Buying a restaurant or takeaway: the checks that matter

Restaurants and takeaways can look alike on paper and earn their money very differently: from sit-down dinners and a bar, from counter sales, or from delivery. This guide covers the checks specific to independent restaurants and takeaways. Read it alongside our guide to buying a cafe and our general due diligence guide.

Split the takings by channel

Ask for point-of-sale reports that separate dine-in, takeaway and delivery sales, by month, for at least a year. Each channel earns a different margin.

• Dine-in. Compare covers (diners) and average spend with the seating and trading hours, and ask what share of takings is drinks.
• Delivery. Ask for the statements from every delivery app the business uses.
• Reconcile. Total sales should be consistent with bank deposits and the sales on the Business Activity Statements.

Compare the trading days and staff on the listing with the rosters, and see our guide to reading a business for sale listing.

What delivery apps do to the margin

Delivery apps usually charge the restaurant a commission or fees on each order, so a delivery sale can earn less than the same meal sold over the counter.

• Gross or net. Some businesses record the full order value as sales and the commission as a cost; others record only the payout. Know which, so you compare like with like.
• The trend. If delivery's share has grown, turnover may have held up while profit per meal fell.
• Dependence. If much of the trade comes through one app, a change in its fees or terms could hit sales quickly.

Food and labour costs

• Food. Compare supplier invoices with sales for the same months, and ask when menu prices last went up. A large gap between purchases and sales can point to waste or generous portions.
• Labour. Review rosters and payroll for a full year, including weekends and public holidays. If the owner or family work unpaid shifts, you will need to cover them. Our guide to add-backs and normalised profit explains how to adjust for this.

Awards and pay

The Fair Work Ombudsman's coverage summaries describe two relevant awards:

• Restaurant Industry Award. Covers businesses that mainly sell food and drinks to be eaten on the premises. Covered employees include waiters, kitchen hands, cooks and chefs.
• Fast Food Industry Award. Covers taking orders for, preparing, selling and delivering fast food, which is mainly takeaway. It covers delivery drivers the business employs directly. It does not cover businesses that mainly sell food to be eaten on the premises or offer table service.

Which award applies depends on how the business operates, and other awards, such as the Hospitality Award, apply in some settings. Check the summaries or contact the Fair Work Ombudsman.

If staff have been underpaid, the wage cost in the seller's figures is too low and the profit is overstated. If those staff move across to you, paying them correctly is your cost from day one. Ask your accountant to test pay records against the award, and your solicitor who would be responsible for any past underpayment and how the contract should deal with it.

The chef or head cook

In many restaurants the menu and the reputation depend on whoever runs the kitchen.

• Who it is. If it is the owner, ask how long they will stay to hand over, and ask your solicitor about a restraint of trade. If it is an employee, ask how long they have been there and whether they intend to stay.
• Recipes. Are they written down with quantities, methods and suppliers? Ask for them to be documented and included in the sale.
• The menu without them. Could the kitchen cook the same menu if the chef left? Regulars can follow a chef out the door.

Kitchen equipment and services

List what is included, check its age and condition, and ask for service records for the cooking equipment, the exhaust hood, filters and ducts, any fire suppression system over the cooking line, and the cool rooms and freezers. Ask which items are leased or financed; our due diligence guide explains the Personal Property Securities Register search.

Food registration and food safety supervisors

Food business rules vary by state and council. In NSW, the NSW Food Authority says restaurants need to notify the local council of their business and food activity details, and that councils and the Food Authority inspect them regularly. Ask for the current registration and recent inspection reports, and ask the council what a new owner must do. ABLIS lists licences, registrations and council approvals by location.

In NSW, businesses that prepare and serve ready-to-eat food that needs temperature control and is not in its original package must appoint at least one food safety supervisor per premises. The Food Authority's list includes restaurants, takeaway shops and outlets selling through third party ordering apps. The supervisor can be the owner, a manager or an employee such as the chef, cannot be the supervisor for another premises, and a copy of their certificate must be kept on the premises. If the only supervisor is leaving, plan who will replace them. Other states set their own rules.

Liquor licences

If the business sells alcohol, find out what licence it holds and what it allows, including hours, areas and conditions. If it is BYO or sells no alcohol, confirm with the state regulator what applies. Licence types and transfer processes differ between states and territories.

In NSW, Liquor & Gaming NSW says a licence can be transferred when a licensed business is sold, and the business can keep operating while the transfer is assessed. It says provisional approval usually comes within ten business days of a complete application, and the transfer is usually confirmed within 60 days if there are no objections. The applicant must provide evidence of Responsible Service of Alcohol qualifications and a recent National Police Certificate. Ask your solicitor whether the contract should be conditional on the transfer.

Trade waste and grease traps

Water authorities or councils may require approval for a kitchen to discharge trade waste, often through a grease trap (also called a grease arrestor), and the rules depend on location. In WA, Water Corporation says food businesses such as restaurants must hold a current trade waste permit, that a change of owner triggers a review of its conditions, and that a new owner may face additional conditions. It tells buyers to ask for the current permit and confirm the grease arrestor meets current sizing standards. Wherever you buy, ask for the approval and pump-out records. An upgrade may fall to you.

The lease

For the process, see our guide to assigning a commercial lease. Ask your solicitor to look closely at:

• Permitted use and hours. Does the lease allow cooking, your menu, alcohol if you will sell it, and late-night trade?
• Ventilation. Who owns and maintains the exhaust and ducting, and must the landlord approve changes?
• Make-good. Will you have to remove the kitchen, exhaust and grease trap when the lease ends?
• Outdoor dining. What permit allows any outdoor seating, who holds it and does it transfer?

Reviews and online accounts

Read a year or more of reviews, looking for repeated complaints and how the owner responds. A poor reputation comes with the business.

Confirm which accounts come with the sale and whether they can be handed over: website and domain, social media, review and map listings, booking systems and delivery app accounts. Some may be in the seller's personal name, and platforms have their own rules on changing owners. A new delivery app account may start without the old ratings.

Questions to ask the seller

• What share of sales is dine-in, takeaway and delivery, and how has that changed?
• What do the delivery apps deduct, and do you pay for promotions on them?
• Who runs the kitchen, and are the recipes written down?
• Which award covers your staff, and when were pay rates last checked?
• When were the exhaust, fire suppression, cool room and grease trap last serviced?
• Are the food registration, liquor licence and trade waste approval in your name, and has anyone raised concerns?