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The recent Autumn Budget’s reforms have increased employment costs, business rates and placed additional financial pressure on businesses, particularly in the hospitality sector.
Not every hospitality business will be able to survive these rising costs, leading some owners to consider selling their restaurant.
When you make the difficult decision to sell, the process can feel daunting, as a sale is rarely just about agreeing on a price. There are licences, property arrangements, contracts and legal paperwork to consider.
Our commercial property expert, Kathryn Moore-Smith, explains how early preparation and the right legal support can help your restaurant sale run more smoothly.
What is the first step in selling your restaurant?
Businesses’ sales can often be delayed or fall through due to missing or unorganised paperwork.
When you decide to sell you must start preparing documentation and give yourself enough time to resolve any issues that may arise from buyers.
You must gather your lease or title deeds, premises and personal licences, employment contracts, supplier agreements, insurance policies, utility information and details of any equipment leases or finance.
If you are unsure whether a document is relevant to your sale, you should seek legal support to advise you on what is required at every stage of the process.
Does a leasehold or freehold premise affect the sale?
Property is often the most important part of a restaurant sale, as its location has a direct impact on footfall and accessibility.
If you own the freehold and are selling alongside the business, this will involve a commercial property transaction. This will include title checks, searches and mortgage redemption, if applicable.
If the premises are leasehold, the lease will usually require the landlord’s consent to assign it to a buyer.
This process can take time and may involve references, financial checks, rent deposits or guarantees.
Any lease issues, such as upcoming rent reviews or repair obligations, should be identified early on to avoid last-minute complications.
Energy Performance Certificates (EPCs) must also be considered as commercial premises must meet the minimum energy standards. A buyer may require evidence that the property is compliant and understand what improvement works may be needed.
Fire safety documentation and evidence of planning consent for the current use of the premises are also commonly requested during due diligence.
A solicitor can review these obligations in advance and address any issues and risks before they become a problem.
Dealing with commercial property compliance early can help you reduce the likelihood of last-minute negotiations or delays to completion.
Why should you check your licences carefully?
When considering a buyer, alcohol licensing can cause unlikely problems.
While a premise licence stays with the premise, personal licences remain with individuals and do not transfer automatically.
Therefore, the buyer must have an appropriate licence holder in place before trading.
It is also essential to check that all licences are in the correct legal name and up to date as any errors or expired licences can delay a sale.
What are your legal obligations to your employees?
If you are selling a trading business, TUPE (Transfer of Undertakings (Protection of Employment) regulations are likely to apply.
This means employees automatically transfer to the buyer on their existing terms and conditions and you must inform and consult staff before this. Failing to do so can result in legal claims.
Accurate staff records, including roles, pay, hours and start dates are essential and will form part of the buyer’s due diligence.
What do you need to know about sale agreements and warranties?
The restaurant sale will be documented in a business or asset purchase agreement.
This sets out what is being sold, the price, completion arrangements and the warranties you give about the business.
Warranties are legally binding statements about matters such as licences, employees and disputes.
Any known issues should be disclosed properly to reduce the risk of claims after completion.
How can we help support your sale?
When selling your restaurant, you should be clear about what is included in the sale, such as stock, fixtures, equipment, branding and online presence.
Selling a restaurant comes with legal and regulatory risks, but these can be managed with the right support.
We can guide you through process and spot potential issues early and liaise with landlords and buyers’ solicitors.
Our expert team can help draft and negotiate your agreement so that you can feel confident that your sale is structured properly.
If you need support with sale of your business and your commercial property obligations, please get in touch with our expert team today.
Solicitor – Commercial Property Department
My role with Mander Hadley involves specialising in commercial property transactions. I particularly enjoy the intricacies and complexities of Property Law and, as an empathetic lawyer, I aim to provide my clients with a personal, friendly and professional service.
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