Selling a specialty food retailer in Canada

Selling a specialty food store means moving three things that do not sit on the shelves: the right to operate a food business, access to the suppliers who make the range distinctive, and the premises. Each has its own gatekeeper and timetable, and none is under the seller’s control, so preparation is mostly a matter of finding out how long each will take and starting the slowest first. This guide sets out an order of work for a seller who has already decided, and the points where a sale can stall. It shows where provinces differ, because approval to operate a food store is run provincially, through local health units, regional health authorities or a provincial ministry.

Put the supplier relationships on paper first

Supplier relationships are not the seller’s to hand over, so start with them. Before listing, write down every significant supplier, the lines each provides, who holds the relationship, what credit or pricing applies and whether anything is in writing, and read any agreement for a clause that limits assignment or ties it to the current owner. Then decide when suppliers will be told. A buyer may ask to speak to the main ones, so decide how early that can happen without word of the sale spreading.

What each province asks of the incoming operator

The approval that lets a food store trade is provincial, and the route differs. In Ontario, O. Reg. 493/17 refers to a person giving the medical officer of health notice of an intention to commence operating a food premise, and sets out what the notice must contain, so the incoming operator should ask the local health unit what it expects on a change of operator. In Manitoba, a food handling establishment must be registered and hold a permit from the public health inspector before operating, and for a change of ownership of an existing business the province’s page says to submit the Food Handling Permit Registration Form, a menu and a floor plan to the area public health inspector.

In Quebec, the Ministry of Agriculture, Fisheries and Food (MAPAQ) issues a permit for food preparation, restaurant or retail sale that must be received before activities begin, and it publishes a processing time that belongs in the closing timetable. Other provinces run their own regimes, so the local health authority is the first call.

Federal licences depend on activities

The Canadian Food Inspection Agency licenses certain food businesses under the Safe Food for Canadians Regulations for activities that include trading food within and outside Canada, manufacturing, packaging and labelling. Whether a store imports directly or packs and labels its own lines is therefore worth establishing early. The seller should check the Agency’s list of licensed activities against what the store actually does, then ask the Agency whether the buyer will need a licence for its own activities and how to obtain one.

The lease, the refrigeration and what is registered against it

Refrigeration, freezers and fit-out sit inside a lease. Where a lease requires the landlord’s consent to assign, section 23 of Ontario’s Commercial Tenancies Act treats that covenant as subject to a proviso that consent is not to be unreasonably withheld unless the lease contains an express provision to the contrary, and lets a judge decide, on application, whether consent was unreasonably withheld. Because a refusal could leave that application as the remaining route, approach the landlord early; other provinces have their own rules. Financed or leased equipment may also carry a lender’s or supplier’s security registered under the provincial personal property security regime, which in Ontario is the Personal Property Security Act, so ask a lawyer how any registration will be dealt with at closing.

Stock, tax and the price allocation

Agree in advance how perishable and imported stock will be counted and priced, who carries the risk of goods that pass their best-before dates before closing, and how a count dispute will be settled. The Canada Revenue Agency says a sales agreement may set a price for each asset, a value for the inventory and any amount attributed to goodwill, and that selling assets can produce a recapture or terminal loss of capital cost allowance. It adds that seller and purchaser may be able to elect jointly, on form GST44, that no GST/HST is payable on the sale, but not if only one or more assets are sold or if the seller is a registrant and the purchaser is not, and some supplies are still charged GST/HST even with the election. An accountant should settle the structure before listing.

Confidentiality in a store everyone talks about

Where a specialty food store is a community fixture, news of a sale can travel through customers, staff and suppliers, so a seller can decide in advance who will be told what, and when. Buyers should sign a confidentiality agreement before supplier names, customer lists or purchase records are shared, and the listing itself should not identify the store. A business broker can carry that discipline for a seller. The wider sequence is in the business sale process end to end.

These are the points at which a specialty food sale can stall:

• A main supplier who has not yet agreed to deal with the buyer on the same terms
• A landlord who has not given consent, or who asks for a new lease or added conditions
• Waiting on the health authority or ministry to approve or permit the new operator
• A disagreement at the stock count over ageing or imported items
• A federal licence question for imported or own-packed lines that surfaces late