FINDING THE SWEET SPOTS IN THE RESTAURANT SECTOR
By Steve Adams | Banker & Tradesman Staff | Oct 30, 2016
Todd C. Smith
Title:President; Managing Partner, Corbett Restaurant Group
Experience: 9 years
Boston’s restaurant scene is evolving. New concepts are spicing up ground-floor spaces in once-overlooked areas such as the Financial District, and a new allocation of 75 liquor licenses has been allocated for historically underserved neighborhoods. Todd C. Smith has completed over $93 million in sales and leases in the food and beverage industry since founding Boston-based Corbett Restaurant Group in 2007. Recent transactions include a 380-capacity sports bar called Finn McCool’s which is moving into the former Julep bar space 200 High St., a 60-seat Bistro 131 at 131 Broad St. and All Star Pizza in the former Griddler’s location at 204 Cambridge St.
Q: What was your real estate background before founding Corbett Restaurant Group?
A: I did 12 years in corporate America doing sales and commercial leasing for American Tower. We’d do 25-year leases with Verizon, AT&T and Sprint. That was my first exposure to long-term leasing. I did some work for a business brokerage and then I started my own company in 2007. As far as the economic cycle, it wasn’t the best time, but my plan was years in the making so I just pushed through it. I’d owned a restaurant of my own and saw an opportunity in the marketplace: UFood Grill in the Landmark Center on Brookline Avenue. I started (Corbett) with a cell phone and a laptop, just me out of my apartment. If you want to go into something like this, it’s a sink-or-swim opportunity. It takes a while. You have to be ready to take a pay cut for a while before you move on to what your larger goals.
Q: Why does the typical restaurant deal take up to eight months?
A: Usually because of licensing. If it’s a café or food use, those can be done in a few months. With a liquor license transfer and the city and state approval processes it can take on a minimum of 120 days, on top of marketing and lease assignment and negotiations. With a lease, usually you don’t get paid until after they take occupancy.
Q: How important is confidentiality in restaurant transactions?
A: We do all types of hospitality transactions: nightclubs, restaurants, food trucks, catering, you name it. There’s two basic transactions we specialize in: the sale of an existing business, and the other is leasing the space to a tenant, whether representing the landlord or developer or tenant. If you’re selling a specific restaurant, confidentiality is almost always crucial. That’s because the value of a restaurant entity is tied up in the gross sales and profit, and once your employees and key managers get wind you’re for sale, you might lose those folks. It can be devastating if it’s not managed properly. Once people get wind, you lose your customers, you lose everything.
Q: Is seller financing included in most transactions?
A: We see it in about 60 percent of the deals. Seller financing can make things happen but sometimes people just want the money and want to move on. It depends upon the seller’s situation. If they believe in the concept and don’t need the money right away, they’re more likely to offer the seller financing.
Q: What’s the formula for determining the value of a restaurant?
A: If you’re going to buy an existing business and run it as-is, it comes down to sales and profitability. If you want to change the concept, that usually comes down to location, quality of the lease, leasehold improvements and things like licenses.
Q: How much is a full liquor license worth in Boston?
A: About $400,000. Beer, wine and cordial licenses are going for about $100,000 to $110,000, which is up. It’s supply and demand.
Q: Boston was awarded 75 additional liquor licenses in 2014, including 60 for neighborhoods outside downtown that haven’t had many restaurants and bars in the past. What effect is that having?
A: It’s good because it helps us and helps businesses, but they need to add it responsibly. If you have over (900) licenses in Boston currently, you don’t want to render those licenses valueless by adding all of those licenses at once. Somerville just added 71 licenses, so by holding a license that two months ago you could get $200,000 for, now you can’t get anything. The value of a license in Somerville is zero right now, so if you hold a license, it’s not good for you. It’s good if you’re trying to open a restaurant.
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