Due diligence for restaurant acquisitions
Restaurants fail on lease terms and labour more often than on food. The analysis focuses where the risk actually is.
From $49 per report.
Occupancy cost against the category
Rent plus taxes, insurance and CAM as a share of revenue, compared to the 6–10% that works for full service. Above 12% the lease is eating the business, and no amount of operational skill fixes it.
Prime cost reconstructed
Food cost plus labour as a share of revenue. Under 60% is healthy; above 65% is a business with no margin for a bad month.
Lease term against the loan
A lender will not amortise ten years against three years of tenure. Where options exist, the report tells you to get written confirmation they survive assignment — the single most common financing surprise in restaurant deals.
Equipment as a bill, not an asset
Hoods, walk-ins, line equipment and HVAC all have finite lives. Deferred maintenance is a price adjustment, and the report tells you what to survey.
Licence transfer paths
Liquor licences in particular vary enormously by state and can represent a large share of the price. The report identifies what transfers and what must be reapplied for.
Questions
What multiple do restaurants sell for?
Full-service typically 1.5×–2.5× SDE; quick service and fast casual 1.8×–3.0×. Both are highly sensitive to lease terms — a strong long lease can move a business a full turn, and a short one can make it close to unsaleable.
Does it handle franchised units?
Yes. It flags franchisor transfer approval, transfer fees, remaining term and any required remodel obligation — the last of which is a capital cost buyers routinely miss.