What happens to the food service contract when I buy a cafeteria business?

In a cafeteria business the host contract is the business. Ask your lawyer what rights you would have to use the building without it. That is why it deserves more attention than any other document in the deal. Do not assume it moves to you with the sale. Read it, ask about it, and have your lawyer advise on what it means.

What to read in the contract

Look at the remaining term and how the contract has renewed or been re-tendered before. Find the termination clauses, including whether the host can end it without cause and how much notice it must give. Look for wording about consent, assignment or a change in who controls the operator. Ask for every amendment, not only the original.

Asset sale or share sale

Ask your lawyer whether the deal is a purchase of assets or of shares, and what each means for this contract. That is a legal question with a legal answer, and it can change who must consent. As a buyer, your job is to bring the question early so the structure is chosen with the contract in mind.

Talking to the host

Ask the seller when and how the host will be told. A host that hears late may feel uneasy about the change. Many buyers ask to meet the host contact before closing, and write the host’s written consent or confirmation into the agreement as a condition. Your lawyer can draft it. If the host will not engage, you learn something useful before you close.