Example · Red Flag Report

Millbrook Diner

Independent restaurant · Asking price $520,000 · 3.71x SDE (typical 1.5x–2.5x)

Red Flag Score

33/100

High risk

Triggered flags

Revenue is declining

-15 pts

Revenue moved from $920,000 to $710,000 — a -22.8% change over the disclosed period. Declining top-line is a serious signal.

Asking price is far above typical range (3.7x SDE)

-20 pts

For independent restaurants, buyers typically pay 1.5x–2.5x SDE. This deal implies 3.7x — about 49% above the top of the range.

Short lease (1.0 years remaining)

-12 pts

With less than 3 years on the lease and no renewal option, the business could be displaced or face steep rent hikes right after you close.

Client contracts are mostly month-to-month

-10 pts

Most client relationships have no contractual commitment. Revenue can churn quickly, especially during an ownership transition.

Business depends heavily on the current owner

-10 pts

The owner personally handles most client relationships and there's no management layer. When they leave, key relationships and know-how can walk with them.

Ask the seller

Questions to bring to your next conversation

01
What has driven the decline, and what specifically will change under new ownership to reverse it? Can I see monthly revenue for the last 24 months?
02
What specifically justifies pricing this deal above the typical range for the category? Are there hard assets, recurring contracts, or growth drivers I can verify?
03
Can we negotiate a lease renewal or option to extend as a condition of closing? What are the landlord's plans for the property?
04
Which clients would agree to sign a 12- or 24-month agreement before or at closing? Can we make signed agreements a condition of the deal?
05
Will you agree to a 6–12 month transition consulting arrangement, and are you willing to make personal introductions to every key client and supplier?

OpenBook gives an informational starting point for evaluating a potential acquisition. It is not legal, financial, tax, or investment advice, and does not replace due diligence by a qualified accountant or attorney before any purchase.