Five Things to Look Out for in Any Restaurant Purchase

But don’t let the allure of being a restaurateur distract you from the risks and challenges that come with acquiring any business. It is not uncommon for new restaurant owners to be hit with legal problems and liabilities long after the deal has closed. No matter what kind of restaurant you aspire to have, you must take into consideration some of the following:

Be Wary of Existing Liabilities

Every business stands a chance of accruing legal liabilities that can carry over to the purchaser. But in many respects, restaurants are especially likely to have this problem, given the additional regulations that are applicable, such as health codes, compensation matters, or an alcoholic beverage license. Any such violations, liens, or lawsuits will become your responsibility – whether you know about them or not. Thankfully, there is a reliable way around this problem: you can specifically purchase only the business’ assets – such as the physical location, equipment, and inventory – rather than the entire business. This is best achieved via a Limited Liability Company (LLC), which offers a versatile and easy way to acquire a business’ assets without any of the legal baggage.

Nonpayment of Sales Tax

If you purchase a business that owes taxes, you’ll be stuck paying it off and dealing with any consequent audits. This is a particularly common issue in the restaurant industry, where many establishments won’t adequately report all their revenue in order to reduce their sales tax rate. Ensure that the seller can provide proof that they are up to date on all paying all their due taxes. The firmest guarantee will be to request that the seller obtain an official Sales Tax Clearance letter from the Florida Department of Revenue.

Check Out the Current Lease Agreement

Purchasing a business means that the existing lease must be assigned to you. Just about every commercial lease stipulates that the lessor must consent to the assignment, and being approved usually requires, at minimum, that you provide proof of your ability to pay rent. However, every lease is different, and there may be many other perquisites and parameters determining whether the lessor will accept you. Request that the buyer provide a copy of their existing lease and scrutinize it carefully to ensure that the terms and conditions are favorable. It is ideal that you contact the owner to find out more information regarding the approval requirements and process, as well as any other provisions you may be concerned about. Plus, it never hurts to introduce yourself.

Transfer of Alcoholic Beverage License

To continue selling alcoholic beverages, you will need to have the seller’s license transferred to you by filling out and submitting an application – ABT-6002 – to a local branch of the Florida Division of Alcoholic Beverages and Tobacco. The main paperwork and instructions are available on the state website, but the fee can cost up to $5,000 and there are a host of other requirements, such as fingerprinting, zoning approval, health approval, and the like.

Check the Inventory

Just about any restaurant transaction will include the purchasing of critical assets such as kitchen equipment, appliances, and other important inventory. Given how expensive it can be to acquire these tools, restaurant buyers are often eager to accept them as part of any sales contract. But do a thorough inspection prior to closing to ensure that the entire inventory is accounted for and in working order. Also make sure to receive proof that the equipment is legally owned by the restaurant, and that there is no lien placed on the items by a creditor. If the equipment is leased, then you will need to obtain an assignment transferring the lease to you.

These are just a few of the considerations to take into account when purchasing any restaurant. Looking out for these issues will ensure that your exciting venture into the restaurant business will not be tainted with costly and time consuming liabilities. To better ensure that your interests will be optimized and safeguarded, it is best to enlist the expertise of a qualified business attorney.