Thinking about buying an existing restaurant in Australia? Before you sign anything, here’s a comprehensive framework to evaluate whether it’s truly a good deal — or a costly mistake.
1. Understand Why They’re Selling
The first and most critical question: why is the current owner selling? Common reasons include retirement, partnership disputes, visa issues, or simply burnout. But sometimes the real reason is hidden — declining revenue, rising costs, or an unfavourable lease renewal.
Always verify the stated reason independently. Speak to staff, neighbours, and if possible, regular customers.
2. Analyse the Financials — Deeply
Don’t just look at the P&L statement the seller provides. Request:
- At least 3 years of tax returns (BAS statements)
- Bank statements to verify cash flow
- POS reports showing daily/weekly transaction volumes
- Supplier invoices to understand true COGS
- Staff roster and payroll records
Red flag: If the owner claims significant cash revenue that doesn’t appear in the books, walk away. You can’t value what you can’t verify.
3. Evaluate the Lease
In Australia, the lease is often more valuable than the business itself. Key things to check:
- Remaining lease term (minimum 5+5 years preferred)
- Annual rent increase mechanism (CPI vs fixed %)
- Outgoings and hidden costs
- Assignment clauses — can the lease be transferred?
- Make-good obligations at lease end
4. Assess the Location & Competition
Visit the location at different times — morning, lunch, dinner, weekdays, weekends. Count foot traffic. Check Google Maps for competing restaurants within a 1km radius. Understand the demographic of the area.
5. Review Equipment & Fit-out
Get an independent valuation of all equipment. Check the age and condition of key items like commercial fridges, ovens, exhaust systems, and grease traps. Factor in replacement costs for anything over 5 years old.
6. Check Licences & Compliance
- Food safety certificates and council registration
- Liquor licence (if applicable) — transfer process can take months
- Fire safety compliance
- WorkCover and insurance
- Any outstanding council orders or violations
The Bottom Line
Buying a restaurant is not just a financial transaction — it’s a lifestyle decision. Take your time, do thorough due diligence, and don’t let emotion drive the decision. The best deal is the one you walk away from when the numbers don’t add up.
Need help evaluating a restaurant purchase? Get in touch with Beyond Growth for a professional assessment.