How many years left on a lease before buying a restaurant business?

Question

I found a restaurant for sale in Chicago with about four years remaining plus one five year option. The seller wants a business sale price that assumes the option gets exercised. How do buyers usually underwrite that?

RusticNegotiator382 · Answer

I would not pay a full multiple unless the option is in writing, assignable, and the landlord has confirmed they will honor it for a buyer. Four years of term without a clean option is a short runway.

CuriousAdvisor173 · Answer

Landlord has not confirmed yet. I am treating the option as zero until they sign an estoppel.

CornerTenant921 · Answer

Lenders and SBA shops get nervous under five years of remaining term. If the landlord will not extend, the price should lean toward furniture, fixtures, and equipment, not the full cash flow multiple.

How many years left on a lease before buying a restaurant business?

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