Buying a café or restaurant: 10 things you need to know

So you’re buying a café or restaurant! 

Congratulations! Many dream of buying a café or restaurant*.

Few do.

This article is for that lucky few…

Let’s begin. 

1. Business sale agreement

Your transaction hinges on 1 important document: the “business sale agreement”.

Here’s an super detailed legal business sale agreement from the NSW Law Society.

So if I can buy a standard business sale agreement template, then why hire a lawyer?

As a business lawyer, our job is delivering financial value. Business people hire lawyers for the same reason they’re in business… so they make money.

So, we save or make you money through:

  1. reducing your transaction costs;
  2. reducing your risk; and
  3. helping to achieve your goals.

2. What am I buying?

The restaurant or café buying is not just a restaurant and a café. It’s a bundle of different contracts, made up of rights and obligations.

The big one is the lease.

It’s so big that, that the price of your café or restaurant, isn’t really the price… If you’re buying a café or restaurant, then need your lease locked down.

You need to know:

  1. Weekly, monthly, annual, including CPI increases costs of your lease.
  2. That all the previous lease payments are paid; and
  3. The date your lease is due for renewal.

3. Transferring or signing a new lease

  • You need to have a lease transfer agreement (called an assignment); or
  • Have a “clean” lease with the property’s owner, as distinct from the vendor of the Café or Restaurant. 

Picture for a second, how bad your situation will get if in six (6) months your landlord outlines that:

  1. his property’s plans don’t include you; or
  2. the lease payments will increase 30%.

4. DA’s are important, ok!

This gets people every year

If your business premises used to be retail and now is a café, then Council must have approved of this change. 

If the previous Café or Restaurant owner didn’t have Development Application approval (DA)… then that will be YOUR problem.

Council don’t care who was responsible for getting that DA. Cafe’s can and do get shut down for not having them. Some never  trade again. 

Our example here is a DA, but it’s only an example. All necessary permits need to be in place.  Not having a liquor license is also common, and leads to big fines.

5. Leased goods

When you buy a café or restaurant, normally you’ll also lease goods. Important goods. Critical even. 

A lot of machines are too expensive to buy outright. 

Examples include

  • coffee machines
  • large fridges; and
  • cool rooms.

So when you buy a café or restaurant, you need to get clear about the terms of all these contracts.

Consider if there’s any “bullet” repayment related to any of these big ticket items. Paying $50,000 for a café may be a great price. Owing another $12,000 in three (3) months’ time isn’t as attractive.

6. Assign all relevant agreement

When you buy a café or restaurant make sure all agreements get assigned or transferred to you.

The value of your café or restaurant includes these overheads.

7. Stock – furnishings

When buying a café or restaurant, then it’s good if your place includes the tables & chairs!

Obvious, right? 

Well, the same goes for lights, fittings & wall hangings.

These all need to be described in your sale agreement. The consequence for not having them aren’t difficult to imagine.

People get blind, about what they assume is not being sold with the business. The cooler the items are, the more often a

As a rule, disputes correspond with how covetable or unique the particular piece in question is…

Seller: “Of course, that table wasn’t included in the sale of my café.”

Buyer: “Of course, I never would have bought the cafe, if I’d known it didn’t come with those amazing lights… (or wall hangings).” 

Buy what you think you’re buying.

8. Stock – perishables

Again, another item that adds up. Any reasonable sized restaurant will often carry $20,000 worth of food in it’s cool room.

The business seller can on-sell perishables easier than you might think.

Get the stock in the agreement.

9. What if I’m opening a different café or restaurant?

If you’re changing the menu, then why pay for the stock purchased for the old menu?

To pay for perishables that will literally perish, isn’t a great star. So here it makes sense to exclude stock from the sale agreement.

The same goes for everything said about furnishing, fittings etc.

Don’t buy materials, that you won’t use.

10. Supply relationships

Buying a café or restaurant always comes with regular suppliers. It’s an important ‘asset’. If the café you’re buying, uses particular beans. For a café, the strategic value of your barista and suppliers are hard to overstate. 

