Posted on: 2 March 2016
Getting into the hospitality business can be quite a lucrative endeavour. However, when contemplating pubs for sale, there are a few things that you need to keep in mind. This is to ensure that you are making a sound investment and not taking on an unprofitable enterprise. Here are some of the important considerations you should have when purchasing a pub.
Ensure a business valuation is conducted
A business valuation is prudent to ensure that the figures that are being projected for the business are as accurate as they can be. The first thing to do would be get access to all financial documentation pertaining to the business. These documents will include the tax records of the business, employee payroll records, invoices from suppliers, receipts for meals, utility bills and anything else that you can think of. Only through professional analysing done by an accountant can you have an accurate depiction of the financial situation of the business. In the event that the pub is closing down due to lack of profit, then you should opt for an asset valuation. This enables you to know how much the pub equipment you will be purchasing is worth.
Enforce a no-compete clause
When contemplating purchasing a pub for sale, it would be prudent to ask the seller to agree to a no-compete clause in the sale agreement. This clause works toward preventing the seller from opening a similar establishment within the vicinity of your pub for a specified period of time. It should be noted though that the no-compete clause should be carefully constructed to avoid any loopholes that could be taken advantage of down the road. For instance, the clause may stipulate that a similar pub is not opened in the same location, but the seller may open a pub with the same name at a different location. This could make potential clients assume the two businesses are related, and in the event the other pub underperforms, it could affect the reputation of your new pub. Overall, having a no-compete clause is better than simply closing the deal without it.
Consider your close of sale conditions
You can include some conditions in your sale agreement that would be deal-breakers in the event that they are not met. For example, you could include a condition that the pub's liquor license should be valid by the time the sale is closed. A pub will require a liquor license to sell alcohol, thus not having one could greatly impede on your profits. If the seller does not ensure this documentation is in order, you have the right to back out of the sale agreement.Share