Common seller tricks in restaurant
Sellers often show a strong season, stay vague about cash, and talk as if a liquor license and a lease assignment were paperwork instead of the deal itself.
- Cash or unreported sales mixed into a story about ‘the real numbers.’
- A chef-owner or personality chef described as if the room will run the same without them.
- Gift cards, large-party deposits, or unpaid vendor bills that are liabilities, not atmosphere.
- A lease that cannot be assigned, or a rent that steps up after the sale.
- A liquor license that is not transferable on a timeline that matches your close, or at all.
Which numbers to verify
Prime cost — food, beverage, and labor — is the first test. Look at weekly sales, not an annual number, and at a full year of seasonality. Reconcile deposits, card batches, and, if they insist on cash, a serious explanation. Recast the owner’s hours in the kitchen and at the door. Vendor aging, unpaid sales tax, and gift-card liability should be on a schedule, not discovered at close.
Licensing and key-person risk
Health permits are tied to the premises and the operator. A liquor license is often the longest pole in the tent and may require a new application, a hearing, or a transfer that can lag the asset close. Confirm with counsel and the issuing authority, not just the seller’s optimism. Sales-tax accounts and music or patio permits can also be required.
Equipment and condition
The line, refrigeration, dish machine, and HVAC in the kitchen have remaining life and health-code implications. A walk-in that is failing is both a capex item and a food-safety risk. Confirm what is owned versus leased (POS, coffee, dish, ice), and that the landlord will accept your equipment plan. A hood and fire-suppression inspection should be current.
Seasonality and the calendar
Tourist rooms, campus rooms, and even neighborhood rooms have a calendar. A December that pays for January should be in the weekly numbers. Do not annualize a patio season. Staffing follows the same curve; a buyer who closes after the holiday rush can inherit a thin crew.
Customer concentration
A lunch-only office crowd, a hotel contract, or a delivery platform can be a large share. If one office park emptied or a platform changed fees, would the room still work? Catering for one company is concentration too. Reviews and a regular bar crowd are assets only if they attach to the place, not just to the owner.
Questions to ask before you make an offer
- Please provide weekly sales for at least two years, with card batches and deposits to match, and a clear treatment of cash.
- What are food, beverage, and labor costs as a share of sales, and may I see prime-cost reports?
- What is the lease term, assignment language, rent schedule, and any personal guaranty?
- What is required to transfer or replace the liquor and health licenses, and how long has that taken for similar rooms?
- How many hours does the owner still work in the kitchen or at the door, and who would replace that work?
- What gift-card, deposit, and vendor liabilities exist today?
- Which equipment is leased, and what inspections are due on the hood, fire system, and refrigeration?
- What share of sales is dine-in, delivery platforms, and catering, and at what fees?
- Are there unpaid taxes, health-hold issues, or open claims?
- After an LOI, may I speak with your accountant and, with a plan, your landlord and key staff?