In closing

Many things need to considered, when buying a café or restaurant. Running your own café or restaurant can be incredibly rewarding. And not longer “working for the man” is more than hipster cool…

So, hire Karma Lawyers to help you buy your dream safely. Focus on what you’re bringing to your new business and leave the legal headache to us.

Hiring a good business lawyer should be like getting insurance for your biggest transaction. We’re in Sydney, but our clients right around Australia.

Contact us for a free phone consult! 

02 9188 7833

enquiries@karmalawyers.com

 *In this article we assumed you aren’t buying a franchise. Franchises are bought, sold or leased, using agreements tailored for the particular franchise. Think McDonalds, Dodo, Etc.

The joke’s on me?

Hi My name is Karma be nice or I bite

Joke 1 – (“Lawyers are Di<$”)

Question: What does a lawyer get when you give him Viagra?

Answer: Taller.

The only profession that’s generated more jokes than the legal profession is the clergy.

It is older.

We love taking down hypocrites. Exposing the self-important to ridicule feels good. It’s dispensing justice.

So major newspapers carry bitingly accurate, cartoons that feature rich and powerful in unflattering ways. Remember Howard’s eyebrows and Carr’s ears? And, the skewered usually enjoy them.

Joke No. 2 (“god, law is SO boring.”)

One day in Contract Law class, the professor asked one of his better students, “Now if you were to give someone an orange, how would you go about it?”

The student replied, “Here’s an orange.”

The professor was livid. “No! No! Think like a lawyer!”

The student then recited, “Okay, I’d tell him, ‘I hereby give and convey to you all and singular, my estate and interests, rights, claim, title, claim and advantages of and in, said orange… and all rights and advantages with full power to bite, cut, freeze…”

Did you glaze over after reading, “I hereby give and convey…”??? That’s the point of this joke. To quote from the under-appreciated movie about the credit crunch, The Big Short. On describing Collaterised (yawn) Debt (yawn) Obligation Funds (or “CDCs”):

Does it make you feel stupid? It’s supposed to.’

To talk or not to talk

Lawyers do explain relevant law to you. It’s our job.

But more often our role is nearly the opposite to that. Not hiding the law, but making the mechanics of a dusty legal agreement quietly do what was intended.

So our job, to some degree, means you should be able to safely avoid thinking too much about it.

Like CDCs, the law is practically a foreign language. Your ability to grow your business might be inversely proportional to your obtaining a deep understanding of legislation and regulations.

The reason is that most sane people just want “the legal details handled”. So back to The Big Short, cut to a scene A bartender cum mortgage broker, sips a gigantic cocktail and says: “I like migrants… They just sign where you tell ’em to… These people just want homes.”

Yeah, disturbing. A High Court case (short-hand, Amadio), describes this scenario as repellent and illegal, but that’s at the extreme end.

You don’t need to dwell on the meaning of the jurisdictional clause of any contract you sign. But you certainly better care about the ‘essential terms’… which include

  • What?
  • How much?
  • When?
  • What happens if I don’t meet my obligations?
  • What happens if they don’t meet theirs?

(A word of warning. ‘Non-essential terms’ get essential like oxogen, when contracts head through a dispute.)

Personally, I forget the sheer tedium of my job. For instance, at home when proudly explaining a technical detail to my partner. Just before her slide from consciousness… from the opposite of spell-bound

Crushed ego or not – I stop.

Small mercies help relationships to thrive…

Joke 3 (“Being thorough… Being really, really thorough.”)

Question: What’s the difference between a good lawyer and a bad lawyer?

Answer: A bad lawyer can let a case drag out for several years. A good lawyer can make it last even longer.

Handling details

This joke stems from lawyers’ hourly fees in the context of a long running dispute. An absence of benefit from a pile of legal invoices is… dispiriting.

