Questions to Ask When Buying a Restaurant
For a buyer looking at an existing restaurant, to put to the owner and the broker during due diligence. The questions follow the order a deal usually takes: the owner and the deal, sales and costs, the lease and location, the kitchen and equipment, licenses and inspections, then staff and the handover. Each has a note on what a good or a worrying answer sounds like and what to check it against.
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The questions
Each question, and why to ask it
The owner and the deal
Why are you selling the restaurant, and why now?
Why ask it
Most owners have an answer ready, so listen for one you can check: a retirement date, a second location, a partner who wants out. Then set it beside the monthly sales and the lease, because a tired owner with steady numbers is a different purchase from one whose sales are sliding or whose lease ends next year. Put the same question to the broker on another day and compare the two accounts.
How long has it been on the market, and has an earlier buyer backed out?
Why ask it
Ask for the listing date and every price change since. A long stretch unsold often means the price sits above what the records support, and that is your opening to negotiate. Where a buyer has already walked away, find out what they turned up in the lease, the books or the landlord's office; 'the financing failed' only raises the question of what the lender saw.
What exactly does the price include: the name, the recipes, the equipment, the inventory, the phone number and the online accounts?
Why ask it
Have each item written into a list attached to the offer, because whatever is only said out loud tends to be remembered differently at closing. Food and drink stock is often counted and paid for separately on the last day, so ask how it will be valued. The phone number, the website and the review profiles matter more than they sound: they are how regulars and search engines find the place.
What is the asking price based on: sales, the owner's earnings, or the value of the lease and equipment?
Why ask it
A price built on earnings can be tested against the records. One built on what the owner spent fitting out the room, or needs to clear a loan, has nothing to do with what the restaurant earns. If the place is losing money, you are really paying for a fitted kitchen and a lease, and should value it that way.
Which shifts do you work yourself, and what would it cost to pay someone to cover them?
Why ask it
An owner who cooks five nights and does the books on Monday is labor the profit figure leaves out. Price a chef or a manager at the going local wage and subtract it, unless you plan to work those hours yourself. Then ask who opens, who closes, who places the orders and who covers when a cook calls out: the owner's name usually comes up more often than the first answer suggested.
How much of the draw is you personally: your cooking, your name on the door, your face at the front?
Why ask it
Regulars who come for the owner may not come for you. Ask what happened to sales the last time they took two weeks off, which is the closest thing to a test you will get. Where the name or the recipes belong to a family, confirm in writing that you may keep using them.
Which menu items, opening hours or promotions have you tried and dropped, and why?
Why ask it
Weekday lunch, brunch, delivery, a happy hour, a set menu: most dining rooms have tried a few and quietly stopped. Ask how long each one ran and what ended it, because an idea that died for want of a second cook is still open to you and one that drew no customers in this neighborhood is not. If nothing has been tried in years, find out whether that is contentment or fatigue before you count the untried ideas as upside.
What do the worst recent reviews complain about, and are they right?
Why ask it
Read the last year of reviews before you ask, so you can name the pattern: slow service, cold food, a rude host. An owner who agrees and explains what they changed is being straight with you. One who blames every bad review on difficult customers may explain away the weak months in the books the same way.
Am I buying the company itself or only its assets, and which debts and obligations stay with you?
Why ask it
The two structures treat old liabilities, contracts, licenses and taxes differently, and the rules change from place to place. Ask the seller which one they expect and why, then take the answer to your own attorney and accountant before you agree to anything. If the seller insists on one structure and will not explain it, look harder at what the business owes.
Would you take part of the price in payments over time instead of all of it at closing?
Why ask it
Lenders can be cautious about restaurants, so part of the price paid to the seller over a few years is sometimes what makes a deal possible. It also keeps the seller interested in how the handover goes, since their money now depends on your first years. Have your accountant and attorney go over the rate, the term and what the seller could take back if you missed a payment.
Sales and costs
Can I see POS sales reports, sales tax filings, income tax returns and bank statements for the same three years?
Why ask it
The point is to lay them side by side: what the register recorded, what reached the bank and what was reported should tell one story. Ask for POS reports exported straight from the system, ideally while you watch, not retyped into a spreadsheet. When a seller says the real takings are higher than the paperwork, pay only for what the paperwork shows; a lender will look at it the same way.
What profit did the restaurant make in each of the last three years, before and after your own pay?
