Glossary

A sale structure where the buyer purchases the restaurant's individual assets — equipment, lease rights, inventory, goodwill, the name — rather than the ownership entity itself. The most common structure for independent restaurant sales.

A ratio lenders use to determine whether a business generates enough cash flow to cover its loan payments. SBA lenders commonly require a DSCR of at least 1.25x, calculated from your restaurant's historical financials.

A deal structure where part of the purchase price is paid later, contingent on the restaurant hitting certain performance targets after the sale. Less common in small restaurant deals than seller notes, but sometimes used when future performance is uncertain.

The portion of a restaurant's value that comes from its reputation, customer relationships, and brand — separate from its physical assets. In an asset sale, goodwill is one of several categories the purchase price gets allocated across, often with favorable tax treatment.

The risk that a business's performance depends heavily on one specific person — often the founding owner — and may decline if that person leaves. Buyers price this in, and transition periods are often structured specifically to reduce it.

The transfer of a lease from the current tenant (you) to a new tenant (your buyer), which typically requires the landlord's written consent. A commonly overlooked step that can add real time to a closing timeline.

A clause restricting the seller from opening or working at a competing restaurant within a certain distance and time period after closing. Standard in most sales, but the specific duration, geography, and scope are negotiable.

A commitment that makes an individual (rather than just the business entity) personally responsible for an obligation, such as a lease. If you personally guaranteed your lease, that guarantee may not end automatically when you sell the business.

The total financial benefit an owner personally receives from a business in a given year — salary, profit, and personal expenses run through the business, added back together. The primary figure used to value independent restaurants, typically multiplied by 2–4x.

A loan the seller extends to the buyer, covering part of the purchase price, repaid over time (commonly 3–7 years) instead of paid in cash at closing. Very common in restaurant sales, especially when SBA financing is involved.

A sale structure where the buyer purchases ownership shares or membership interest in the company itself, taking on the entity's full history and any liabilities along with it. Less common than asset sales for small restaurants.

A closing-day adjustment to the purchase price based on the actual level of inventory, prepaid expenses, and accrued obligations (like unused vacation pay) at the time of sale — a technical detail that can shift the final number meaningfully if it isn't addressed upfront.