Café or coffee shop due diligence

Due diligence on a café or coffee shop is more compact than for a larger hospitality business, but it still has to verify a specific set of items that a generic small-business checklist can miss entirely: the true size of the gift card and loyalty liability, whether the lease actually transfers on workable terms, and whether the equipment a buyer is counting on has real life left in it. Treating café diligence as an afterthought because the business looks simple is exactly how a buyer ends up inheriting a bigger liability, or a shorter equipment runway, than the numbers suggested.

Reconcile the gift card and loyalty balance directly

Request the current, reconciled balance of outstanding gift cards and loyalty-program credits directly from the point-of-sale system rather than accepting a seller’s summary figure, since this is a real liability the buyer assumes at closing rather than revenue the buyer gets to keep. Compare that figure against what was represented earlier in the process — a material gap between the two is one of the more common findings that reopens price negotiations late in a café deal.

Lease and landlord consent

Review the lease directly for its remaining term, any rent-reset provisions triggered by an assignment, and whether landlord consent has actually been sought and, ideally, obtained rather than merely expected. A lease silent on assignment, or a landlord who has not yet been approached, is a genuine closing risk rather than a formality to sort out later, since the café cannot operate at the same location without it.

Equipment condition and supplier agreements

Have the espresso machine, grinder and any roasting equipment inspected directly rather than relying on the seller’s description of their condition, and get a realistic estimate of remaining useful life and replacement cost. Review any roaster, dairy or pastry supplier agreement for its term and whether it is assignable, and confirm whether a backup supplier relationship genuinely exists or is simply assumed.

Food premises and, where applicable, liquor licensing

Confirm the food premises licence is current and review the inspection history with the local public health unit for any open items, since this licensing runs on its own local schedule separate from the lease or the corporate transaction. Where the café operates a wine-and-beer format, review the liquor licence file the same way a bar or restaurant sale would require, including whatever transfer-approval process the applicable provincial authority runs.

The patio and encroachment permit file

Where the café operates a seasonal patio, request the municipal encroachment permit itself rather than taking the seller’s description of it, and confirm its renewal history, any conditions attached, and — critically — whether it is assignable to the buyer’s entity or will lapse and require a fresh application after closing. A patio permit tied to a specific past approval does not automatically renew for a new operator, and finding that out after a deal has already priced in a full patio season is a common, avoidable source of post-closing disappointment.

Trademark and brand-name search

Search the Canadian Intellectual Property Office trademark register directly for the shop’s name and any house-blend branding rather than accepting the seller’s account of what is registered and to whom. Confirm that any existing registration sits with the corporation being sold rather than with an individual who is not staying on, and check for a conflicting registration held by an unrelated third party — a smaller but real risk for a café that has built a recognizable house-blend or shop name without ever formally protecting it.

Equipment financing and lien search

Espresso machines, grinders and roasting equipment are commonly purchased on an equipment loan or lease, and that financing can leave a registered security interest against the equipment long after the seller believes it has been paid off. A personal property registry search in the province where the café operates, run against both the corporation and the specific equipment being acquired, confirms whether anything registered against it still needs to be discharged before closing.

Findings that commonly stop a deal

• The reconciled gift card and loyalty balance is materially larger than what was represented, changing the effective price the buyer is paying
• The landlord will not consent to assignment, or will only do so at a rent the café’s economics cannot support
• Espresso or grinder equipment is found to need near-term replacement well beyond what the seller’s description suggested
• A key barista or manager who built the regular customer base confirms they do not intend to stay through the transition
• The patio permit turns out to be non-transferable, removing a season of revenue the offer had priced in

The corporate and employment layers underneath

Beyond the café-specific items, confirm the corporation’s good standing, check for outstanding CRA debts or registered security interests against the equipment, and review staffing arrangements, including how many employees are part-time or casual and what continuity obligations follow the sale. A café with only a handful of staff can still carry meaningful employment-law exposure if these arrangements are not reviewed carefully.