And that’s the dark side of your lawyer “handling the details”…

Expensive legal moves and counter-moves are opaque. So, then here’s the same joke, re-told with less-the-funny:

  • If your lawyer’s incompetent then he’ll cost a fortune, via idiocy and inefficiency; AND
  • If strategic / brilliant, then she’s the expertise to drag your matter out for as long as you cannot afford.

Karma’s effort to deal with this harsh but fair critique, is to smash our firm’s hourly rate to a (still significant) $220 per hour. The other response is our firm’s focus. Our focus is corporate & commercial legal work. Karma very rarely runs any open-ended litigation or disputes.

We kind of hate ’em…

Fixing prices that bite

Corporate and commercial law is often for managing transactions. It means we often fix prices.

Recently I handled the sale of a modest construction company. I underestimated the quantity of work. In my defence:

  1. some of the complexity wasn’t foreseeable; and 
  2. fixed pricing is, at some level, best-guessing.

So we didn’t make our hourly rate for the job.

But here’s the thing. My client took a risk also, when he agreed to our fixed price quote. If we’d mopped that job in under 2 days, then we would’ve earned more than our hourly rate.

The ‘other firm’ cost problem

Ideally, everyone is motivated to finish a legal agreement.

Ideally.

A firm’s charging rate certainly impacts how a matter is handled. 

Years ago, I settled a significant commercial lease with a well known retailer. Their lawyers dragged that straightforward deal through geography and topography, it had no reason to be near.

The job should have taken 2 weeks but took 6. 

In a fixed fee arrangement, the same deal would’ve been a distant memory at the 6 week mark…

Joke 4 (“Lawyers and clergy in an unholy marriage.”)

A lawyer dies and goes to Heaven.

“There must be some mistake,” the lawyer argues. “I’m too young to die. I’m only 55.”

“Fifty-five?” says Saint Peter. “No, according to out calculations, you’re 82.”

“How’d you get that?” the lawyer asks.

Answers St. Peter, “We added up your time sheets.”

Retelling without-the-funny…

This ‘classic’ insider joke is about Defrauding Their Clients Via Overcharging…

Um… hypocrisy?

Each of the 4 jokes were circulated on http://www.lawyersweekly.com.au/. 

Did the skewered (lawyers) enjoy their jokes?

But isn’t the overcharged (clients), the ones who really get skewered?

New Karma Partner! + Why firms charge clients $400/hr to train their baby lawyers…

 

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Either I’m embarking on an AFFAIR or Karma Lawyers just signed a NEW PARTNER. We need to stay quiet about our budding “we’re getting serious” relationship.

Imploding my 6 year relationship is 1 way to win readers, but disappointingly (for click-bait reasons), my partner IS a law firm partner.

Here are some tidbits fit to be published…

First, Karma’s new partner is a great lawyer. Adopting a bad lawyer would barely feed a blog post. But let’s get the mandatory compliment out of the way…

Karma’s new partner is leaving a mid-tier firm to arrive here. For those unfamiliar, a mid-tier firm is the sort of firm where lawyers arrive to receive an umbrella AND a fruit basket. 

Imagine leaving all that, for little ‘ole Karma! We aren’t mid tier. This does not mean we’re not good. (We’re awesome.) It means we don’t charge $300 an hour for a graduate’s work.

As covered on our website, our prices get fixed at 2/3 of that. If your writer worked at a mid-tier firm (as friends do), then my charge-out rate would be around $650 per hour.

At Karma we charge $220 / hr for every legal hour no matter the seniority. At the end of the day, the work will need to be a certain high standard, or it won’t go out the door.

And to be candid KL do charge higher for particularly complex transactions where the partners bring broad experience. These would include running an IPO, reverse takeovers, mergers, larger acquisitions, applying for an AFSL, facilitating certain large property trusts and the like. In those cases, we may double our rate or more… but how expensive IS that? 

I did just write that firms like my partners’ charge $300 an hour for their graduate’s work… Second year lawyers are routinely billed at about $400 per hour. 

Breaking down the legal invoice

Let’s break this pricing down for a moment, because it’s instructive. 

