What should I check before buying a cafeteria business?

A workplace, school or institutional cafeteria is not a restaurant with its own storefront. It trades inside someone else’s building, for people who are already there, under an agreement with the host. That changes what a buyer needs to examine. Much of what you would check in a restaurant, such as street traffic and a lease of your own, matters less here. The host relationship matters far more.

Start with the host and the contract

Ask who the host is and how much of the revenue comes from that one site. A business with a single host depends on that host’s goodwill. Read the contract for its remaining term, how it has renewed before, and how either side can end it. Ask whether the host knows a sale is being considered. Your lawyer should review the contract before you rely on it.

Separate sales from subsidies

Some cafeterias live on cash sales. Others receive a management fee or subsidy from the host. The two behave differently when attendance changes. Ask for the financial statements broken out by source, and ask what the host pays for, such as utilities, cleaning or space. Your accountant can help you see which numbers will carry over to your ownership.

Equipment, calendar and people

Ask which kitchen equipment belongs to the business and which belongs to the host or a lessor. Then look at the calendar. School terms and office occupancy shape slow periods, so ask how the business handles them. Find out which staff stay after a sale, who holds the host relationship day to day, and whether any key person plans to leave.

• Host contract: term, renewals, termination and notice wording
• Revenue by host and by source, sales versus subsidy
• Equipment list showing who owns each item
• Operating calendar, including slow periods
• Staff roles and who manages the host relationship