The value of the goodwill in a hospitality business – restaurant, café or bar – is usually determined in the first instance by reference to future maintainable earnings having regard to historical revenue and then negotiated according to other features of the business including location, reputation etc.
Fixtures, fittings, plant and equipment and stock also feature prominently in arriving at a sale price.
As with all leasehold businesses, the security offered by the lease – and any options to renew – is also an important feature.
Other special considerations apply to motel and hotel business sales.
Hospitality businesses are often highly leveraged and particular attention needs to be paid to ensuring that all security interests including those under the Personal Property Security Register are released at the time of payment of the purchase price.
It is particularly important that all “representations” as to profitability and takings made by the Seller are recorded in writing and that adequate due diligence is conducted by the buyer’s financial advisers.