How do I sell my cafe?

A cafe sale has two tracks that run side by side. One is the commercial deal: price, equipment, the lease and the records the buyer reviews. The other is regulatory, because provincial food-premises rules call for a permit or a notice before food is sold to the public, as the examples below show. If you work only on the first track, you could find the second one close to the closing date, when little time is left to fix it. This guide walks through the order of work for an owner who has decided to sell, and it points out the steps that sit outside the purchase agreement.

Start with the records a buyer will ask to see

BDC says an accountant can help you prepare year-end and interim financial statements, projections and other documents that buyers typically ask to see as part of due diligence, and that buyers will ask to look at your historic and interim statements, projections and tax returns. For a cafe, that can mean cleaning up the daily sales records and any cash handling before a buyer sees them. BDC also suggests reviewing your records with your accountant so that interim statements are accurate and projections are realistic.

Check whether the lease and key contracts can be assigned

BDC tells buyers to make sure key contracts, such as leases, regulatory agreements and customer contracts, can be assigned to them if necessary. For a cafe the lease may be the contract that decides whether a buyer can proceed, so read yours carefully before you list the cafe for sale. Look for who must consent to an assignment, what the landlord can ask of a new tenant, and whether equipment leases or supplier agreements need the other party’s approval. If consent is needed, ask early rather than after you have a buyer. If the buyer needs the premises to run the cafe, settle this first. Keep a copy of every consent in the file you will hand to the buyer’s lawyer, along with the date it was given and who gave it.

Plan the food permit or notice as its own step

Food-premises rules are set provincially, and the two examples below differ. In Manitoba, the provincial health department says that to prepare or sell food to the public you must register your food handling establishment and obtain a permit from your public health inspector before operating. For new establishments or a change of ownership of an existing business, it directs you to submit the Food Handling Permit Registration Form, the menu and a detailed floor plan to the area public health inspector. In Ontario, the Food Premises regulation under the Health Protection and Promotion Act says a person who gives notice of an intention to commence to operate a food premise to the medical officer of health under subsection 16(2) of that Act must include their name, contact information and the location of the premise. Ask your local public health unit what a buyer must file and when, and share that with the buyer early.

Keep the sale quiet while you look for a buyer

Decide early who should learn of the sale, and when. BDC warns that, depending on a listing site’s confidentiality procedures, word could get out to employees, customers or suppliers that you are selling the company. Decide in advance who on your staff will be told and when, and what you will say to a landlord or supplier who asks. Ask any serious buyer to sign a confidentiality agreement before you share financial statements, the lease or supplier terms, and keep the first conversations off the shop floor and outside opening hours.

Know what the CRA expects when you sell

The CRA’s guidance on selling a business says that if the business has a business number, it is important to contact your tax services office, since you might have to cancel it. If the business has employees, you must close your payroll account. If it has a GST/HST account, you must contact your tax services office to close it. Put these on your closing checklist, and ask your accountant who will make the calls and on what date. The CRA also notes that when you sell a business or part of one, you generally set an amount for the entire business, which is a point to settle with your accountant before you sign.

• Ask your accountant to prepare year-end and interim statements and projections before the first buyer meeting.
• Read the lease for assignment, consent and landlord approval terms, and do the same for equipment and supplier contracts.
• Call your local public health authority to learn what the buyer must file, and how long it takes.
• List the CRA accounts to close or cancel, and who will do it after closing.
• Ask your lawyer how the purchase price will be set out across equipment, inventory and other assets.