What should I check before buying a used cooking oil collection business?

A used cooking oil collection business takes a by-product that restaurants would otherwise pay to dispose of, and sells it on. That sounds tidy, but the business has two sides to check: the kitchens that supply the oil and the buyer that takes it. A weak link on either side affects the whole route, so it pays to examine both before you go further.

Supply agreements and the bins

Ask for every agreement with a restaurant and see how long each lasts. Find out who owns the bins or tanks at each site, since equipment placed in a kitchen can be hard to track. Ask whether any agreement can be ended on short notice, whether competitors have approached these customers, and whether each agreement can be assigned to you. Count how many accounts the owner holds through personal relationships.

The buyer of the oil

Ask who takes the collected oil, how long they have done so and what is written down. The price a buyer pays for oil can move with the market, so look at how the business fared in both strong and weak periods without relying on a single year. A single offtake buyer is a concentration risk. Ask whether the seller has talked to alternatives.

Trucks, storage and theft

Look at the collection trucks, pumps and storage tanks, and ask for maintenance records and any spills or incidents. Theft of used oil from bins is a known problem for some collectors, so ask how it has been handled, whether the business has had losses and what it did about them. Insurance coverage and claims history are worth a look.

Permissions and paperwork

Whether the business holds what it needs to collect and transport oil, and whether that carries over to a buyer, is a question for your lawyer and the regulator. Read what environmental checks you need, and ask your accountant to review the books with you. The hood cleaning checklist covers a neighbouring trade.