Clients go to mid-tier and top-tier firms only for plenty of that proportion of work to get handed to lawyers with almost NO experience to stumble through these matters. 

The same mid-tier firms subsequently invoice, with a straight face, $400 per hour (before GST). This effectively provides a ludicrously well compensated method to give their baby lawyers’ opportunities to learn how to practice law. 

(Lucky clients!!)

Of course we need to monitor our revenues and expenses. We are charging similar prices to a mechanic, and less than plumbers. (Also, we’ll review prices regularly, because we’re not commercial morons.)

We haven’t yet, hit a compelling reason for suggesting our disruptive legal pricing model isn’t sustainable.

Why is he coming?

So why is my partner coming to the modest cache, that’s Karma Lawyers?

There’s a few reasons. He’ll explain them in a blog post himself at some point. From my perspective it’s anchored on a couple points. 

1. We already know we’re a good team. 

Synergy is rare. I don’t mean “synergy” in the prospectus of some complicated financial instrument, designed to separate people from their life savings…. I mean the sort of kinetic energy that good partners bring to work they find exciting.

Synergy in these circumstances can be found anywhere. Two (2) experienced cops on a murder case or 2 programmers with a long history of late nights and Red Bulls… 

When the sum of a team is greater than it’s parts, then it’s tempting to bottle the performance… It’s rare and it’s valuable.

2. My partner helped brainstorm the Karma model – so he’s arriving to equity. 

The mid-tier firm (and the 50 priced just like it), will NEVER offer equity to a lawyer until they’ve completed their 15 years of late nights.

By the way, if this all sounds a little like a Marxist critique, well sue me. These points are as valid as they are obvious. 

And look, I don’t know where that $400 paid on account to a first year lawyers’ work actually goes…

Certainly not to the first year lawyer. 

They may make $80,000. Not a bad salary to start out. Just remember that these people do not work 35 hour weeks. They work 60 hour weeks. Let’s recalculate that hourly rate. Hmmm, yep. That’s around $1440 per week. If it was a 35 hour week, that would be a princely $41 per hour. At 60 hours per week, we have a more modest $24 per hour. Not really $400 is it?

The $376 difference, doesn’t go to the graduate’s boss either. That’s the “Junior Associate”. Junior Associates will make around $110,000. They also work a nice 60 hours a week… and earn $55 per hour… but charging clients $500 per hour. But wait! We are on the Alice-in-Wonderland scale of legal fees and billable hours… So let’s correct course quickly… $32 per hour! 

Stylin!

Where does the big firm money go?

So, the first year lawyer gap wages plus the Junior Associates’ profits per hour aren’t running to ($376 + $468 = $844) straight to their boss…. that’s the Senior Associate. She makes a thoroughly impressive $200,000 – $240,000. 

Charging out at $650 per hour and earning maybe $100 per hour… but remember recalibrating for actual hours employed, and let’s call it $60 per hour.

Anyway, these monstrous gaps between the hours charged e.g. $650, and the lawyers bringing home e.g. $60 per hour – to the husbands they hardly know, and children they rarely see… Now where the hell does all this money go? 

And I don’t mean to bring out the violin for well paid lawyers – but you can’t work 60 hours a week and expect a well rounded home life. (Sure you can pretend to…)

Anyway, after the Senior Associate, THEN you hit a partner and the hallowed equity stakes. 

Given this escalating pyramid of finance… surely the top guys make millions?

In a normal company, they do – or the shareholders do. 

But partners don’t. Equity partners’ make about $600,000 to $800,000 per year. Some of the “kings” at the very top firms make $1.5million per year, but not many. 

The people at the top of this pyramid don’t work more than their lower paid colleagues. It’s physically impossible. Compensating for their eroded ability to stay past midnight, they invariably work weekends. (Wives / husbands usually have either left or read the Riot Act…)

Inefficient & overcharging

So let’s just say it. Law firms are not efficient. They succeed in the modern world via overcharging their clients. (Like being paid $400 per hour to train their junior lawyers how to be lawyers.) 

