Buying an existing hospitality business

Buying an existing hospitality business 2017-06-01T13:06:11+11:00

A common way to open a hospitality business is to buy an existing one. It usually comes with everything needed to walk in the door and start trading. Cash flow from day one.

If you’re not planning to carry on that restaurant or bar under that name, the business should come with the licences and permits needed to operate a similar business. A good way of avoiding the time, cost and uncertainty of applying for planning permission and a liquor licence and the rest, at the expense of paying for goodwill.

Whites Legal helps new hospitality businesses get established with:

  • Contracts for buying the business
  • Your legal structure
  • Due diligence. We’ve included a list of some of the things we look for below
  • Transferring the lease, business name, food safety registration, liquor licence, trade marks
  • Varying the existing planning permission
  • Employee agreements
  • Solicitor’s certificate for those becoming a franchisee

Get the lawyers involved

You’re probably paying hundreds of thousands of dollars for the business. Please don’t skimp. It’s worth the few thousand dollars for a lawyer (any lawyer!) to look over the deal. It’s a sensible investment. We lawyers analyse these kinds of documents all the time.

Know what you’re buying

Get your due diligence done. Some of the things to look and ask for:

  • Seller’s legal identity. Who (or what) are you buying from?
  • Property title. Any strange restrictions on use? Is it used pursuant to existing use rights or a planning permit?
  • Planning permission. Does it cover how you want to run your business?
  • Liquor licensing. Is it consistent with the planning permission? It might not be. Does it have a good star rating?
  • Lease. Got a copy of it? How long is left on the lease? Can it be assigned? Will you enter into a new lease? Who is the landlord? How much are outgoings?
  • Financial books of the business. Are the numbers consistent with what the seller says? You can’t trust the books if there’s a lot of unrecorded cash wandering around. Be sceptical about the seller’s valuation of the business.
  • Food safety register. Get an inspection report. Any convictions (which can stay with the premises)? Any failures to comply with requests which would prevent transfer? The inspector will be back – when did they last come?
  • Employees. Are you keeping any? Who’s paying for leave?
  • Carrying the business on in the same name? Check the business name and any trade marks.
  • Supplier agreements. Big suppliers, alcohol supply, ATM agreements.
  • Those other agreements: car parking, storage, rubbish, waste areas, disposal, hire purchase.
  • Plant and equipment. What are you getting?
  • PPSR. Any charges or security interests? Security over the liquor licence?
  • Buying a business for less than $350,000 that doesn’t have a liquor licence? Need a Vendor’s statement / Section 52 Statement.
  • Buying a franchise? Get the franchise agreement and an updated disclosure statement.

Let’s get you started

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Call us on 1300 797 512