Why ask it
Get the figure from the profit and loss statement and again from the tax return, and ask about any gap between them. Then ask what happened in the weakest year. Be a little wary of a final year that looks better than the rest: a repair put off, a cook not replaced and an owner covering extra shifts all lift profit for a while.
What do sales look like month by month, and by day of the week?
Why ask it
A yearly total hides a patio that carries the summer and a January that barely covers payroll. Daily figures show whether the place lives on Friday and Saturday alone, which limits what you can fix by working harder. Use the slowest quarter, not the average, when you work out how much cash to keep in reserve.
How many covers do you serve on a normal weekday and a normal Saturday, and what is the average check?
Why ask it
Covers times average check should land close to the sales the POS shows. Then test the claim yourself: eat there on a Tuesday and a Saturday, count the occupied tables and note how long the kitchen takes. A seller who quotes the best night of the year as normal will be caught by one quiet midweek visit.
How do sales divide between dine-in, takeout, delivery apps, catering and alcohol?
Why ask it
Each channel earns a different margin, so two restaurants with the same sales can make very different money. A large catering figure deserves a follow-up: is it many clients, or one office contract that could leave with the owner? Drinks tend to earn more per dollar than food, so ask about a bar share that has been falling.
What do the delivery platforms keep, and are the sales figures shown before or after their fees?
Why ask it
Ask for the payout statements from each platform, because the commission, the promotions the restaurant funded and the refunds all come out before the money arrives. Sales reported at menu price can overstate what was actually received. Also ask whether the accounts and their ratings can be moved to a new owner or have to be opened again from zero.
What is your food cost as a percentage of sales, and how do you calculate it?
Why ask it
A useful answer comes from counted inventory and supplier invoices: opening stock plus purchases minus closing stock, set against food sales. 'About a third' with no count behind it is a guess. Ask for three months of invoices from the main supplier and do the sum yourself, then compare the result with what restaurants of the same type in your area run.
What does payroll come to, and does anyone work here who is not on it?
Why ask it
A spouse who does the books, a cousin on the dish machine at weekends and a cook paid in cash all make labor look cheaper than it will be for you. Compare the names on the posted schedule with the names on the payroll report for the same week. Anyone on the first and not the second is a wage to add at local rates, and something to raise with your accountant.
Which expenses in these accounts are personal or one-off, and can you show the receipt for each?
Why ask it
Sellers add these back to profit to justify the price: a car, a family phone plan, a one-time repair. Accept the ones with paper behind them and question the rest. A repair listed as one-time on a ten-year-old walk-in is likely to come around again on your watch.
Beyond food, labor and rent, what do utilities, card fees, repairs, linen and marketing cost in an average month?
Why ask it
Food and labor get all the attention, and the rest quietly decides whether there is anything left. Ask for a year of actual utility bills, since old refrigeration and gas burning all day cost more than an estimate suggests. Check which contracts, such as card processing or linen, would lock you in after the sale.
How many meals are comped, discounted or voided in a typical week, and who can approve them?
Why ask it
The POS can print this report in a minute. Heavy discounting means the menu prices are not the prices people pay, and a high void count on one server's shifts is a control problem you would inherit. A calm answer names a manager's code and a weekly review. A shrug means nobody has been looking.
When did menu prices last go up, and what did regulars do?
Why ask it
Prices that have not moved in years while supplier invoices climbed explain a thin margin, and they may be room for you. They may also mean the neighborhood will not pay more. Ask to see sales for the two months on either side of the last increase.
How much is outstanding in gift cards, catering deposits and loyalty rewards that I would be expected to honor?
Why ask it
These are meals already paid for, to the seller, that you would cook for nothing. Get the balance from the POS or the gift card provider and agree in the contract who carries it; a credit against the price is one common fix. Refusing old gift cards in your first month is a poor way to meet the regulars.
Are sales tax, payroll taxes and supplier accounts paid up to date, and can you show proof?
Why ask it
Ask for the latest filings with proof of payment and a statement from each main supplier. Whether unpaid tax or old debts can follow a buyer depends on where you are and how the deal is structured, so ask your attorney what clearance document the local tax office issues and whether to make it a condition of closing. A supplier who keeps the restaurant on cash-on-delivery terms is telling you how the bills have been paid.
Lease and location
How many years are left on the lease, and what renewal options are written into it?
Why ask it
Read the lease itself, not a summary of it. You want enough term, with options, to earn back what you pay and to satisfy a lender, who may set a minimum. A lease with two years left and no option means you are renting the seller's customers until the landlord decides otherwise.
