Purchasing and Selling Restaurants and Bars

Contact Neufeld Legal for restaurant/bar legal matters at 403-400-4092 / 905-616-8864 or Chris@NeufeldLegal.com

When you are looking to purchase or sell a restaurant, bar or pub (whether independently owned or franchised), experience is critical. Restaurant acquisitions and divestitures bring significant exposure to your finances, work-time and future success and wealth. For this very reason, you should be retaining legal counsel experienced and knowledgeable in transactions involving restaurants, bars, pubs, lounges and night clubs.

We are heavily engaged in mergers, acquisitions and divestitures, with extensive experience in the restaurant and bar industry. Such experience has proven critical to our ongoing legal representation, as these business transactions are constantly evolving and have their own unique features (and problems) that demand effective solutions - so as to realize your objective business goals.

The scope of our law firm's legal work for restaurants and bars that are being bought and sold includes:

A. Initial & Pre-Contractual Legal Work

• Structuring the Transaction: Advising the client (buyer or seller) on the best legal structure for the deal (e.g., Asset Purchase vs. Share Purchase) and the legal and tax implications of each.

• Drafting/Reviewing Preliminary Documents:

  • Letter of Intent (LOI) or Term Sheet: Drafting or reviewing this non-binding document to ensure it accurately reflects the agreed-upon price, terms, and conditions before moving to a formal agreement.

  • Confidentiality/Non-Disclosure Agreement (NDA): Drafting or reviewing to protect sensitive business information shared during negotiations and due diligence.

  • Non-Compete/Non-Solicitation Agreements: Negotiating and drafting clauses or separate agreements restricting the seller from opening a competing business or soliciting former employees/customers for a specific period and geographic area.

B. Due Diligence (Investigation of the Business)

The buyer's lawyer conducts comprehensive due diligence, and the seller's lawyer assists in providing the necessary information and addressing any issues found [more on specifics for restaurants, bars, QSRs].

• Corporate & Legal Status Review:

  • Verifying the seller's legal ownership of the business and its assets.

  • Reviewing corporate records (e.g., articles of incorporation, minute books, shareholder agreements).

  • Conducting searches for liens, security interests, and judgments against the business and its assets.

• Contracts & Leases Review:

  • Commercial Lease Review: Critically analyzing the restaurant's commercial lease, including terms, renewal options, transfer/assignment clauses (often a major hurdle in these deals), and landlord consent requirements.

  • Reviewing all material contracts: supplier agreements, service contracts (e.g., POS system, maintenance), franchise agreements (if applicable), and loan agreements.

  • Determining the assignability of contracts to the new owner.

• Licenses and Permits Review & Transfer:

  • Liquor License: This is often the most critical and complex item. Reviewing the license's status, compliance history, and requirements for transfer to the buyer or for the buyer to obtain a new license.

  • Reviewing and ensuring the transfer of all other essential permits: business licenses, health permits, fire safety certifications, signage permits, etc.

• Litigation and Compliance Review:

  • Identifying any pending, threatened, or past lawsuits or regulatory actions against the restaurant/bar.

  • Reviewing compliance with all applicable laws (e.g., health codes, zoning, labor laws).

• Employee and Labor Matters:

  • Reviewing employment agreements and employee benefit plans.

  • Advising on the transfer of employees, required notices, and potential severance liabilities.

C. Drafting and Negotiating the Purchase Agreement

• Drafting/Negotiating the Asset or Share Purchase Agreement: This is the core legal document, outlining all terms of the sale, including:

  • A clear list of the assets being purchased (equipment, inventory, recipes, intellectual property, etc.) and liabilities being assumed (if any).

  • The purchase price, payment schedule, and any holdbacks or escrow arrangements.

  • Representations and Warranties: Negotiating and drafting clauses where the seller guarantees certain facts about the business (e.g., no undisclosed liabilities, all assets are in good condition).

  • Indemnification Clauses: Defining how the buyer and seller will be protected from losses or liabilities arising from the other party's actions (pre-closing vs. post-closing).

• Allocation of Purchase Price: Consulting with accountants and drafting the schedule for allocating the purchase price among various assets for tax purposes.

D. Closing and Post-Closing Matters

• Drafting Closing Documents: Preparing all ancillary documents required to legally transfer ownership, such as the Bill of Sale for equipment, assignments of leases and contracts, and intellectual property transfers.

• Managing the Closing Process: Coordinating with the other party's counsel, the landlord, and escrow agents (if used) to ensure all conditions are met and funds and assets are properly exchanged.

• Filings and Registrations: Ensuring necessary documents are filed with government registries to reflect the new ownership, transfer trademarks, and clear all liens.

• Post-Closing Obligations: Advising on the seller's obligations for post-closing transition support, and ensuring compliance with all terms of the purchase agreement, especially concerning warranties and indemnities.

As a business lawyer experienced in the operational side of the restaurant business, we have the ability to integrate invaluable practical experience and knowledge when advising restaurant clients, both franchised and independently owned [more on distinction of acquiring an operating QSR franchise]. There is simply nothing better than first-hand experience when providing restaurant and bar clients with professional business and legal advice.

For knowledgeable and experienced legal representation in purchasing or selling a restaurant or bar, together with a raft of legal intricacies and dilemmas that may arise, contact restaurant lawyer Christopher Neufeld at 403-400-4092 [Alberta], 905-616-8864 [Ontario] or Chris@NeufeldLegal.com.