Restaurant Law Blog

Tuesday, June 12, 2012

How to Save Money When Buying a Restaurant

It amazes me how often clients come into my office having identified a restaurant or bar they want to purchase, but are otherwise unaware of the significant out-of-pocket costs they will incur through the process. If you want to keep costs within reason, consider:

1. If you know you will need and attorney, accountant, broker, consultant, etc., ahead of time, then hire them ahead of time. Often work can be completed more timely and with greater efficiency with advanced planning. Delay and an increase in cost is inevitable whenever you ask your team to drop everything to handle a last minute transaction which requires permits and licenses to be obtained and due diligence to be performed.

2. Following on that note, perform all due diligence ahead of time. How well do you know the seller’s business? Has he/she previously tried to sell the restaurant and if so, why did it fail. Are there any vendor or sales tax debts, pending lawsuits or UCC liens of concern. Can you obtain all desired licenses and permits for the location and if so, how long will the process take. Answering these questions ahead of time will save you a lot of money.

3. What are the terms of the deal? Do not wait until you have an attorney involved to hash out necessary terms such as key money, assets to be acquired, rent, lease term, build-out periods, landlord contribution, contingencies (i.e. liquor license approval), etc.

4. Once key terms are in place, set a reasonable deadline for closing and stick to it. Flexible deadlines are always moved and almost always lead to cost increases. By adhering to established dates, work is performed without delay and will permit you the greatest opportunity to get open, operating and generating cash flow more quickly.


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