Things You Should Know Before Buying A Restaurant In Florida

Buying a restaurant in Florida can turn out to be an interesting experience in the long run. However, if you purchase the wrong restaurant in Florida, then your experience might not end up being so interesting.

Buying a Restaurant in Florida

The first thing you should consider when you are buying a restaurant in Florida is if you are purchasing the assets or the business itself.

Traditionally, it is thought that when you buy a business, you inherit everything that comes with the business, good and bad. It is also thought that buying a business’ assets means that you do not inherit any of the business’ previous liability.

This is not entirely true. According to Florida law, if you buy a company’s asset, you inherit the seller’s sales tax debt. This happens when a buyer doesn’t get a certificate of clearance from Florida’s Department of Revenue. When this happens, you would be liable for the seller’s outstanding sales tax debt, up to the price of the asset.

Other Issues to Consider When Buying a Restaurant in Florida

When you are buying a restaurant in Florida, you should consider the following:

• The confidentiality agreement is very important and sellers should make sure buyers execute it before they disclose proprietary information.
• You should be careful of contract information that broadly describes equipment, furniture, and supplies in a vague manner. The vague language of the contract is likely to lead to dispute in the future. So, make sure the contract is written in clear language.
• When it comes to the sale of stock, you should do more than just checking the restaurant’s financial statement. Make sure that the seller discloses every asset, liability, debtor, vendor, contract, and lawsuit.
• There are three types of valuations you can use to determine how much a restaurant is worth:
  • Market Based: This is the value of similar restaurants in that area.
  • Asset Based: This refers to the book value of the restaurant. It is calculated with by using the restaurant’s asset and liquidation value.
  • Earnings Based: This valuation metric considers the restaurant’s past, present, and future income to debt streams.
• Fixtures and equipment can be depreciated over three to ten years, while you can get longer tax write-off periods for intangible assets. Goodwill cannot be amortized and as a result, buyers try to avoid allocations to goodwill unless there is a need to preserve a minimum amount for the seller’s trademark.
• You cannot enforce a covenant not to compete unless there is a price allocation for the restaurant’s goodwill.
• You should take note of the successor liability. This is a liability imposed on business buyers. Make sure that your agreement has a clear and unambiguous indemnification and defense clause.
• A lot of lease agreements require the landlord’s consent. So, make sure that the seller has already gotten the landlord’s consent to transfer the restaurant’s lease to you. You should also insist on a provision that makes the closing of the deal contingent on the landlord’s written approval of lease transfer.