Buying a restaurant is not the same as buying a generic small business. You are acquiring cash flow, equipment, permits, a lease or real estate, and often a brand customers already recognize. The right questions early in the process prevent expensive surprises after closing.
Revenue and financial quality
Ask for three years of tax returns, trailing twelve months of POS data, and bank statements that reconcile to reported sales. Understand seasonality, catering or event revenue, third-party delivery mix, and whether recent sales reflect a one-time boost or sustainable demand.
Clarify what is included in reported seller's discretionary earnings. Owner salary, one-time expenses, and related-party rent should be adjusted transparently. If the seller cannot document numbers cleanly, assume diligence will take longer and the risk premium should rise.
Lease and real estate
Confirm remaining lease term, renewal options, base rent, NNN or CAM history, and whether the landlord will consent to assignment. Review personal guarantee terms and whether the seller can help negotiate a release or partial release at closing.
If real estate is included, separate the business valuation from the property valuation. A strong business on a weak lease is a very different asset than fee-simple ownership with a profitable operation.
Equipment and infrastructure
Inspect hood class, exhaust, grease trap size and maintenance history, walk-in condition, HVAC capacity, and electrical service. Restaurant equipment has latent maintenance issues that are expensive after closing.
Ask for an equipment list with approximate age and whether items are owned, leased, or subject to UCC filings. Confirm what transfers in an asset sale versus a business sale.
Permits, licenses, and compliance
Verify health permit status, alcohol license type and transfer eligibility, signage rights, patio or sidewalk seating approvals, and any outstanding violations. Permit transfer rules vary by city and state; some require new applications when the operating concept changes materially.
Staff, vendors, and transition
Understand which staff are expected to stay, whether key managers are under contract, and how vendor accounts and credit terms transfer. A smooth transition plan reduces revenue drop in the first 90 days after closing.
Deal structure
Clarify whether the transaction is an asset sale, business sale, or property sale. Each structure has different tax, liability, and permit implications. Ask about seller financing, training period, and non-compete terms.
Document everything in a letter of intent before legal spend accelerates. Restaurant deals often die over lease assignment, license transfer, or unrealistic seller price expectations — the earlier you surface those issues, the less you spend on dead deals.
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