What Are You Really Buying When You Purchase a Bar or Restaurant?
Purchasing an existing restaurant or bar is a big commitment that comes with plenty of risks, but it can help you get into the hospitality business without getting your bar or restaurant off the ground by yourself. When you purchase a bar or restaurant, you are taking over a premises lease, buying fixtures and equipment, transferring food and liquor licenses and permits, and more.
Every part of your sale needs to be thoughtful, so purchasing a bar or restaurant is a many-step process.
The Space
Most small business owners rent the space they use for their business, which means if you are purchasing a bar or restaurant, you are also inheriting a lease. You need to understand your rent payments, rights, and responsibilities when it comes to using the space.
During a sale, you may be able to renegotiate your lease or even enter into a new lease with the property holder. If the party you are buying the bar or restaurant from has a good relationship with your landlord, however, you may want to stick to the terms of the original lease.
An attorney can help you negotiate the lease.
Plumbing, Electrical, Ventilation, and Climate Control
In commercial leases, tenants are usually responsible for maintaining the systems they use (plumbing, electrical, etc.), but the systems stay in the building even after the lease ends. The bar or restaurant owner likely spent a lot of money making “leasehold improvements,” and if you’re purchasing, you may pay some of the price.
For example, if the previous owner of the bar or restaurant you are purchasing recently updated their plumbing system, the price of the bar or restaurant may be higher.
Fixtures and Equipment
A restaurant would not function very well without a stove and an industrial dishwasher. If you are buying a bar or restaurant, chances are, you are also buying the fixtures and equipment inside. Sometimes, the seller may want to keep certain equipment, so you may have to buy a new piece of equipment, but most often, sellers let you keep fixtures and equipment for a nominal fee.
Including an industrial fridge in a restaurant purchase, for instance, costs much less than transporting the fridge, but a baker may want to keep their favorite proving oven. Sometimes, restaurant owners may rent their equipment or fixtures with plans to reclaim and sell the property later.
Your sales contract should have a list of what fixtures and equipment are included with the sale. Again, an attorney can help you negotiate.
Licenses and Permits
Bars and restaurants that serve alcohol must have liquor licenses, and restaurants must have food handling permits and other documents. If you are purchasing an existing bar or restaurant, these licenses exist, but they are in someone else’s name.
As such, you will need to transfer them for your new bar or restaurant to legally operate.
Scaringi Law has a reputable liquor licensing practice to help you transfer licenses and permits with ease.
Finances
When you purchase a bar or restaurant, you put yourself in the middle of that business’ cash flow – or lack thereof. Make sure you understand the full financial picture before purchasing a bar or restaurant.
If the business you are purchasing is profitable, it will likely be more expensive. Sellers can anticipate the expected cash flow, but nothing is certain.
To get the best price, consult an attorney who can help you evaluate the price of purchase and negotiate if that price is unfair.
Goodwill and Reputation
One of the biggest benefits of buying an existing bar or restaurant is the business’ reputation. If people already love the bar or restaurant you are purchasing, you will get instant name recognition and loyal customers.
If your business is plagued by bad reviews, however, that bad reputation can be hard to overcome – even if you host a grand reopening and advertise new management.
Noncompetition Agreements
If you are buying a bar or restaurant, you will want to decide if you are also buying the brand. You may choose to rebrand your new business and update the name, logo, and menu, or you may want to keep things just how they are.
You may have to purchase the seller’s intellectual property if you want to keep things the same. To protect yourself, you should also have the seller sign a non-compete agreement, so they do not open a competitor shop next door or move their reputation and goodwill to a business across town.
A Business
Once the sale is complete, you have purchased an entire business – and you will have to look after it. At Scaringi Law, we can help you start your business, maintain legal compliance, and protect your investment from beginning to end.
If you are considering purchasing a bar or restaurant, please call us at (717) 775-7195 to discuss your situation or contact us onlinefor the quality legal solutions you need.