The Harsh Reality of Selling Underperforming Restaurants: Price It Right or Walk Away With Nothing
- Jimmy Carey
- Jan 15
- 11 min read
Updated: 7 days ago
Every week in Metro Atlanta, I watch restaurant owners face one of the hardest business decisions they’ll ever make: selling underperforming restaurants that are draining their savings and destroying their quality of life. What makes these conversations especially difficult is the disconnect between what owners believe their business is worth and what the market will actually pay. As Atlanta’s Premier Restaurant Broker with over 37 years of restaurant industry experience, I’ve had countless difficult conversations about realistic pricing—and I’ve seen too many owners lose everything because pride prevented them from accepting market reality.
The truth is straightforward but painful: when your restaurant isn’t generating positive cash flow, the business has no earnings to value. In asset sales, you’re not selling a profitable enterprise—you’re selling used equipment, leasehold improvements, and fixtures at steep discounts from what you originally paid.
The blood, sweat, tears, and life savings you invested don’t create value or “potential”. Only earnings create value. And when there are no earnings, there’s no earnings-based valuation.
Understanding this reality early can mean the difference between recovering some of your investment and walking away with nothing.
Why Selling Underperforming Restaurants Requires Different Pricing
A restaurant asset sale occurs when a business is sold based solely on the liquidation value of its tangible assets—not on its ability to generate profits. The valuation process we covered in my blog How to Calculate (SDE) for Your Restaurant demonstrates how profitable restaurants are priced using earnings multipliers, typically calculated against Seller’s Discretionary Earnings (SDE). But when SDE is negative or minimal, that entire valuation framework collapses.
In profitable restaurant transactions, buyers pay for proven earnings, established customer base, operational systems, brand equity, and future income potential. When selling underperforming restaurants, buyers pay only for used kitchen equipment at liquidation prices, existing leasehold improvements worth pennies on the dollar, a good lease, furniture and fixtures deeply discounted, and maybe transferable inventory.
The difference is stark. A profitable restaurant in Buckhead or Midtown might sell for 2-3 times its annual SDE. That same restaurant, if losing money, might fetch only 15-30% of the original equipment and build-out costs.
I recently worked with an owner in Atlanta who had invested $750,000 into a beautiful build-out with state-of-the-art equipment. After two years of negative cash flow, the market value in an asset sale was approximately $125,000. That’s the harsh reality when earnings don’t exist.
The Three Critical Mistakes When Selling Underperforming Restaurants
Mistake #1: Waiting Too Long to Decide
The single most expensive mistake is waiting too long to sell. I see this constantly across Metro Atlanta: owners continue operating at a loss for months or even years, draining savings, damaging credit, and exhausting themselves.
Every month you operate at a loss compounds the problem. Your personal savings decrease, equipment ages and loses value, landlord relationships deteriorate, your negotiating position weakens, and market conditions may worsen.
In Sandy Springs last year, I met with an owner who had been losing $8,000 monthly for 18 months—$144,000 in additional losses beyond the initial investment. Had she listed after six months of losses, she could have recovered $100,000 from an asset sale. By the time she finally decided to sell, she couldn’t afford to list at market value—she needed any offer just to stop the bleeding.
Warning signs that indicate it’s time to make a decision: consistent monthly losses for 6+ months, inability to pay yourself a reasonable salary, mounting vendor debt, deteriorating landlord relationships, personal credit line exhaustion, and physical or emotional health impacts.
Mistake #2: Pricing Based on Investment Rather Than Market Value
This is where pride and emotion create the biggest problems when selling underperforming restaurants. I regularly encounter sellers who believe they should recover 70-100% of their initial investment because they “put everything into this place.”
The market doesn’t care what you invested or how hard you worked. The market only cares about one thing—what’s it worth to a buyer?
In asset sales, buyers are calculating their risk carefully. They’re looking at current condition of equipment, remaining useful life, cost to replace if needed, risk of inheriting operational problems, and lease terms.
