Buying a restaurant is many people’s dream. When that dream is realised, however, some people neglect to consider the legal issues (because choosing the wine list is much more exciting, obviously). But there are some potential legal issues every purchaser or prospective purchaser must consider when buying a restaurant to ensure the transaction goes ahead smoothly and you actually get what you pay for. Otherwise, you may end up with a very bad taste in your mouth!

Here is a short list of some of the more important things that you should be aware of when you’re buying a restaurant.

Food and safety certificates

This is pretty obvious, however it is often overlooked. All restaurants will need a food safety certificate (or equivalent) in order to operate. This means that without it, you won’t be able to run your restaurant. In some cases, the vendor will have existing food safety certificates that can be passed onto you, otherwise you will need to obtain your own, and this can vary from place to place. Accordingly always check with your local council, or get into contact with us, and our small business lawyers will be able to assist you.

Stock and equipment

Always organise a stocktake to occur as part of the sale, with the sale price to be adjustable dependant on the value of the stock. Here, ‘stock’ can apply to food/ wine and even some equipment. This way you’ll know what exactly you’re buying and whether you’ll have enough stock to keep the restaurant going. You should only pay for saleable or fresh produce, and equipment that actually works. There is no point paying top dollar for bad oysters!

Sometimes, something that you thought was part of the equipment that you were going to buy turns out to be rented and is returned to the lender as part of the sale. The best way to get around this is to ensure that the seller gives you a list of all of the equipment that is transferred and to let you know if any of the equipment is being borrowed, and facilitate transfer of the lease.

Finally, always ensure that you inspect the equipment before buying a restaurant. This way you’ll be able to determine whether the equipment is in good working order and be able to raise any concerns to the seller before you complete the sale.

Suppliers

Without suppliers, you won’t be able to get the best quality ingredients to prepare your food. Accordingly, unless you have your own existing suppliers, include a clause in the contract that requires the seller to introduce you to the existing suppliers and for them to also provide you a copy of the contract that they have with the suppliers. This way you’ll be able to negotiate similar terms with the existing suppliers. If you would like to renegotiate any supplier contracts, our small business lawyers will be able to help you get the best deal.

Employees

Sometimes, the success of a restaurant will be attributable to the skill of a chef. What would Aria be without Peter Gilmore?

If you intend to keep the existing employees on, you’ll need to have the seller introduce them to you and for you to be given an opportunity to employ them. The best way is to provide them with an employment agreement which is entered into concurrently with the settlement of the sale. Generally, this will be done on the existing terms that the employee is currently on.

Also, with most employee transfers, it’s a good idea to have the seller pay out all of the employee’s current benefits. This way you can start fresh and not have to worry about this.

Social media

With online reviews and social media being such an important part of getting customers, most restaurants nowadays have an online presence. Accordingly, you should always ensure to ask the seller whether they have any online presence and have them transfer you the access to these accounts as part of the sale.

Liquor Licence

There is not much point carefully choosing the wine list if you don’t have a license to serve it. The transfer of such licenses can take some time and involve some paperwork, so this issue should be addressed well before the proposed settlement.

Conclusion

Buying a restaurant is an exciting prospect. As with all commercial transactions though, there are always things to watch out for. Contact some of the best small business lawyers in Australia and we’ll make sure that your new restaurant gets off the ground without a hitch.

Emma Jervis

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