4/13/2023 | Retail

Thinking of selling your garden centre? Consider your options.

Garden Centre Director, Tom Glanvill advises operators on the three simple options when considering the sale of their garden centre business.

Are you thinking about how you can take a step back from the day to day running of your garden centre business or considering selling? It’s important to consider all of your options when it comes to the type of sale that’s right for you. This will depend on the level of longer-term involvement that you wish to have in the business. Essentially, you have three simple options.

1. Implement a management team

The first option is to build a solid and reliable management team that can run the business day-to-day. This can sometimes work but it is more often the case that either; owners are unable to fully pull back from the business and still need to make many day-to-day decisions or that without longer term strategic decision making from the owners, businesses tend to drift, fail to innovate and profitability declines.

2. Sell the business on a leasehold basis

The second option is to retain the freehold but turn it into a commercial “buy to let” by creating a lease and selling this to a third party who will operate the business. With the right tax planning this can be a very good model as rents are often as high as 50% of profits. For an owner working a six-day week and long hours, the prospect of receiving half of this income passively may be very appealing!

Selling the lease may not be the end of the story, as once a commercial investment has been created owners can enjoy the rent for a period and then look to find an investor to purchase the land – there are a large number of private and institutional investors looking for commercial property with rental income. Garden centres which often occupy large sites on the end of towns are clearly of great appeal as they offer strong income as well as long-term potential for change of use or further development.

It’s important to keep in mind that granting a new lease means you remain involved and responsible for the ‘Landlords Covenants’ (obligations). The landlord leases out the property on lease terms agreed between the parties at the outset. The RICS “Code for Leasing Business Premises” provides a helpful checklist of principal terms to negotiate before approaching the legal process of granting a lease, but of course if you speak with us we can offer our advice and experience.

3. Sell the freehold

The final option is to sell the business and property in its entirety. This is the route that most owners take, indeed 80% of the garden centres that Christie & Co have sold in the last six months have been a complete sale of the business and property. Selling the freehold generally results in much greater proceeds and the opportunity to start afresh.

Unlike many other garden centre agents, Christie & Co do not charge to discuss the likely market value of your site and having sold considerably more garden centres than any other agent in the last five years, we are well placed to offer this advice. Once we have advised on the likely sale price it is wise for owners to speak with their accountants as it is important to have the mechanism for the sale agreed and other important tax considerations understood before you go to the market. Simple things like will it need to be a share sale or asset sale, what will the apportionments between land and goodwill likely be are key considerations and can have significant cost implications for both sellers and buyers.

The process of selling a business is complex, from how to handle the transfer of staff, issues of stock and assets such as vehicles and fork lift trucks, often complicated land issues such as rights of way, planning issues, overages and concession leases. If you’re considering the sale of your garden centre business it’s important to speak with a specialist agent with the requisite experience.