Understanding what restaurant buyers actually look for in Atlanta helps clarify why asset sale pricing is so much lower than original investment. Buyers aren’t trying to compensate you for your labor—they’re making a calculated financial decision about the lowest-cost path to opening their concept.
Mistake #3: Holding Out for an Unrealistic Price
This mistake combines the first two and adds stubbornness. Sellers list their underperforming restaurant at an inflated price hoping to find a uninformed buyer. Meanwhile, the business continues losing money every month.
Months 1-3: Property sits on market with minimal buyer interest. Serious buyers review financials, recognize there are no earnings, and move on to properly priced opportunities.
Months 4-6: Owner reduces price slightly but not enough. Monthly losses continue accumulating. Equipment continues aging. Landlord becomes more concerned.
Months 7-9: Owner becomes desperate as savings are depleted. The business has been on market so long that buyers wonder what’s wrong with it.
Months 10+: Owner can no longer afford to keep operating. Turns in keys to landlord.
Equipment becomes landlord property or sold at auction for 10-20 cents on the dollar.
I’ve watched this exact scenario play out in Decatur, Alpharetta, and East Atlanta multiple times in the past year. The most heartbreaking aspect is that many of these owners could have recovered $75,000-$150,000 with realistic pricing in the first 90 days. Instead, they walked away with nothing.
The Real Math Behind Pricing Underperforming Restaurant Sales
Let me show you the actual calculations buyers use when selling underperforming restaurants:
Original Investment Scenario: - Kitchen equipment and other: $175,000 - Dining room furniture: $40,000 - POS system: $15,000 - Leasehold improvements: $220,000 - Total Investment: $450,000
Asset Sale Buyer Perspective: - Used kitchen equipment value: $45,000-65,000 (25-35% of original) - Dining room furniture value: $7,000-12,000 (20-35% of original) - POS system value: $3,000-5,000 (20-33% of original) - Leasehold improvements: $20,000-40,000 (9-18% of original) - Buyer’s Maximum Price: $75,000-$122,000
This reflects actual market conditions for used restaurant assets in Georgia. Equipment loses 60-70% of its value within the first two years. Leasehold improvements are essentially worthless unless they perfectly match the buyer’s concept.
The concept of restaurant asset sales and their pricing structure is explained in detail in my blog What is a Restaurant Asset Sale, but the fundamental principle is simple: without earnings, you’re in a liquidation scenario, not a business sale.
When Cutting Your Losses Makes Financial Sense
Let’s run a scenario analysis that I frequently present to sellers in difficult situations:
Scenario A: Hold Out for Unrealistic Price - Current monthly loss: -$6,000 - Listed price: $300,000 (overpriced) - Time to sell: 12+ months (if at all) - Total additional losses: -$72,000+ - Likely outcome: Eventual key turn-in with zero recovery
Scenario B: Accept Realistic Market Price - Current monthly loss: -$6,000 - Listed price: $125,000 (market rate) - Time to sell: 60-90 days - Additional losses during sale: -$12,000 to -$18,000 - Recovery after losses: $107,000-$113,000
The difference between these scenarios is $100,000+ and your emotional sanity. Yet I regularly encounter sellers who choose Scenario A because they can’t accept that the market won’t reimburse their original investment.
This calculation becomes even more compelling when you consider opportunity cost. While you’re losing $6,000 monthly operating a failing restaurant, you could be working a full-time job generating income, starting a new venture with better prospects, or preserving your mental and physical health.
The Landlord Factor: A Critical Element in Selling Underperforming Restaurants
One critical aspect sellers often overlook is how their struggling restaurant affects landlord relationships. When your restaurant is consistently late on rent or visibly struggling, landlords start preparing for your failure. They may begin marketing the space confidentially to new tenants, restrict or refuse lease assignments, demand additional security deposits, or pursue eviction if rent becomes significantly delinquent.
Once a landlord loses confidence in your operation, selling becomes dramatically more difficult. Even if you find a buyer for your assets, the landlord may refuse to approve the lease transfer—effectively killing your deal.
