Should I buy a restaurant that reports cash sales off the books?

You should not pay for them. Undocumented sales cannot be verified, cannot be financed and carry tax risk that may follow the business. Price the business on what the records show. If the seller insists the real number is higher, that is their problem to prove, and their choice to have made it unprovable.

How important is the chef to the valuation?

Very, when the concept depends on them. A chef-driven restaurant where the chef is the seller is largely owner-dependent and should be priced like one. A cafe with a simple menu and documented recipes is less exposed. Plan retention or replacement before you commit.

Can I change the concept after buying?

Yes, subject to the lease's permitted use and any licensing conditions, but you will then be paying for a location and equipment rather than a business, and the price should reflect that. Buyers who plan a new concept often overpay for goodwill they intend to discard.

What working capital does a restaurant need after closing?

Enough for the first payroll, the first supplier orders, deposits with new suppliers who do not know you, licence fees and any immediate repairs, before the first full month of sales reaches the bank. Model it with your CPA. Running out of cash in the first month is a common and avoidable failure.

Buying a restaurant or cafe in BC without overpaying

Restaurants and cafes change hands often in British Columbia, and the price range is wide for businesses that look similar from the street. Some are genuine businesses with systems, staff and documented earnings. Others are a lease and some equipment with an owner who has been working long hours for a modest return. The difference is visible if you know where to look.

This guide walks through what to verify before you make an offer and how to think about price. Licensing, lease and employment questions belong with your lawyer, and the numbers with your CPA. Our role is to make sure you are paying for a business and not for a story.

Start with the lease

A restaurant without a lease is equipment in a truck. Read the lease first. Note the remaining term, renewal options and the conditions attached to them, the rent and how it escalates, what additional costs you pay, the permitted use, and the landlord's rights on assignment. Many leases require landlord consent to transfer and allow the landlord to demand a personal guarantee, a deposit, or new terms. Find out what this landlord will actually require before you negotiate the price with the seller.

Ask whether the premises meet current code and whether any work is required at renewal or on assignment. Ask about demolition clauses and redevelopment plans for the building. A great location with two years left on the lease and no renewal is a short-term rental, not an acquisition.

Verify the sales

Request point of sale reports by day and by category for at least two years, and tie the totals to bank deposits and to the sales tax filings. Where the three agree, you have a documented business. Where they do not, you have a question, and the usual answer is unreported cash sales. A seller who asks you to pay for sales that do not appear in the records is asking you to take their word and the tax risk together. Decline.

Look at the sales trend by month, the mix between food and beverage, the average cheque, and the share from delivery platforms, which carry high fees. Visit at different times on different days and count covers yourself. Your observations should match the reports.

Costs that decide the margin

The number that matters is the earnings after paying a manager, because that is what the business produces as an investment. Many small restaurants produce a reasonable living for an owner who works in them and almost nothing for an owner who does not. Decide which one you intend to be, and price accordingly.

Food and beverage cost as a share of sales, from actual purchases, not menu theory
Labour cost including the owner's own hours at a market wage for a manager
Rent and occupancy costs as a share of sales
Delivery platform commissions and payment processing fees
Repairs and maintenance, and the age and condition of major equipment
Licensing, insurance, utilities, waste and linen
Marketing, and whether the business owns its website, reviews and social accounts

Licences, permits and people

A liquor licence, if there is one, is issued to a specific licensee for specific premises, and transferring it to a new owner is an application with its own timeline and conditions. Health permits and the municipal business licence have their own processes. Your lawyer will map what must be transferred or reissued and how long each takes, and the closing date should be set around those timelines rather than hoped into them.

Review the staff list with your lawyer, including pay, tenure and any written agreements. Identify the chef, the manager and anyone else whose departure would change the business. Ask who creates the menu, who orders, who schedules and who handles the landlord, and whether the answer to all four is the owner.

Equipment, condition and price

Get the kitchen inspected. Hood and fire suppression, refrigeration, cooking lines and dishwashing are expensive to replace and often near the end of their lives in a business for sale. Confirm which equipment is owned, which is leased and which belongs to suppliers. Factor replacement into your price and your working capital.

Restaurants are usually valued on seller's discretionary earnings, with the equipment and leasehold improvements supporting the price rather than adding to it. Where the earnings are weak or undocumented, the price tends toward the value of the assets and the lease. If you are weighing a restaurant or cafe purchase in BC and want a frank second opinion, call or text (604) 632-4959. A Business Acquisition session with Ali runs 60 minutes for $399.