If you’re like many Victorians, you’ve probably dreamed of owning a pub, whether for commercial or lifestyle reasons.
There are several reasons why it might make more sense to buy an established pub rather than starting one from scratch. You get a business with an existing customer base and can be earning money from day one.
But that doesn’t mean there aren’t pitfalls you need to watch out for. So before you invest time, money and energy into your new business venture, it’s important you do your due diligence.
With that in mind, here are five important issues you need to resolve before buying a pub.
- Are the financial records accurate?
You don’t want to pay more than you should for the business. So you and your accountant should pull the pub’s financial records apart to confirm their accuracy. This includes:
- Reviewing balance sheets, profit-and-loss statements, annual reports and any cashflow statements for at least the past three years
- Verifying the numbers against independent evidence, such as sales records and invoices and bank statements, if the pub’s financials aren’t audited
- What assets are included in the deal?
Do you know exactly what is included in the purchase price? Check rather than assume, as the pub might not necessarily come with all the equipment it needs to function. Once you have an asset list, do a stocktake and check the condition of everything listed. You can ask for a depreciation schedule from the pub’s accountant to find out just how old the current equipment is.
- Are all employee entitlements up to date?
When you buy a pub, you might have to take on responsibility for worker entitlements including holiday, long service leave and compulsory superannuation. So make sure all entitlements are up to date. If they are not, you can negotiate to get them deducted from the sale price.
- What’s the reason behind the sale?
See if you can find out the owner’s reasons for the sale. After all, you’re investing your hard-earned money in the pub, so you want to make sure the deal isn’t too good to be true. As part of your due diligence
- Check online reviews to see if the pub has a good reputation.
- Speak to suppliers and competitors to get more information
- Get an honest opinion from people without any stake in the deal, such as customers
- What are your legal obligations as a liquor licensee?
As a pub owner, you will need a liquor licence – which comes with some big legal responsibilities attached. So make sure you are up to speed with all your obligations and have completed an approved Responsible Servicing of Alcohol training course.
Blaine Hattie is a hospitality focused commercial lawyer and Principal of Sutton Laurence King lawyers.
Buying a pub is an Australian Dream, but there are plenty of legal traps waiting for unsuspecting buyers. Avoid these by getting the right legal advice from Sutton Laurence King. Call us on 03 9070 9810 or fill out this online form.