- If 2020 was about survival and 2021 about revival, 2022 looks to be the time for a rebound—and potentially a good time to sell your pizzeria.
- The traditional dine-in pizzeria remains less attractive to buyers than a pizza shop focused on delivery or one that operates with less overhead.
By Bryan Vitagliano
The COVID-19 pandemic was stressful for pizza shop owners, particularly those with predominantly dine-in businesses. This created an opportunity for those pizza shops with a greater delivery footprint to keep and increase business. If 2020 was about survival and 2021 about revival, then 2022 looks to be the time for a rebound, with investors and seasoned operators looking to capitalize on business acquisitions.
The market is attractive to buyers because the past two years have left many pizza shop owners exhausted. Many made it through pandemic shutdowns and now are dealing with staffing challenges. For some, ownership has lost its appeal, and the thought of “getting out” has a greater appeal than being one’s own boss. In fact, many pizza shop owners had plans to sell in 2020 but had to hold off due to the pandemic and the negative effects on the industry as a whole. Customers are now returning to restaurants, and, while the profits are moving closer to previous years’ numbers, that sense of exhaustion is moving owners to take this opportunity to sell their business.
Prospective pizza shop buyers are leaning more toward buying “distressed businesses” or, more appropriately, buying a business from a “distressed owner” who would be in a position to sell the business and assets and ideally transfer some employees for a reduced price. The benefit for the seller is the ability to get out of the lease and take a break from the stress of operations. However, there is still considerable risk for a buyer, due to the increased cost of ingredients and rising wages. Plus, rising interest rates are an omnipresent issue for prospective buyers looking to finance their purchase or working capital.
But even with this risk, there is much more of an opportunity to purchase an existing business than to start one from the ground up. For this reason, buyers are very active at this moment in time.
However, there are many pizza restaurants for sale on the market today, from franchises to independents. In addition, a buyer might also explore purchasing a second-generation space that may need only a few thousands of dollars invested in equipment or TI to make it into a pizza shop and operate. I have noticed that the two levels of businesses that make up the majority of the pizza shop sales in 2022 are those with sale prices below $100,000 and those that are generating over $200,000 in seller’s discretionary earnings with quality financials.
With cash being king, especially in this current socioeconomic period, buyers are hesitant to use large amounts of cash for a business purchase and would much rather finance. The caveat to this is that interest rates are very high and the cost to finance that money is greater than a year ago; the financials of the businesses often do not meet the litmus test for bank approval. For these reasons, the market is challenging, and pricing and expectations become key for a successful sale.
There is a return to the traditional dine-in pizzeria, but it remains less attractive to buyers than the pizza shop focused on delivery or one that operates with less overhead. Dine-in restaurants have increased fixed costs associated with rent and utilities. They are more likely to fail in this market because the number of sales required to cover costs is greater than a smaller restaurant. However, plenty of experienced restaurant buyers—those who know how to run a successful pizzeria—are not shying away from this part of the market.
The restaurant industry continues to climb back after a tough couple of years, and that means buyers are more likely to move forward and acquire a pizza shop in today’s market.
Bryan Vitagliano is the leading restaurant broker at Strategic Business Brokers Group, in affiliation with American Realty Brokers. Bryan has helped dozens of restaurant owners sell their restaurants across Arizona.