Will the landlord assign the lease to me, or do they want a new one, and what will they ask for in return?
Why ask it
Leases commonly require the landlord's consent, and the conditions vary: a higher rent, a fee, a fresh deposit, a look at your finances. Meet the landlord early and in person, because a deal that you and the seller have agreed can still die here. Ask your attorney to make the offer conditional on a lease you can accept.
What does the space cost each month once property tax, building insurance, common-area charges and any percentage rent are added?
Why ask it
Base rent is the number sellers quote, and the extras can add a great deal to it. Ask for twelve months of what was actually paid, including any year-end adjustment. If rent rises on a schedule, put next year's figure in your budget, not this year's.
Would I have to sign a personal guarantee, and are you released from yours when the lease moves to me?
Why ask it
Read what the guarantee would let the landlord claim from you personally if the restaurant closed, and have your attorney explain how that works where you live. Landlords will sometimes limit it to a fixed sum or end it after a few years of rent paid on time, but only if asked before signing. Ask too whether the seller is released: one left on the hook may want a say in how you run the place.
What does the lease say about permitted use, hours, outdoor seating, signage and other restaurants in the building?
Why ask it
Adding breakfast, staying open late, keeping the patio and changing the cuisine all hang on this wording. An exclusivity clause can stop the landlord from renting the unit next door to a competitor, and without one they may be free to. If your plan depends on changing anything, get the landlord's agreement before you buy.
Under the lease, who pays when the roof leaks, the air conditioning dies or the drains back up?
Why ask it
Restaurant leases often push repairs onto the tenant, including equipment on the roof that you never see. Ask the seller what they have paid for in the last three years and what the landlord covered without an argument. A landlord who is slow to fix the building now will be no faster for you.
Can the landlord end the lease early or move me if the building is sold or redeveloped?
Why ask it
Look for demolition, relocation and sale clauses, and ask the landlord directly what their plans for the property are. A low price on a busy restaurant sometimes means the seller already knows the block is changing. If the clause is there, ask what notice and compensation it gives you.
Who eats here, how many are regulars, and where do they come from?
Why ask it
A good answer is specific: the office lunch crowd, families from two nearby neighborhoods, a theater audience on show nights. Then ask what each group depends on. A dining room filled by one employer or one venue goes quiet when that employer changes its work pattern or the venue closes for a season.
What is changing nearby in the next two years: road work, parking, new buildings, a competitor opening?
Why ask it
The seller lives with this and may be selling because of it. Check the answer with the city planning office, with people who work next door and with a walk around the block at lunch and at dinner. Months of construction outside the door can undo a year of good numbers.
Kitchen and equipment
Can I have a list of every piece of equipment with its age, and whether it is owned, leased or on loan?
Why ask it
Dish machines, ice machines, coffee equipment and soda systems often belong to a leasing company or a supplier, and leave if the contract ends. Anything financed may have a lender's claim on it, so ask your attorney how to search for claims against the assets where you are. Walk the kitchen with the list in hand and tick off what is actually there and working.
How old are the walk-in, the refrigeration compressors, the HVAC units and the water heater, and what has been repaired?
Why ask it
These are the expensive failures, and they tend to arrive in the first hot month. Ask for service invoices, then pay a refrigeration and HVAC technician to inspect before you close. Their estimate of remaining life is a figure you can take off the price or set aside in cash.
When were the hood, the ducts and the fire suppression system last cleaned and inspected?
Why ask it
Ask for the contractor's dated report, and look for a service tag on the system itself. Cleaning that is long overdue is a fire risk and can be a problem with the insurer and the fire inspector. Ask too whether the hood suits the cooking you plan, since adding a fryer or a charbroiler may need more than the current one provides.
How often is the grease trap pumped, and has there ever been a backup or a notice from the sewer authority?
Why ask it
A seller who knows the schedule and can show the hauler's receipts is maintaining the plumbing. Vague answers here often go with slow floor drains and a smell on warm days. Have a plumber run a camera down the main line: it is cheap next to digging up a kitchen floor.
What breaks most often, and who do you call when it does?
Why ask it
Every kitchen has one machine that is nursed along, and the cooks know which. Get the names and numbers of the technicians who already know this equipment, because a stranger on a Saturday night costs more and takes longer. If the answer is 'nothing ever breaks', ask the dishwasher.
On your busiest night, what gives out first: the line, the dish pit, the cold storage or the dining room?
