Five Tips On Transitioning A Restaurant

by Gray Reed & McGraw
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You may have just acquired a restaurant or perhaps you are days away. What are the main things to consider in the transition? This week, we decided to answer this question, to focus on restaurant transitions, what makes them go well and what makes them go badly.

Assuming that the sale of the restaurant was properly documented, here are Five Tips On Transitioning A Restaurant:

  1. Permits. Hopefully prior to the sale, but at least shortly after, it is important to ensure that all permits are properly in the name of the new owner. These permits include at a minimum the Certificate of Occupancy, the Food Establishment Permit, and a Mixed Beverage Permit (or other applicable permit dealing with alcohol, if you serve it). Failure to properly permit your restaurant could be a major civil or even criminal infraction.
  2. Contracts. The next key issue deals with the restaurant’s contracts. It is important to either assign the restaurant’s contracts from the old owner to the new owner or to obtain new contracts with key vendors. These vendors could include the food vendor, the soft drink vendor, the alcohol vendor and many more.
  3. The Lease. Similar to the point above, one often overlooked contract to make sure becomes assigned is the lease. Many times, owners forget that the landlord must approve new tenants, and it often takes quite a bit of time to ensure that the landlord is comfortable with the new owners. Therefore, it would be best to have the lease assigned before the sale, if at all possible.
  4. The Menu. Many restaurant owners immediately want to change or improve the menu upon acquiring a new restaurant. However, as Michael Shine found out when he purchased Frank’s Chop House on Westheimer in the Houston area, that’s not always wise. Click here for an article by Greg Morago at the Houston Chronicle for more on this story.
  5. Inventory. A key consideration when transitioning a restaurant is how to account for the inventory when a new owners takes over. If not handled correctly, the transition could give the old owner an incentive to either stock up too greatly on food or to deplete inventory levels to virtually nothing. Therefore, it is important to consider how food and other inventory will be transferred.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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