I’ve had multiple transactions in Midtown, Marietta and Buckhead where seller desperation was so obvious that landlords refused reasonable lease assignments, preferring to wait for the struggling tenant to vacate. This eliminates any asset sale opportunity.
What Smart Sellers Do When Selling Underperforming Restaurants
After over three decades in the restaurant industry, I can identify the characteristics of sellers who successfully navigate difficult exit scenarios:
They’re Honest With Themselves Early: Smart sellers recognize problems early and make decisions based on objective financial analysis rather than emotional attachment. When consistent losses appear, they immediately review detailed financials, identify whether problems are fixable within 90 days, consult with industry professionals, calculate total exposure if losses continue, and set clear decision deadlines.
They Price Realistically From Day One: Smart sellers understand asset sale pricing before listing. They accept that market value doesn’t equal original investment, asset sales mean liquidation pricing, time on market equals continued losses, and realistic pricing equals faster exit and better outcomes.
They Maintain Operational Standards: Even when selling an underperforming restaurant, smart sellers maintain quality operations throughout the listing period. This preserves remaining value, maintains landlord relationships, keeps the business presentable for showings, and demonstrates professionalism to buyers.
They Work With Experienced Restaurant Brokers: Perhaps most importantly, successful sellers engage qualified restaurant brokers early in the process. An experienced broker provides realistic market valuations, buyer network access, negotiation expertise, transaction management, and landlord relationship facilitation.
The pattern is clear: Earlier exits with realistic pricing almost always produce better financial outcomes than holding out for prices the market won’t support.
Moving Forward: Your Action Plan for Selling an Underperforming Restaurant
If you’re currently operating an underperforming restaurant in Atlanta or Metro Georgia and recognize yourself in this article, here’s your immediate action plan:
Step 1: Conduct Honest Financial Assessment (Today) - Compile complete financial statements for the past 12 months. Calculate actual monthly cash flow. Determine total exposure if current losses continue for 6, 12, and 18 months.
Step 2: Establish Your Decision Deadline (This Week) - Based on your financial assessment, determine your absolute deadline for making a change. Whatever deadline you set, commit to it.
Step 3: Consult With Restaurant Broker (Within 30 Days) - Get a professional market valuation through Jimmy Carey Commercial Real Estate. Understand realistic asset sale pricing for your specific situation. Learn about timing expectations and buyer criteria in Atlanta’s current market.
Step 4: Make and Execute Decision (Within 90 Days) - Based on your financial assessment and professional guidance, either commit to a viable turnaround plan or list the property at realistic market value.
Step 5: Maintain Operations and Confidentiality (Throughout Process) - Whether pursuing turnaround or sale, maintain operational standards and appropriate confidentiality.
The sooner you move through these steps, the better your ultimate outcome will be.
Final Thoughts: Facing Reality Isn’t Failure
After 37 years in the restaurant industry as both operator and broker, I want to end with this perspective: recognizing reality and making sound business decisions doesn’t constitute failure—it demonstrates business maturity.
The restaurant industry is extraordinarily difficult. It combines brutal economics, unpredictable variables, intense competition, and unforgiving timelines. Most restaurants fail. Most restaurant owners lose money. You’re not deficient because your restaurant struggled—you’re normal.
What separates smart business people from those who lose everything is the ability to recognize untenable situations early and exit strategically rather than emotionally. Asset sales represent a last-chance opportunity to recover some capital and move forward. They’re not ideal outcomes, but they’re vastly superior to turning in your keys and walking away with nothing.
The pride and stubbornness that make you a fighter in the restaurant industry can become liabilities when it’s time to exit. My goal as Atlanta’s Premier Restaurant Broker isn’t to sell every restaurant that walks through my door—it’s to help restaurant owners make the best possible decisions for their specific situations.
If you’re struggling with selling an underperforming restaurant right now, I encourage you to face the numbers honestly and make decisions based on financial reality rather than emotional attachment. Your future self—and your bank account—will thank you.