Why ask it
This tells you where growth would stop. If the kitchen is already at its limit on Saturdays, a plan to raise sales needs new equipment, a shorter menu or more hours, and each has a cost. Stand in the kitchen during a full service if the seller will let you.
Which POS, reservation and online ordering systems do you use, and can the contracts and the data move to me?
Why ask it
Some contracts run for years and carry a fee to leave; others cannot be transferred at all. The customer list, the reservation history and the sales data are worth keeping, so ask how each would be handed over and what privacy rules apply where you are. Budget for a new system if the current hardware is leased and stays with the seller.
Licenses and inspections
Can I see every health inspection report from the last three years, including any re-inspections?
Why ask it
One bad visit followed by a clean one is ordinary. The same violation written up year after year, such as food held at the wrong temperature or signs of pests, points to a habit or to equipment that cannot do its job. Many health departments publish reports or supply them on request, so check the seller's set against the official one.
Which licenses and permits does the restaurant operate under, and which of them pass to a new owner?
Why ask it
Expect a list: business registration, food service permit, fire and occupancy approvals, signage, outdoor seating, music. Some belong to the address and some to the person, and the answer differs by city and country. Call each issuing office yourself and ask what a change of owner requires and how long it takes.
Does a change of ownership trigger a fresh inspection or bring the space under current building, fire or accessibility rules?
Why ask it
Older restaurants sometimes run on approvals from the year they opened. In some places a new owner or a new permit means meeting today's standards for restrooms, exits, ventilation or the grease trap, and that work can be costly. Put this one to the building and health departments before you sign; the seller may honestly not know.
If alcohol is served, what does the license cover, and how would I keep serving from my first day?
Why ask it
Find out what kind of license it is, whether it can be transferred or you must apply for your own, and how long that takes locally. Ask for its violation history and confirm it with the licensing authority. Weeks with no beer or wine on the tables would change your first quarter, so ask whether an interim arrangement exists where you are.
Who does the pest control, how often do they come, and what have they been treating for?
Why ask it
Regular preventive visits with a logbook are normal and reassuring. Frequent call-outs for the same problem are not. Ask to read the service reports, then look for yourself behind the cook line, under the dish machine and in the dry store.
Have customers, staff, neighbors or suppliers made any complaints, claims or legal threats in the last five years?
Why ask it
Go through them one at a time: a pay or tip claim from a former server, a guest who said the food made them ill, a fall on a wet floor, a neighbor's letter about noise or kitchen smells. Each says something different about how the place is run. Ask your attorney which of them could reach you under the deal structure, and whether the seller's answers can be written into the contract.
What does insurance cost here, and what claims have you made?
Why ask it
Ask for the insurer's own record of claims instead of the owner's memory of them. A grease fire, a burst pipe over the dining room or a guest's fall on the front step each tells you which part of the building to look at twice. Price your own cover before you commit, because a new owner is not always offered the seller's rate, and ask whether any insurer has declined or dropped the restaurant.
Staff and handover
Who are the people this restaurant could not run without, and have they said they would stay?
Why ask it
Usually it is a head cook, a manager and one or two servers the regulars ask for. Ask how long each has been there and what would keep them. If the kitchen follows one person and that person is the owner's relative, treat their staying as unknown until you have heard it from them.
Do the staff know the restaurant is for sale, and when can I talk to the chef and the manager?
Why ask it
Sellers often keep it quiet, fairly, so people do not leave in the middle of a sale. Agree a point, such as after the offer is accepted and before closing, when you can meet the key people. Closing without having spoken to the person who runs the kitchen is a risk you can avoid.
What is each person paid, how are tips shared, and what vacation, raises or bonuses have been promised?
Why ask it
Ask for the roster with wage, hours and start date for everyone. Rules on tips, minimum pay and what happens to employees when a business changes hands vary by place, so have an employment adviser check the current practice against the rules there. Promises the seller made out loud will be presented to you as debts in your first month.
Are the recipes written down with quantities, yields and plate costs, or do they live in someone's head?
Why ask it
Written, costed recipes mean the food can stay the same after the handover and you can see which dishes earn their place. If nothing is on paper, make documenting the menu part of the seller's training period. Taste the ten best sellers cooked from the written version before you rely on it.
Who are your main suppliers, and will their prices, credit terms and delivery days stay the same for me?
Why ask it
Good terms are often a reward for years of prompt payment and may not carry over to a stranger. Ask the seller to introduce you, then ask each supplier directly what a new account would look like. If one hard-to-replace product comes from a single source, find out what the kitchen does when it is unavailable.
