Pub & Restaurant Sales, Mergers, and Acquisitions

Common Issues & Solutions

1. Licensing & Regulatory Compliance

Issue:
Pubs and restaurants must adhere to strict licensing laws, covering alcohol sales, food hygiene, late-night operations, and entertainment. Failing to transfer or obtain the correct licences can delay or even prevent a transaction from completing.

Buyer Resolution:

• Conduct thorough due diligence on existing premises’ licences and compliance history.
• Ensure all necessary licences can be transferred or re-applied for before completion.
• Engage with licensing specialists early to avoid unexpected delays.

Seller Resolution:

• Provide a clear record of compliance and disclose any conditions attached to licences.
• If there are outstanding regulatory issues (e.g. health and safety breaches), resolve them before marketing the business.
• Assist the buyer with a smooth transition by introducing them to the relevant licensing authorities.

2. Leasehold Complications & Landlord Consent

Issue:
If the premises are leasehold, landlord approval may be required before a sale can proceed. Issues such as restrictive covenants, rent increases, or disputes with the landlord can affect the deal.

Buyer Resolution:

• Review lease terms carefully, paying attention to rent review clauses, repair obligations, and break clauses.
• Negotiate lease assignment terms early and obtain the landlord’s consent in writing.
• If the lease is unfavourable, consider renegotiating terms before proceeding with the purchase.

Seller Resolution:

• Notify the landlord of the proposed sale as soon as possible to avoid delays.
• Ensure all lease obligations (e.g. rent, repairs) are up to date to prevent objections from the landlord.
• If the landlord is reluctant to approve the transfer, negotiate with the buyer on alternative premises options.

3. TUPE & Employment Liabilities

Issue:
Under TUPE regulations, employees automatically transfer to the new owner, meaning buyers inherit employment liabilities, such as unpaid wages, redundancy risks, and disputes.

Buyer Resolution:

• Conduct a full HR review, checking staff contracts, redundancy obligations, and ongoing disputes.
• Negotiate indemnities and warranties to protect against unknown employment claims.
• Assess whether staff restructuring is necessary and ensure compliance with TUPE consultation rules.

Seller Resolution:

• Provide accurate employee records, contracts, and payroll information upfront.
• Address any outstanding disputes or unpaid wages before the sale.
• Assist with TUPE consultation requirements to ensure staff are properly informed.

4. Supplier & Inventory Challenges

Issue:
Many pubs and restaurants rely on long-term supplier contracts for food, beverages, and equipment. Some of these agreements may not be transferable, or they may include minimum purchase commitments that don’t suit a new owner.

Buyer Resolution:

• Review supplier contracts to determine which agreements can be assigned.
• Renegotiate terms where necessary, ensuring contracts align with the new business model.
• Conduct a stock valuation before completion to avoid unexpected costs.

Seller Resolution:

• Disclose all supplier agreements and inventory records early in the process.
• If certain contracts cannot be assigned, assist in renegotiating new agreements for the buyer.
• Ensure accurate stock valuation to prevent disputes over price adjustments.

5. Financial Liabilities & Hidden Costs

Issue:
Outstanding debts, VAT obligations, business rates, or historic financial mismanagement can be uncovered during due diligence, affecting the business valuation and deal structure.

Buyer Resolution:

• Request full financial statements, tax records, and debt disclosures.
• Conduct a VAT and business rates review to check for hidden liabilities.
• Negotiate price adjustments, indemnities, or retention mechanisms to protect against unforeseen debts.

Seller Resolution:

• Prepare a detailed financial report, ensuring transparency in accounts and liabilities.
• Settle outstanding debts before completion or agree on a repayment plan.
• Offer financial warranties where appropriate to reassure the buyer.

6. Reputation & Customer Retention Risks

Issue:
A pub or restaurant’s success is heavily dependent on brand reputation and loyal customers. A change in ownership or management can risk customer loss and negative PR.

Buyer Resolution:

• Implement a brand continuity strategy, retaining key elements of the business that attract customers.
• Where possible, retain existing staff to ensure consistency in service.
• Invest in marketing campaigns and promotions to reassure existing customers and attract new ones.

Seller Resolution:

• Offer a handover period, introducing the new owner to key customers, suppliers, and stakeholders.
• Provide insights into successful marketing strategies and customer engagement methods.
• Consider a goodwill agreement, where your name remains associated with the business for a short period post-sale.

7. Planning Permission & Property Constraints

Issue:
If the buyer intends to renovate, expand, or change the business model, planning permission may be required. Listed building restrictions, conservation area rules, or change-of-use constraints can delay operations.

Buyer Resolution:

• Conduct a full property review, checking planning restrictions and change-of-use feasibility.
• If planning permission is required, engage with the local authority early.
• Ensure any necessary approvals are a condition of the sale.

Seller Resolution:

• Provide accurate property records and planning history to prevent disputes.
• If any prior applications have been rejected, disclose reasons to the buyer.
• If applicable, assist with change-of-use applications before completion.