Four Things to Keep in Mind When Buying a Food Service Business
Food businesses have never been more popular. At a basic level, food, as something we consume every day, is always on our minds. But the celebritization of the industry via competitions, the Food Network, and wildly successful concepts has brought a new level of interest to this marketplace. Food service businesses have some particular things you need to keep in mind when doing your due diligence.
Lease
Every lease is different and every landlord is different too. A restaurant’s location is intimately tied to its value so if you can’t retain the location, there’s no guarantee that the business will survive. You need to make sure that the lease can transfer to you, and sometimes there is a long vetting and qualification process before such a transfer can be affected, so don’t delay the application process. If given the proper attention, this is rarely a problem, but we can give you plenty of stories of deals that got held up or actually torpedoed because of problems with the lease.
Equipment
If the equipment is leased there will often be maintenance records that go along with them, but if the equipment is owned, find out what the maintenance record is. Find out what condition the equipment is in. Look under the hood. Kick the tires, gently.
Liabilities & Licenses
There are certain charges that follow the business, not the owner. This can include unpaid sales taxes and health code violations. Have your attorney check with the relevant agencies. It’s not about not trusting the seller. It’s about trust, but verify.
Non-compete
If it’s a chef-owner, this should be a given. These people have often (rightfully) earned a following and if they don’t sign a non-compete, they can decide (not even spitefully, but just because they want to) to open up a restaurant (similar or otherwise) near you, which could seriously hurt your business. A non-compete shouldn’t be a deal breaker, and it’s not meant to bury the seller, but rather to protect the buyer. The seller should want the buyer to succeed, so this makes sense all the way around.
Food service business can be tough, but rewarding in their own ways. If you are serious about buying into one, or selling one you’ve cultivated, give us a call. We’ve got the experience to help you.
