Hypotheticals by Manny Wood. Published in the Coffs Coast Advocate on 3 December 2016.
Max and Charlene are looking to buy a fish and chip takeaway food business called A Salt and Battery.
Due Diligence
They obtain the business’ financial records from the vendor and receive accounting advice regarding the viability of the business.
The business is operated out of leased premises and the lease includes an option to renew the lease for a further term.
The terms of the franchise agreement are considered.
The purchasers talk to their accountant about establishing a company. They consider forming a family trust or operating as a partnership.
Their solicitor calls for the contract which is prepared by the vendor.
Negotiation
The parties agree on a reasonable training period and the vendor agrees to a restraint clause, preventing him from operating a similar business in the area for 2 years.
The purchase price includes goodwill and equipment. Stamp duty is only calculated on the value of the equipment. An inventory is prepared.
A settlement date is agreed.
The purchase is subject to the assignment of lease and the execution of a new franchise agreement.
The contract is provided to their bank and finance approval is obtained.
Exchange
Max and Charlene pay a 10% deposit to secure their purchase. A settlement date is scheduled.
The employees of the business are notified of the sale and the manager of the business agrees to continue employment. Long service leave is assessed and superannuation details provided.
Settlement
Their solicitor conducts a PPSR search and discovers that some of the assets of the business are encumbered. The amount owing is paid by the vendor at settlement.
The business name, phone number and web-site domain are transferred at settlement. Continuing agreements with suppliers are assigned to the purchasers. A fresh franchise agreement is signed.
Adjustments are made for the business’ outgoings and a stock take is undertaken. Employee entitlements are calculated.
The landlord consents to an assignment of lease and the lease is registered after settlement.
Max and Charlene are given the keys and the doors of their venture open.
If you are buying or selling a business, you can contact Manny at manny.wood@ticliblaxland.com.au or call him on (02) 6648 7487.
