Getting What You Pay For When Buying a Restaurant-Part One

Many times we have clients who come in for assistance in purchasing an existing restaurant. Typically the scenario is that Bill Buyer (B) is planning to buy a restaurant from Owen Owner (O).  B wonders if he can buy any of the liquor or food inventory that O has in stock.  He also wonders if any of the licenses from the health inspectors or alcoholic beverages division can be transferred from O to B.

What restrictions are placed on the sale of liquor or food inventory during the sale of a restaurant?

SALE OF LIQUOR OR WINE INVENTORY:  In order to legally sell wine, beer, and/or liquor the business owner must have a license. These are normally issued by the City in which the restaurant/bar is located. The seller of the restaurant/bar (the “licensee”) may sell their stock of alcoholic liquor and wine to the new owner, as long as the new owner will be operating the business in the same location.  (IA ADC 185-4.36).  When making this transfer, it is strongly advised that the new owner make certain to detail within their records which inventory was received as a part of the sale of the business, since liquor sale records are required to be open for inspection.  (IA Code § 123.33).  They must also make certain that the inventory is affixed with the proper seals (IA refund 5¢), as all liquor must be obtained from a licensed wholesaler.  (Lynn Walding, Administrator, IA ABD, 515-281-7402).

SALE OF FOOD INVENTORY:  Food inventory is frequently sold as part of the sale of a restaurant. There are really no code provisions regulating this.  The sale of food inventory should be itemized in the contract for the sale of the restaurant, with specific provisions identifying the items and quantities requested.  Frequently, the contract will include a minimum dollar amount of inventory (including food, to-go containers, etc.) that must be on hand for the sale of the business, with discrepancies affecting the sale price.

Be sure to check back next week where I’ll be discussing whether of the licenses from the health inspectors or alcoholic beverages division can be transferred as part of a sale of a restaurant and/or bar. In the meantime, if you need any help or have any questions about buying, or selling, a restaurant feel free to email us at info@kreamerlaw.com or call us at 515-727-0900.

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