How to Close Your Restaurant: General Best Practices
Making the decision to close your restaurant is never easy. With so many factors at play, it can feel daunting on even knowing where to start. I personally went through this in 2009 when I had to close my restaurants due to the Great Recession. It was one of the toughest experiences in my restaurant career but as a result, I gained an immense amount of knowledge on how the process worked.
Here are some general best practices on what steps you will likely need to take to make the transition as smooth as possible. Please note that this is not intended as legal or professional advice. We highly suggest you speak with your trusted advisors to assist you in making the best decisions for you and your business.
- Speak with your accountant and attorney. A business attorney who is experienced in business closings can be a huge help in deciding whether to file bankruptcy as well as guiding you through the closure process. In addition to dealing with sometimes recalcitrant landlords and other creditors, an attorney can alert you to any potential liabilities you may have not considered or any steps you might omit. Even more important may be seeking the advice of an accountant or tax expert, who can advise you on the tax consequences of selling assets, the various tax forms you'll need to file, and ways to take advantage of your business losses for tax purposes. While the majority of small business owners can wind up their business affairs (and protect their personal assets) without filing for bankruptcy, if you have a heavy debt load and creditors who won't settle for less, bankruptcy may be your best, or only, option. If you do file for bankruptcy, it will be your first step in the closing process.
- Prepare an official statement for your staff and the media. Be prepared to receive comment requests from the press and be sure to designate a public relations/press contact to speak on behalf of you or your business. Update your website as well to let the public know of your decision and inclulde a closing date if possible.
- Relocating Staff: Don’t be afraid to contact your peers. I personally contacted several restaurateurs and offered my staff to them following the announcement of my closure. Thankfully, most were hired within a few days. The Georgia Restaurant Association (GRA) will gladly make an announcement for you in our member communications to assist. Non-profit organizations such as the Giving Kitchen can also be of help in getting the word out. If you have a team member who can assist you with this, see if you can keep them on board for a while longer to help and offer them a small bonus.
- Call your vendors personally but don’t change your number. Responding to calls will be very important to maintain your credibility and to be able to negotiate. Don’t forget to let vendors such as your linen company know to come and pickup remaining inventory.
- Set your date for getting everything done. You will need this date to confirm with your landlord and vendors. Be realistic in your planning in that you may need to keep a few team members on board to help with other closing tasks. Always remember that they know you are out of business and the loyalty may now be different. Be sure to keep alcohol and other valuables secured to prevent any potential theft.
- Remove signage.
- Contact credit card companies to discontinue merchant services.
- Remove all certificates and licenses from your location(s) and secure them with other important documents. Arrange to have a place for all your documents stored. You will need your payroll records for your workers compensation insurer to audit and return any overage on your workers compensation insurance. Also contact them to end the coverage for your staff when all closing tasks are complete.
- Fill out the separation notice form for each terminated employee and submit no later than 3 days to Georgia Department of Labor. Employers with 25 or more employees can fill out a Mass Separation Notice form and must file it within 48 hours of separation.
- Collect all outstanding accounts receivable for billing accounts.
- Notify and cancel all upcoming reservations. If you have any large groups booked you will need to refund deposits. I highly suggest contact fellow restaurateurs and ask them to work with those guests to rebook their parties with their events team. Contact your reservations service and shut down the system after you have cancelled your future reservations. Keep in mind that once it is shut down you can’t get back into it.
- Call your broad line distributor to pick up any unopened product and to credit your account.
- Contact local food banks to donate food. They can help you to determine what foods/items can be donated. Ask for food bank volunteers to pick it up if possible.
- Inventory all remaining alcohol and contact your distributor(s). Arrange for your distributors to pick up what can be returned and request a refund.
- Check to see if your Furniture, Fixtures & Equipment (FF&E) is subordinated to the landlord, if not sell it off. Check to make sure that anything that is not the landlord’s (e.g. open table terminals, leased POS equipment, dish machines, soda systems, grease trap systems, etc.) are arranged for pickup as well as anything that is leased or borrowed. Don’t forget to remove your personal property.
- Submit your final payroll. Ensure that your payroll company is filing all of your final employment tax returns and be sure to request that they run your W-2s in January. You might have to prepay.
- Submit your final sales tax returns.
- Copy all of your computer data to the cloud or a portable hard drive and erase all data from the computers.
- Prepare letters to Internal Revenue Service (IRS), Social Security Administration (SSA), U.S. Department of Labor, Georgia Department of Revenue. Check with your accountant to confirm if you are under one account or more for these departments. Be sure to also notify your local Health Department, County Tax Assessor, property tax, alcohol license department, and your local police.
- Arrange for utility shut-off. Contact your phone company, gas, electric, music system, etc. with a turnoff day. Provide them your forwarding address for final bills and arrange for the return of any prepaid deposits.
- Clean your restaurant and return the keys.
- Close bank accounts when and if appropriate.
- Last but not least, always remember that you gave it your all. You had a great run, made a lot of people happy and with one door closing another one opens. Don’t beat yourself up and keep your head high. You are not alone in this experience.
Please know that the Georgia Restaurant Association team and I are always available to assist you in locating resources. Feel free to contact us directly.
Karen Bremer, CAE, is the President + CEO of the Georgia Restaurant Association.