How to buy a restaurant in Newfoundland and Labrador: licences, ownership rules and what transfers

A restaurant in Newfoundland and Labrador sits under two provincial regimes that treat a change of owner in different ways. The Food Premises Act, administered by the minister and enforced by inspectors, licenses the place where food is served. The Liquor Control Act and the Newfoundland Labrador Liquor Corporation, with its board, license the sale of liquor. One is written so the licence cannot move to a buyer. The other allows a transfer, but only with approval. A buyer who treats them as the same step can reach closing without a lawful right to operate. This guide covers what each says, and covers Newfoundland and Labrador only.

The Food Premises Act and restaurants

The Act says a person shall not operate a food premises without a licence. It defines food premises to include restaurants, along with hotels, catering vehicles, bakeries and other places where food is prepared, offered for sale, sold or served. The minister may issue a licence, and may also amend, suspend, cancel or refuse to renew one, or add terms and conditions to it. The Act defines an operator as a manager, owner, licensee or lessee of a food premises, so the duties it sets reach people beyond the named licensee. A buyer who plans to open on the closing date should treat the licence as something to obtain, not something to inherit.

Why the licence cannot be bought with the business

Under the Act, a licence is issued only to a specific person and with respect to a specific food premises. The Act then states that a licence is non-transferable. Taken together, the seller’s licence names the seller and the premises, and it does not pass to a buyer under the purchase agreement. The buyer applies in their own name. Ask the seller to show the current licence, and ask the province what a new applicant must file and how long the review takes, so the closing date does not run ahead of it. If the restaurant also holds a liquor licence, that is a second application with its own steps, covered below; ask the province and the Corporation whether the two applications can proceed at the same time.

Plans and approval before you renovate

The Act also says a person shall not construct or alter a food premises unless plans and specifications prescribed in the regulations are submitted to and approved by an inspector. A buyer who intends to change the kitchen, the layout or the dining room should confirm whether the change counts as an alteration, and whether the seller’s earlier work was approved. Make any renovation plan a question to the inspector before it becomes a line in a budget. The same inspectors may inspect or examine a food premises and its books and records for a purpose related to the administration or enforcement of the Act or the regulations, so the seller’s paperwork on past work is worth asking for.

The liquor licence transfers only with approval

The liquor side works differently. Section 44(1) of the Liquor Control Act says a licence shall not be transferred except with the written consent of the board. Under section 44(2) and (3), when the board approves a transfer the transferor surrenders the licence, the board issues a new licence to the transferee for the balance of the unexpired term on payment of the prescribed fee, and the transfer is not completed until that happens. Section 44(4) requires the directors of a company that is a licensee to present a proposed issue or transfer of its shares to the board for approval; where in the board’s opinion a substantial interest is involved, the transfer rules apply as if the company were transferring its licence, so a share purchase does not avoid the question. The Newfoundland Labrador Liquor Corporation says that to transfer an existing establishment licence an application must be made to it, and that the applicant must also have a letter from the current licensee agreeing to the transfer. It adds that a letter from the current licensee allowing use of the licence is required to operate the business while the application is processed. Ask a lawyer how the purchase agreement should provide for those letters. Ask the Corporation whether the licence class and the premises will carry over unchanged.

What the board may refuse

Under section 33(3) of Newfoundland and Labrador’s Liquor Control Act, the board may refuse an application for a licence or refuse to approve the transfer of a licence on listed grounds. They include a case where past conduct establishes reasonable grounds for the belief that the applicant will not carry on business in accordance with the law and with integrity and honesty, and a case where the applicant is carrying on activities in contravention of the Act or regulations. Read the full list in the Act. Section 45 applies sections 34 to 41 to a transfer, with the necessary changes, but the board may dispense with as many of those provisions as it considers desirable. A buyer with a record that might raise a question under these grounds should ask a lawyer about it before signing.

What to ask the seller for

Request the following, and confirm each with the province or the Corporation where you can:

• The current food premises licence and any terms or conditions the minister has attached to it.
• Inspection reports and any orders an inspector has issued to the operator.
• The approved plans and specifications for any construction or alteration of the premises.
• The liquor licence, and the seller’s written agreement to the transfer, in the form the Corporation asks for.
• The lease and the list of licences and permits the business relies on, which BDC lists among the items to review in due diligence.

For the national picture, see buying a restaurant in Canada, and browse restaurants for sale across the country.