Sale and purchase of takeaways and restaurants in England
We at Martinsons Legal know how stressful it can be when looking to buy or sell a food business. As specialists in the sale and purchase of restaurants and takeaways we have guided many individuals, companies and families through the process with the aim of taking the burden off your shoulders.
With our dedicated Cantonese and Mandarin speakers throughout the firm, we have particular experience in handling the sale and purchase of Chinese, Cantonese, Malaysian and other Asian food businesses.
This article is the first in a series on buying and selling food businesses in England. In this first article, I will give an overview answering some of the key questions which my clients ask me at the outset of a sale or purchase.
What Am I Actually Purchasing?
Generally speaking, when people refer to the purchase of a restaurant or takeaway business, they are talking about buying the following specific assets of the business:
A lease: almost every restaurant business runs from a property with a formal lease with a landlord. On the sale side, you will likely need to involve your landlord in the process, as their consent is often needed to a sale (also know as an assignment of lease).
Goodwill: this term covers the business’ reputation, customer loyalty, brand recognition and other such intangibles which give a business value and give prospects of earnings over time in spite of the change of ownership.
Fixtures, Fittings and Equipment: these are physical items used within the business such as cooking equipment, plates and cutlery, tables and chairs etc.
These are the key components and assets of value in a food business, and each will be given a valuation as part of the sale.
What is the main legal document in the process?
As you might expect, there is a sale and purchase contract to be negotiated and agreed between the parties. This will regulate the of transfer in ownership of assets from Seller to Buyer but will also outline important considerations, such as:
who is responsible for debts of the business before the sale and what about profits generated before the sale but to be realised after completion?
whether the seller should be restricted in some way after the sale i.e. it is common to prohibit the seller from operating a similar restaurant business in the locality for a certain amount of time or prevent them from taking key members of staff with them.
Who should be liable for legal action for incidents which occurred before completion, but the claims only materialise after the sale of the business.
These issues are complex and will require negotiation and compromise by all parties involved so it can take some time for the contract to be in agreed form.
Can the Landlord say “no” to the sale of the business
Under most commercial leases, a landlord can refuse their consent to assign a lease to a new tenant but only when it is “reasonable” in all the circumstances to do so. In our experience, though, it is relatively rare for a landlord to refuse consent as they would prefer to have a tenant who wants to run a business from the premises rather than one who has lost interest.
Most leases require the outgoing and incoming tenant to enter into a formal licence with the landlord – called a Licence to Assign. Often the outgoing tenant will be responsible for the landlord’s costs towards this licence.
How long will it take to complete?
There is no single answer here, unfortunately, as each case is unique.
Often, though, we are looking at months rather than weeks because there is a complex contract to agree on, as well as a good deal of due diligence for the Buyer’s lawyer to complete. Not to mention also that the Landlord’s involvement to consent to the change in ownership of the lease can cause some delays.
How much will it cost me?
Again, there is no single answer. But if you reach out to us here, we will happily discuss your situation and to provide you with a fixed quote for the work.