You’re my Blue Sky (Falling)?

*photo by Emily Bauer Photography

In the words of one of my favorite guitar players, Dicky Betts of the Allman Brothers Band, “You’re my blue sky, you’re my sunny day.”   So who is lending on Restaurant blue sky these days? (don’t all raise your hands at once). In case you aren’t familiar with the terminology blue sky, it’s a lender term for goodwill or the intangible assets of a business. With a depletion in funds due to disaster relief, the conservative lending hats are on!  Don’t get me wrong, it is not all doom and gloom , there are lenders doing deals they just are being more conservative.  In the meantime, if you are a buyer and are feeling opportunistic (and do not think the “sky is falling”) maybe you can catch a piece of the sky during this downturn?

Opportunistic restauranteurs looking to expand should look for deals NOW.  With several restaurant closures and seats getting taken off the map, it is an ideal time to lever up (if you can).

Here are some reasons:

  1. Boston liquor licenses are at all time lows.
  2. Deal structure is favorable for buyers with owner financing/earnout structures as the number 1 option.
  3. Excess retail space coming to market driving down PSF rents for restaurants.
  4. Opportune time for credit tenants and regional chains to negotiate new space with landlord incentives.

So what restaurant deals are trading?

  1. Three letters Q-S-R.  QSR concepts are paving the way for deal flow.  ANYTHING with a drive-thru option is desirable.  Free standing, fast-casual concepts where you can get in and out.
  2. We all scream for ICE CREAM.  Ice cream concepts are demanding higher valuations and demand.  Especially with window service. Real estate asset is a must in these deals.
  3. The great OUTDOORS.  If you have outdoor dining, you are in luck. This will most certainly be a “must have” in post pandemic climate.  Restauranteurs are scrambling for outdoor seating approvals to meet the June 8th Gov. Baker opening order. Even those restaurants with limited outdoor seating are finding ways to turn a profit.  Take Boston’s Fort Point Row 34 is adding a take out window deemed “The Window at Row 34”
  4. Seafood.  Seafood Markets and “Clam Shacks.”  People are cooking more fish and who doesn’t love fried clams? A demand in these businesses is apparent.
  5. Seasonal Opportunities.  While many Cape and Islands’ businesses may miss the season due to the pandemic, seasonal opportunities are always desirable.  Typically driven by counter service and outdoor seating, which will remain in high demand.

So who are the underdog’s (for now)?

  1. Function and wedding venues.
  2. Any f/s restaurant with no outdoor seating.  The larger ones may be able to sustain but the 40 seat bistro cannot sustain at 25% operating capacity.
  3. Fine dining.  You can’t wear sweatpants to fancy restaurants and who wants to wear a mask and drop $200 a plate?

I will continue to listen to “Blue Sky” until the lending climate returns to normal and remain optimistic that there are blue skies ahead.


Adam Bauer is the Principal of The Business Exchange and Partner at Ellis Realty Advisors based in Norwell Massachusetts.

The Business Exchange is a Southeastern MA firm specializing in main street/lower middle market Hospitality Sales and Business Brokerage. 


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