What should I check before buying a cell phone store?

A cell phone store that sells for a carrier is a different purchase from a shop that repairs phones. Much of what the business earns, and much of what it can keep, is set by a contract with the carrier rather than by the store itself. Check that contract first, then the money it produces, then the things in the store that the owner may not actually own.

The dealer agreement

Ask for the full agreement and every amendment. Read it for three things: whether the carrier has to approve a new owner, how long the agreement runs and how it renews, and whether it gives the store any exclusive area or limits where else the carrier can authorise a dealer. Ask the seller what the carrier has said about the sale. A buyer who is not approved may be left with a lease and no products to sell. Your lawyer should read the agreement itself.

Commissions and chargebacks

Activation commissions are often paid on one schedule and clawed back on another when a customer cancels early. Ask for the commission statements and the chargeback history side by side, covering enough months to show a pattern. Your accountant can help separate commission income from product margin, and show how much of the income depends on plans the carrier can change.

Stock, displays and the lease

Ask which inventory, fixtures and demo devices belong to the store and which belong to the carrier. Branded displays often stay with the carrier. Then read the lease. Mall and plaza leases can restrict signage, hours and assignment, and the landlord may need to consent to the new owner. Compare the lease term with the dealer agreement term, since one running longer than the other creates a gap.

• Carrier consent to the transfer, in writing
• Commission statements with chargeback history
• A list of carrier-owned stock and displays
• Staff who hold the carrier relationship and their contracts