Frequently Asked Questions
Q: How long does it typically take to sell an underperforming restaurant in Atlanta?
A: Realistically priced underperforming restaurants in Metro Atlanta typically sell within 3-8 months. However, overpriced listings can sit on the market for 10-12 months or longer without selling. Properties in desirable areas like Buckhead, Midtown, or Decatur generally move faster than those in secondary locations.
Q: What percentage of my original investment can I expect to recover when selling an underperforming restaurant?
A: Asset sales typically recover 20-35% of original equipment and build-out costs, depending on age and condition. Used kitchen equipment generally brings 20-35% of replacement cost, leasehold improvements bring 10-20% of original build-out costs, and furniture brings 10-35% of original cost. Without earnings, you’re in a liquidation scenario where market value is far below original investment.
Q: Should I try to turn my restaurant around before selling it?
A: Only if you have a clear diagnosis of fixable problems, sufficient capital to fund the turnaround period (typically 6-12 months), and objective evidence that your market/concept/location can support profitability. If you’ve been consistently losing money for 6+ months without a clear turnaround plan with adequate funding, selling immediately is usually the better financial decision.
Q: Will a buyer assume my existing restaurant lease or need to negotiate a new one?
A: This depends on your specific lease terms and landlord cooperation. Some buyers prefer lease assignments, while others prefer negotiating fresh lease terms directly with the landlord. In asset sales, landlord approval becomes critical regardless of the structure. If your landlord has lost confidence due to rent payment issues, getting approval for either arrangement becomes more difficult.
Q: What happens to my restaurant equipment if I can’t find a buyer?
A: If you can't sell your restaurant and default on your lease, you'll eventually turn in the keys—and your equipment might become the landlord's property depending on your lease terms. At that point, the landlord controls its fate: they may auction it off for 10-20 cents on the dollar, use it as an incentive for a new tenant, or simply dispose of it. This worst-case scenario is exactly why accepting realistic market pricing while you still have control is critical—it's the difference between recovering $75,000-$125,000 or walking away with zero.
Q: How do I maintain confidentiality while trying to sell my struggling restaurant?
A: Working with an experienced restaurant broker helps immensely. Brokers use blind listings, require NDAs before sharing details, schedule showings during off-hours, and carefully qualify buyers. You should avoid publicly advertising the sale, don’t discuss it with staff until necessary, and never mention it to customers. However, maintaining quality operations matters more than paranoid secrecy.
Q: What’s the biggest mistake sellers make when selling underperforming restaurants?
A: The biggest mistake is waiting too long to make a decision and then pricing unrealistically when they finally list. This combination drains capital through continued operating losses, erodes equipment value, damages landlord relationships, and ultimately leaves sellers with no good options. Sellers who recognize problems early, accept market-based asset sale pricing, and execute quickly almost always achieve substantially better financial outcomes. Time is money.
About the Broker
With over 37 years of restaurant industry experience, Jimmy Carey has owned and operated five successful restaurants, including the acclaimed Jimmy’z Kitchen in Miami and Atlanta. This first hand expertise makes him Atlanta’s Premier Restaurant Broker, uniquely positioned to understand both sides of every transaction—especially the difficult conversations around selling underperforming restaurants and realistic pricing.
Stay connected with Jimmy through Instagram, Facebook, and LinkedIn for daily market insights, new listings, and industry trends. Subscribe to his YouTube channel for in-depth market analysis and follow him on X/Twitter for real-time updates. Read reviews from satisfied clients on his Google Business Profile.
If you’re ready to sell your restaurant or need honest guidance about your options, visit Sell My Restaurant Atlanta for a confidential consultation and market analysis. Learn more about Jimmy’s credentials through his IBBA and GABB professional profiles, or explore his full range of services at Jimmy Carey Commercial Real Estate.
Atlanta’s Premier Restaurant Broker
Coldwell Banker Commercial Metro Brokers
■ 305-788-8207
■ 678-320-4800
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