What do you buy when you buy a restaurant or venue?
A hospitality business is a trading location plus the permission to trade there. You acquire:
- The lease. The right to occupy the site for the remaining term and any options to renew. In hospitality this is often the core asset.
- Licences. The liquor licence, food business registration and any outdoor dining or late-trading permits.
- Fit-out and equipment. Kitchen equipment, cool rooms, bar, furniture and point-of-sale systems.
- Trading history and brand. The name, reviews, social following and regulars.
- Functions and events income. Private bookings and catering, often the most profitable revenue.
- Staff. Chefs, managers and front-of-house team.
- Supplier terms and booking data. Accounts with suppliers and the customer list in the booking system.
What makes a good venue to acquire?
| Feature | Strong target | Weak target |
|---|---|---|
| Lease | Several years left plus options, at a sustainable rent | Under two years left or rent above what trade supports |
| Revenue | Recorded through POS and bank statements | Owner claims "cash on top" |
| Kitchen | Documented recipes and a sous chef who can run service | Everything depends on the head chef |
| Mix | Functions, catering or a strong weekday trade | Relies on weekend walk-ins only |
| Trading record | Several years of stable trading | Recently opened or recently rebranded |
The best target is usually the venue that's been on your radar: one nearby whose customers, suppliers and staff overlap with yours.
What are the due diligence risks in hospitality?
Add these to the general due diligence red flags:
- Lease assignment. Landlord consent is usually required. Check the remaining term, rent reviews, options, outgoings and make-good obligations (the cost of restoring the premises when you leave).
- Licence transfer. Liquor licences typically need regulator approval on a change of owner. Check the rules in your state/country and allow time.
- Unrecorded revenue. If the seller says profit is higher than the books show, ignore the difference. Lenders and buyers can only rely on recorded revenue.
- Equipment age. Replacing a cool room, exhaust system or combi oven can cost far more than expected. Inspect it.
- Wage compliance. Hospitality has complex rates for nights, weekends and public holidays. Underpayment is a serious hidden liability.
- Chef dependence. If the menu walks out with the chef, so do the regulars.
- Food safety and complaints history. Review inspection reports and any notices.
Why do venue owners sell?
The hours. Hospitality owners often work nights, weekends and public holidays for years. Many sell from burnout, to spend time with family, or to retire. Some own several venues and want to simplify. Few have a successor, because managers rarely have capital. Owners who built a venue over many years often care deeply about its name and staff surviving, which makes them open to being paid over time.
How do the no-money-down structures fit hospitality?
Funding combines up to three parts: senior (commercial) debt, seller finance and seller rollover. Hospitality changes the mix:
- 100% vendor finance is often the most realistic option for a single venue. The seller is paid from the venue's trading profit, and the lease and fit-out act as practical security.
- 70/20/10 works for multi-site groups or venues with long, consistent trading records, where a lender may fund the larger share. The 20% seller note and 10% rollover keep the seller supporting the transition.
- 60/40 suits a seller who wants to stay involved, such as a founder-chef who keeps 40% and keeps cooking.
We structure deals at a DSCR of around 1.5x. That buffer matters in hospitality, where a quiet winter or a rent review can move profit quickly.
What synergies come from buying a competing venue?
- Purchasing power. Combined volumes improve supplier pricing on produce, beverages and consumables.
- Shared staff. Chefs and floor staff can cover shifts across venues, reducing overtime and agency labour.
- Central prep kitchen. One kitchen can prepare sauces, bakery or desserts for both sites.
- Functions overflow. Bookings one venue turns away can go to the other.
- Shared marketing. One database, one loyalty programme, one social team.
Illustrative example: a 100% vendor-finance venue
Illustrative only. An owner of two cafés buys an established restaurant nearby for $800k. It earns $280k a year in recorded profit before owner wages and debt, and has seven years left on its lease plus an option.
- Funding: 100% vendor finance. The seller is paid over five years, about $185k a year including interest, from the restaurant's profit. Coverage is roughly 1.5x.
- Security: The seller keeps a charge over the business assets until paid, and the landlord consents to the lease assignment.
- Handover: The seller stays for three months and introduces the head chef, suppliers and function clients.
- Synergy: A shared prep kitchen and joint purchasing cut food cost across all three venues.
Josh Li bought two of his own clinics this way, with no bank and no equity partner. The principle is the same in hospitality: the business pays for itself, and the seller gets a steady income and a successor they trust. See the full playbook in how to buy a business with no money down.
If you run an established hospitality business doing $1M+ in revenue and want a signed LOI within 90 days, see if you qualify for an acquisition strategy call.