Buying a Restaurant

Name: Acquisition Stars - M&A Attorney Michigan
Address: 26203 Novi Road Suite 200, Novi, MI, 48375, US
Telephone: +1-248-266-2790
Price range: $$$$

Restaurant acquisitions are fast-moving, lease-dependent deals where the commercial lease and liquor license often determine whether the transaction closes. The physical buildout of a restaurant space is expensive to replicate, making the existing lease the most valuable asset. Health department permits, liquor licenses, and employee transitions add regulatory complexity that requires careful legal coordination.

Typical deal: $100K - $3M Structure: Asset Purchase

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The Restaurant Acquisition Landscape

The U.S. restaurant industry exceeds $1 trillion in annual sales across over 1 million locations. High turnover in restaurant ownership means a constant supply of acquisition opportunities. Most restaurant transactions are asset purchases in the $100K to $3M range, with the lease, equipment, and liquor license comprising the primary assets.

Key Legal Considerations

Restaurant acquisitions involve industry-specific legal issues that general business attorneys often miss:

Commercial lease assignment and landlord consent (the lease buildout can be worth more than the business)

Liquor license transfer or new application (varies dramatically by state and municipality)

Health department permits and any pending violations or inspection issues

Equipment liens and UCC filings on kitchen equipment and POS systems

Seller's food vendor contracts and any exclusive supply agreements

Employee retention for key kitchen and management staff

Due Diligence Checklist: Restaurant Acquisition

Before closing on a restaurant purchase, verify each of these items:

Review commercial lease terms, assignment clause, and remaining term
Research liquor license transfer requirements and timeline in the jurisdiction
Request full health department inspection history for trailing 3 years
Inspect all kitchen equipment and verify ownership vs. leased items
Review POS system data to verify reported revenue
Assess employee situation: key staff, wage obligations, any pending claims
Verify compliance with local food safety, fire code, and ADA requirements

Common Deal Killers

These issues kill more restaurant acquisitions than bad economics:

Landlord refuses lease assignment or demands unreasonable rent increase

Liquor license is non-transferable in the jurisdiction, requiring new application

Health department violations requiring costly remediation before transfer

Why Legal Counsel Matters

Restaurant deals have the shortest fuse of any small business acquisition. Perishable inventory, employee retention pressure, and time-sensitive license transfers mean delays are expensive. Your attorney needs to run lease, license, and permit workstreams in parallel from day one.

Our Process: Restaurant Acquisitions

A structured approach to restaurant acquisition counsel

LOI and Lease Review

We review the letter of intent, analyze the commercial lease for assignment provisions, and research liquor license transfer requirements.

Due Diligence

Health inspection review, equipment assessment, revenue verification through POS and bank records, and vendor contract analysis.

License and Permit Coordination

We initiate the liquor license transfer or new application, health department transfer, and any other required permit changes.

Purchase Agreement Negotiation

Asset purchase agreement with restaurant-specific provisions: inventory valuation, liquor license contingency, lease assignment timeline, and employee transition plan.

Closing

Lease assignment execution, license transfers, inventory count, equipment transfer, vendor notifications, and closing document execution.

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Frequently Asked Questions

Common questions about buying a restaurant

Is buying a restaurant usually an asset purchase?

Yes. Nearly all restaurant acquisitions are asset purchases where you buy the equipment, lease rights, liquor license (if transferable), recipes, trade name, and inventory. This structure protects the buyer from inheriting the seller's debts, tax obligations, and any pending lawsuits.

How does a liquor license transfer work for a restaurant?

Liquor license transfer rules vary dramatically by state and municipality. Some jurisdictions allow straightforward transfers with the business, while others require the buyer to apply for a new license from scratch. The process can take 30 days to 6+ months. Your attorney should research the specific requirements in your jurisdiction before you sign the LOI.

What should I check about the restaurant's lease?

Key lease items to review: remaining term and renewal options, rent escalation schedule, assignment clause and landlord consent requirements, CAM (common area maintenance) charges, personal guarantee requirements, and any restrictions on cuisine type or operating hours.

How do I verify a restaurant's revenue?

Request POS system reports, bank statements, and tax returns for trailing 3 years. Cross-reference POS data against bank deposits. Review credit card processing statements separately. Restaurants with significant cash transactions require extra scrutiny. Utility bills can help verify operating patterns.

How long does it take to buy a restaurant?

Restaurant acquisitions typically take 45 to 90 days, but liquor license transfers can extend this significantly in some jurisdictions. If you need a new liquor license rather than a transfer, budget 3 to 6 additional months. Start the license process immediately after LOI execution.

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