Why this list exists

Most buyers who lose money on a restaurant purchase didn't lose it because the food was bad. They lost it because of something on this list they didn't verify before they wrote the check.

Use this as your pre-offer checklist. If any item is unclear or missing, slow down.

Lease (items 1–3)

1. Remaining lease term. Anything under 5 years is a yellow flag. Under 3 years is a red flag — you're buying a business with a built-in expiration date.

2. Lease assignability. Read the assignment clause in the lease itself, not what the broker tells you. Ask: "Will the landlord transfer the lease to me on the same terms?" Get the answer in writing before the offer.

3. Rent-to-revenue ratio. Aim for under 10%. Over 12% means margins are thin and any revenue dip is fatal.

Finances (items 4–7)

4. Three years of tax returns — not just P&Ls. Tax returns are what the IRS sees; P&Ls are what the seller wants you to see.

5. Bank deposit logs — match against reported revenue. Cash businesses often have 15–25% unreported income; deposits will show the real number.

6. POS reports — Square / Toast / Clover exports for the last 12 months. Look for trends (growing, flat, declining) and day-of-week patterns.

7. Vendor accounts — current with all suppliers? Net 30 or COD? A restaurant on COD has cashflow problems even if revenue looks fine.

Licenses & permits (items 8–10)

8. ABC license type and transfer eligibility. Type 41 (beer & wine) or Type 47 (full bar)? Has the owner had any disciplinary actions? Transfer takes 45–90 days — budget time.

9. Health permit history. Pull the public health inspection record. A history of violations is a maintenance / training problem you're inheriting.

10. Local business license. City-specific. Ensure transferability and check for any open code violations.

Equipment & operations (items 11–12)

11. Equipment list with age and condition. Restaurant equipment lasts 7–12 years. If the hood is 11 years old, budget $15K for replacement in the next 18 months.

12. Employee status and key staff. Will the head chef stay? The manager? Restaurants with high turnover risk lose 20–40% of revenue post-sale if key people leave.

Two things buyers forget

Pest control history — any active rodent or pest contracts? Recent treatments?

Insurance claims — three years of claims history. A pattern of slip-and-fall claims tells you about staffing and maintenance culture.

What to do with this list

Make your offer contingent on satisfactory due diligence on these 12 items. A good seller won't object — they want the deal to close as much as you do. A seller who refuses is telling you something.

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