What should a holdback cover when you buy a restaurant?

A holdback typically keeps part of the price out of the seller’s hands for an agreed period after closing. How it works in any sale is covered elsewhere. This page is about what a restaurant buyer might ask it to protect, because a kitchen has particular risks that surface in the first weeks of running it.

Equipment that fails early

Walk-in coolers, fryers, dishwashers and ventilation can look fine on a visit and fail once they run at full service. If equipment is a large part of what you are buying, ask whether a holdback could cover repair or replacement of named items for a set period. Have a technician inspect them before you sign.

Supplier invoices and stock

Food, beverage and supply vendors may send invoices for goods delivered before closing. Ask for a list of what the seller owes and who is owed, and ask how unpaid balances are handled. A holdback can give you a source to pay a late invoice if a supplier then asks you for it.

Deposits, gift cards and final bills

Event bookings, catering orders and gift cards sold before closing are promises you may be expected to honour. The seller may already hold the money. Utilities, waste pickup, alarm and other services also bill in arrears. Ask how each is handled and whether a holdback should cover them.

Your lawyer will set the amount, the length of the period and how a claim is made. These points are negotiated, and every deal differs. Raise the restaurant-specific items early, so they are written into the agreement and not discussed after closing. This page on what a restaurant purchase agreement should cover is a good companion.