agreements to Purchase upon business premises,
9) Assignment of Options to Purchase upon business premises,
10) A pledge of the shares of the operating company,
11) A pledge of the shares of the holding company,
12) An assignment of the suppliers’ accounts,
13) A pledge of any intellectual property,
14) An agreement to be named as an additional insured on the insurance policy,
15) An agreement by the insurer to waive its rights of subrogation,
16) An agreement to the assignment of the telephone number,
17) An agreement to the assignment of the website,
18) An Authorization to examine the books,
19) An Authorization to examine the bank accounts,
20) An Authorization to examine the HST returns,
21) An Authorization to examine the Income Tax returns,
22) An Authorization to examine the Workplace Safety assessments and payments,
23) A personal guarantee of the owner, proprietor,
24) A personal guarantee of the spouse of the owner proprietor,
25) A copy of all suppliers’ contracts, including books of accounts, inventories and entitlements.
Many times, lenders will wonder: why do I need all that security? In this situation, numerous items were necessary just to operate the business as a going concern until the sale.
Brian Madigan LL.B., Broker
www.OntarioRealEstateSource.com