How long will you stay after closing to train me, and what will we cover in that time?
Why ask it
Agree which weeks the seller will work beside you, how many services in each and whether they are paid for them, and have it written into the purchase agreement. A useful handover covers ordering, the prep schedule, opening and closing, introductions to regulars and suppliers, and the quirks of the equipment. Holding back part of the price until the training is done gives the seller a reason to finish it.
Will you agree in writing not to open or work in a competing restaurant nearby, and for how long?
Why ask it
The case to guard against is a chef-owner who reopens three streets away with the same menu and the same regulars. How far such an agreement can reach, and whether a court would enforce it, differs from place to place, so have your attorney draft it. Strong resistance to any limit at all is worth a direct question about what the seller plans to do next.
If I asked your regulars and your staff what should change here, what would they say?
Why ask it
It lets the owner speak in someone else's voice, which is easier than admitting a fault. The answers tend to be the real to-do list: the wait on weekends, the worn dining room, the dish everyone misses. Keep the list and compare it with what the staff tell you once you are allowed to ask them.
How to question a restaurant seller
Practical guidance for the conversation itself
Before the first meeting
Eat there before you introduce yourself
Go three or four times at different hours as an ordinary customer. Order the dishes the menu leads with, time the food and watch how the staff treat each other. You will hear the seller's claims differently once you have seen a Tuesday night.
Expect a confidentiality agreement
Brokers usually ask for one before they release the address or the figures, and that is reasonable: staff and suppliers usually do not know about the sale. Read what it stops you from doing, such as speaking to employees or the landlord, and ask when those limits lift.
Line up your own advisers
Find an accountant who has read restaurant books and an attorney who has handled a business purchase where you live before the first numbers arrive. Ask the broker who they represent and who pays them. If it is the seller, read their summary as a sales document until the records back it up.
Ask in the order of the list
The owner, the deal and the headline numbers come first, because they decide whether the rest is worth anyone's time. Leave the lease, the equipment and the licenses for when you have the documents in hand, and the staff and handover questions for when a price is close.
Who to ask what
The owner
Why they are selling, what they do each day, what breaks, who matters on the staff and what they would change. With these the manner of the answer tells you as much as the content, so ask them face to face, in the restaurant if you can.
The broker
How the price was set, how long the listing has been up, what an earlier buyer found, and which documents you will get and when. Put the why-are-they-selling question here as well and compare the two answers.
The landlord
Whether they will transfer the lease or write a new one, on what terms, and what they plan for the building. Have this conversation, with the seller's permission, before you spend money on inspections. Nothing else matters without a lease you can live with.
The offices that issue the permits
The health department, the licensing office, the fire inspector and the building department can tell you what a change of owner requires where you are. The seller's memory of the rules may date from the year they opened. Phone or visit yourself.
Checking the answers
Match three records
POS reports, bank deposits and tax filings for the same months should agree within reason. Where they do not, ask for the explanation in writing. Pay for the sales you can trace and treat the rest as a story.
Count for yourself
Pick a weekday lunch, a weekday dinner and a Saturday, and count guests from a table or from across the street. Multiply by the average check and compare the result with that day of the week in the POS reports.
Bring the trades in
A refrigeration technician, a hood contractor and a plumber with a camera can each look over their part of the kitchen in a single visit. Their written estimates turn 'everything works fine' into repair figures you can negotiate with.
Get what you rely on into the contract
The equipment list, the gift card balance, the training weeks and anything else you are counting on belong in the purchase agreement, signed by the seller. Your attorney will know how that is done where you are. What is only said across a table is hard to hold anyone to later.
When to pause or walk away
The real money is off the books
A seller who says the restaurant earns far more than it reports wants to be paid for income nobody can show. It also tells you how they treat paperwork in general.
The lease stays out of sight
The lease is the restaurant's right to be at that address. If the document is withheld until late, or you are kept away from the landlord, assume there is a reason and find it before you go further.
Figures that arrive late or keep changing
A second version of last year's profit, or tax returns that are always coming next week, suggests the numbers are being assembled for you. Set a date, and stop paying for inspections if it passes.
No inspection allowed
A technician's visit, a walk through the kitchen during service and a look at the health reports cost the seller nothing if all is well. A refusal is itself an answer.
Pressure to close fast
Another buyer may well exist. Even so, a deadline that leaves no time for your accountant, your attorney and the permit offices only helps one side of the deal.