Buying a Restaurant in Edmonton: Equipment, Lease Assignment and Asset-Sale Due Diligence

1. Define exactly what you are buying

Ask for a written description of the transaction before comparing prices. An equipment package, an operating business and a company share purchase give the buyer different things to investigate.

Ask whether the business name, recipes, website, phone number, social accounts, ordering systems and supplier arrangements are included and transferable. A listing's description should be reconciled with the final agreement and schedules.

2. Verify equipment ownership and condition

Walk through the premises with the seller's proposed asset schedule. Match each material item to its location, description, model, serial number where available and photographs. Mark anything missing, substituted, excluded or not yet verified.

Check registered interests as well as invoices

Alberta's Personal Property Registry can identify registered interests affecting personal property. Ask your lawyer or registry professional to determine the appropriate searches, including searches under the seller's correct legal name, and the releases needed for the assets being purchased. [1]

Equipment serial numbers identify the items; they are not a universal lien-search method. Alberta's serial-number searches apply to specified property categories. A restaurant appliance inventory is not a substitute for the appropriate debtor-name and other transaction-specific searches. A registry result also does not replace proof of ownership.

Restaurant equipment inventory template

Copy this record into your own document and repeat it for each significant item. Use separate records for stock and smallwares where a count-based schedule is more practical. Keep an issue marked unverified until you have the evidence.

This is a working template. Ask your lawyer to reconcile the agreed items, exclusions and closing requirements with the signed asset purchase agreement.

RESTAURANT EQUIPMENT INVENTORY — ONE RECORD PER ITEM

Business / premises reference:
Item ID and location:
Equipment description and quantity:
Manufacturer / model:
Serial number or asset tag, if available:
Photo / document reference:

Included in sale?  Unconfirmed / Included / Excluded
Legal owner and evidence of ownership:
Status: Unknown / Seller-owned / Financed / Leased /
        Supplier-owned / Landlord-owned
Related invoice, lease, finance or supplier agreement:
Search / consent / payout / release action for lawyer:

Service records supplied:
Inspection or operational test completed by:
Findings and unresolved condition issues:
Repair / replacement estimate (CAD) and quote reference:
Agreed asset value, if applicable (CAD):

Required action and responsible person:
Stage required: Before commitment / Before closing / Handover
Evidence that action is complete:
Purchase agreement / asset schedule reference:
Final walkthrough: Present / Missing / Changed / Not checked
Additional notes:

You can also select and copy the text directly. Complete your inventory in your own document; this page has no inventory submission form.

3. Resolve lease assignment and landlord requirements

The equipment purchase and the right to occupy the restaurant must work together. Ask your commercial real estate lawyer to review the executed lease, amendments, renewals, guarantees, notices and any proposed assignment or new lease.

Establish the consent process from the actual documents. Do not assume the landlord has approved the buyer, that a verbal assurance is sufficient or that the seller's renewal rights carry over unchanged.

• Assignment or new lease: What does the lease permit? What consent, buyer information, fees, guarantees, deposits or other documents are required? What written approvals must be obtained before you commit?
• Term and renewal: How much term remains? Can the buyer exercise the renewal options, and what notice requirements and rent-setting provisions apply?
• Complete occupancy cost: Request base rent, additional rent, operating-cost reconciliations, utilities, taxes charged under the lease and upcoming increases. Identify arrears, deposits and closing adjustments.
• Permitted operation: Does the lease allow your concept, menu, hours, alcohol service, patio, signage, delivery activity and intended alterations?
• Repairs, fixtures and exit obligations: Who pays for building systems and equipment? What belongs to the landlord? What removal, restoration, relocation or demolition provisions could affect your plans?

BDC's commercial leasing guidance is useful for understanding costs and renewal questions. Your signed lease and the proposed transaction documents need individual legal review. [2]

4. Confirm the buyer's approvals to operate

Investigate approvals using the proposed owner's details and the intended operation. An existing restaurant's paperwork is a starting point for questions, not proof that the buyer can open on the same terms.

Request the seller's permits, inspection reports, outstanding orders, approved plans and relevant service records. Ask the responsible authority about unresolved issues and proposed changes. Keep landlord permission, municipal approval, health approval and liquor licensing as separate checks.

5. Ask the transaction questions before removing conditions

Give each issue an owner and identify the evidence needed to close it. The following questions help turn a general information package into a purchase decision.

Questions for the seller

• Who is the legal seller, and which assets can that seller transfer? What is excluded, leased, financed or owned by someone else?
• Which equipment defects, lease defaults, disputes, inspection orders or required repairs remain unresolved?
• If earnings support the price, can sales reports, financial statements, tax records and supporting bank or processor information be reconciled?
• Which employees, supplier arrangements, warranties, training commitments and digital accounts are expected to continue? Which require a separate agreement or consent?

Questions for your lawyer

• Are the seller, asset schedule, exclusions, assumed obligations and representations clearly described? What searches, consents and releases are needed?
• How should the agreement address landlord approval, financing, equipment inspections, regulatory requirements and access for due diligence?
• What employee, vacation-pay, termination, supplier, gift-card or other obligations could affect the buyer? What must be documented about their treatment?
• What happens if an item is missing or damaged before closing, an approval is delayed or a required release is unavailable? Are holdbacks or other protections appropriate?

Questions for your accountant and lender

• How much cash is needed beyond the price for deposits, professional fees, inventory, repairs, approvals, insurance and working capital?
• Do the financial records support the earnings assumptions after owner compensation, rent, payroll, food costs, repairs and other operating expenses?
• How should the price be allocated among equipment, inventory and goodwill? Do the purchase agreement and tax treatment align? [8]
• Does the proposed financing cover this asset package and the opening budget? What lender conditions remain?

Do not assume the asset purchase is GST-free. Ask your accountant whether the transaction qualifies for the joint election using Form GST44, whether the parties meet the requirements, what exceptions apply and who will handle filing. Buying a collection of equipment does not automatically qualify as buying a business for this purpose. [9]

Questions for inspectors and operating authorities

What has been inspected, what could not be assessed, and what needs specialist follow-up? What repairs, plans or approvals are needed for the intended operation? Ask for findings in writing, with cost information where the professional can reasonably provide it.

Restaurant purchase decision checklist

Use these boxes to track your review. Completing a checklist is not an approval to waive a condition; make that decision with your advisers using the agreement and the evidence available.

Tick boxes are an on-page convenience. Keep your evidence, outstanding issues and closing instructions in your own transaction records.

Common restaurant-buying questions