Chapter 12: Selling a restaurant, shop or other physical business

Selling a physical business — a restaurant, a café, a hair salon, a retail shop, a workshop or a manufacturing business — follows the same main steps as other business sales. But there are a number of special matters that can determine whether the deal can go through at all: the lease, licences and official permits, the physical fixtures and fittings, and the inventory. This chapter brings together the most important ones.

The lease

For many physical businesses, the lease is one of the most valuable assets. A good location, a reasonable rent and a long period of non-terminability can be decisive for the buyer — and a short or uncertain lease can make the business almost unsellable. So start by going through the lease thoroughly.

• How long is the lease non-terminable by the landlord?
• What does the lease say about assignment and subletting — is the landlord’s consent required?
• How is the rent adjusted (net price index, stepped rent, market rent)?
• Has a specific permitted use been agreed that limits what a buyer can use the premises for?
• Who is responsible for maintenance, and is there a backlog?
• What has been agreed about reinstatement on vacating?
• Is there a deposit or prepaid rent that needs to be transferred?
• Do you own the property yourself — and should it be sold with the business or let to the buyer?

The Danish Commercial Leases Act (erhvervslejeloven) contains rules that in certain cases give the tenant the right to assign the lease to a buyer of the business, and rules on when the landlord can refuse. The rules depend on the type of lease and on what has been agreed in the contract. Have a lawyer assess your lease, and contact the landlord early — a landlord who feels bypassed can make the handover difficult. If the lease has to be renegotiated or redrawn, Sitavo’s commercial lease can give an overview of what a new lease should contain.

Licences, registrations and permits

Many permits are tied to a specific person or a specific CVR number and do not automatically transfer on a sale — especially not in an asset sale. The buyer often has to apply themselves, and processing times can be several weeks or months. Make a list of the business’s permits and find out for each one what has to happen on a change of ownership.

Fixtures, fittings and operating assets

In an asset sale, fixtures, fittings and operating assets must be listed and handed over. A precise inventory list prevents disagreement about what is included.

• Draw up an inventory list with description, quantity, age and condition — e.g. kitchen equipment, cold room, cash register, furniture, machinery, tools and vehicles.
• Clarify ownership: What does the business own, what is leased, and what belongs to the landlord or a supplier (e.g. draught beer systems, freezers, signs)?
• Leasing: Can the leasing agreements be transferred, or must they be paid off?
• Service agreements and inspections: Gather documentation of maintenance so the buyer can see that the equipment has been looked after.
• Personal belongings: State clearly what you are taking with you.

Inventory

The inventory is often settled separately, on top of the price for goodwill and fixtures and fittings. Agree in the purchase agreement how the stock is counted and valued — typically at cost for saleable goods, while unsaleable, obsolete or damaged goods are excluded or written down. The count is normally carried out jointly on the completion date.

• Agree the valuation principle (cost price, latest purchase price).
• Agree what counts as unsaleable and how it is handled.
• Agree an upper and lower limit for the size of the stock, so there are no surprises.
• Check dates on food and other goods with a limited shelf life.
• Clarify the VAT on the transfer of the inventory with your accountant.

A business lease as an alternative to a sale

If it is difficult to find a buyer, or you do not want to sell yet, a business lease (forpagtning) can be an alternative. Under a business lease, a lessee takes over the running of the business — e.g. a restaurant, a hotel, a canteen or a shop — in return for paying a lease fee, while you continue to own the business and often the fixtures and fittings. Use Sitavo’s business lease agreement as a starting point, and see the businesses offered for lease on Sitavo — you can also create a lease listing yourself with a monthly lease fee.

A business lease agreement should govern, among other things, the size of the fee and how it is adjusted, duration and termination, maintenance and replacement of fixtures and fittings, insurance, permits, access to the accounts and what happens to goodwill and customers when the lease ends. A purchase option can turn a business lease into a step-by-step route to a sale.

Checklist for physical businesses

• The lease has been reviewed, and the landlord has been contacted at the right time.
• All permits have been listed, and it has been clarified what happens on a change of ownership.
• The inventory list has been drawn up, and ownership and leasing have been clarified.
• The principle for counting and valuing the inventory has been agreed.
• Insurance, utilities and service agreements are ready to be transferred.
• The latest inspection reports and official visits have been gathered.
• The buyer has seen the premises and equipment at a viewing outside opening hours.
• A business lease has been considered if a sale is not possible or desired right now.