So you want to buy a bar. Well do you? That is the first question that you need to answer. Is it a bar, licenced cafe, restaurant or club that you are really after? They all have different liquor licences and also come in many different shapes and sizes. You will need to understand the differences, costs and impacts on your ability to trade. What is the capacity you are looking for and where abouts? Does the venue have a kitchen, foot path trading and where are the smokers going to end up? Many question that can only be answered with a bit of research. Also will you be working in the venue or just looking for a passive income with the venue run under management? If you have an idea go and visit some of the venues that are listed and see things from a customers perspective. Understand that you’ll more than likely only buy a venue that you like. So go out and have some fun all in the name of research. Then when you find the venue that you think should be yours there are some things you need to think of.
- Finance. Can you afford the venue that you are looking for? Note that the buy price is not the whole picture. Whatever that price is you have to add on your bond, which normally is about three months rent, your legal costs ($5k), stock depending on the size of venue (but between $5-10k), and float of another $5k. If you are looking for finance from a bank or another institution then they will ask for a considerable amount of information that may or may not be available, so ask the banks early to see what they can do for you. Remember that hospitality is a cash based business so the books rarely show any profit and because of this it is best to have the cash to hand to move things forward.
- Licence Transfer. This is not a difficult process but has a lot of pitfalls. When you start to look for a venue get your RSA and First Step course done soonest, just google service providers. If you do have a RSA and it is older than two years then you will need to do a refresher course. Are you keeping the name of the venue or choosing your own? If the latter then check the name is available and register it with ASIC as you will need the certificate of registration of business name. At the same time register your company with ASIC and get yourself an ABN, if you do not already have one, as that is who is buying the business. Note from the time of submission it takes about six weeks to get approval.
- Landlord. The landlord needs to know that his rent is protected and the chances of you failing are slim and so will need certain information. Failure to provide it may lead to the landlord denying the transfer of the lease which he is legally entitled to do so. You will need to get an accountant to produce a statement of assets and liabilities for you showing your wealth. You’ll need three business references stating that you pay your bills on time and if you can get one from a previous landlord even better. Then you’ll need a short bio as to who you are and a business plan as to what you intend to do with the venue.
- Offer. Once you believe the venue is for you make an offer. If the offer is accepted by the vendor be prepared to make a deposit that your broker will have informed you as to what it will be when drafting the offer letter.
- Contract. You can normally withdraw your offer and get your deposit back any time up to signing the contract of sale. Once that is signed you are committed to the purchase. You’ll need a solicitor to review the contract of sale and ensure that your interests are protected.
- Lease. When you put your offer in, what you are agreeing to is the transfer of lease as it is. You may ask for extras terms or minor changes and these will be recorded as a variation upon transfer, if the landlord agrees. Do not expect any rent free period or reduction in rent from the landlord as it is rarely in the landlords interest to do so. Note that the purchaser is liable for all of the landlords and managing agents costs in relation to the transfer of lease.