So, returning to my super-duper secret partner. He held in his hot little paws, a time-limited option to step into Karma and receive real equity… So he took it. I wasn’t confident he would (Remember at the last firm they gave away, FRUIT BASKETS!!!) 

But I’m glad he has. And I want my Legal Ninjas to be exposed to a different style of leader. Anything that lightens my responsibility to my Ninjas and my modestly charged clients is a good thing, because
a. I’m not an egocentric Type A personality; 
b. I’m unburdened by destructive control issues; and
c. I work normal hours.

So WELCOME [name coming soon]!!!!!

PS. If you want myself or my team to work for you until 2am – forget it. Go pay a mid-tier law firm graduate $400 per hour. They’ll accept as much money as you can throw at them… Spend, spend, spend!

Why you should write like a hypo©rite

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This 7 minute read, follows from Grasshopper‘s suggestion about blogging about building Karma Lawyers as a business. Topics include 

  • copyright
  • blogging
  • writing &
  • marketing.

Web designer friend Jono from Proton Creative (info@protoncreative.com.au) suggested Henneke for tips on writing a good blog.  

A benefit of being neurotic is a never ending quest for good advice. And Henneke Duistermaat’s copy sparkles. 

Stephen King’s book On writing had the largest conscious impact on my writing. Fiction is formative, but its’ influence is stealthy. King isn’t the first to suggest targeting 10 to 12 words per sentence. You need to vary that rule thought.

Metronome sentences put readers to sleep faster than novocaine.

Henneke sent her free course subscribers like moi, a special link. Click here to download a free chapter (“Editing your Blog posts”) from Henneke’s Blog to Win Business.  

In case you missed it, I suggested you download copyright protected material… without paying the author.

I’m a lawyer… So what the f%$%# am I doing???

Copyright

Copyright and copywriting have little in common. In essence, copyright is some version of this sentiment: “I own, what I wrote. I can sell it. I can lease it. But you can’t sell or lease it unless I’ve agree to your profiteering.”

Doesn’t encouraging you to jump on Henneke’s “secret link” (her words), encourage copyright breach?

Let’s postpone the answer.

First, Henneke won’t sue. Her publisher won’t either. And my reasons for optimism are several…

Damage

First, my blog isn’t Bit Torrent. Like a red herring, it belongs in the outer ring of my legal defence.

As I write these words, I’m not aware of a… single reader.

So in the vein of, if a tree falls in an empty forest… it’s questionable whether announcing Henneke’s link gives anything to anyone.

That leads to to the legal concept of “damage”. Now I’ve committed a tort (a legal wrong) by encouraging online theft…

Haven’t I?

Well, lack of “damage” may be an issue. Damage means “you doing that (e.g. send readers to steal copyright material), has cost me. So I can now send lawyers to damage YOU and get my pound of flesh…”

I can’t have damaged her… because there were no takers. No harm, no foul – right?

Waiver

Henneke initiated the “here, world. Have my copyright material.” In doing that she waived her right to sue me based on copyright… Well for that chapter and that particular link.

Because she hasn’t completely waived it only in a particular & narrow way.

Say I jump on her link and download it. Then I go and post that downloaded chapter at the bottom of my post. That would sidestep my solid-as-a rock waiver defence, with a spectacular own goal.

Because doing so, I’ve “breached” Henneke’s copyright in a different method than she permitted.

Standing

Then we move to “standing”. This might be a problem. It’s more complicated… Okay, it sounds complicated in the great tradition of our bullshit Latin infused profession…

Standing, means simply, “you’ve done something to me that gives me some specific right to sue you.”

Failing due to a lack of standing” is illustrated by my insult to law as a profession: bullshit / Latin infused etc. 

I’ve offended someone.

So who then has standing to sue me? Let’s play multiple choice.

  • Every lawyer that reads my comment?
  • Every lawyer that hears about my comment?
  • Everyone, who loves Latin… and is horrified to see “bullshit” written near it?
  • Everyone who hates lawyers… almost everyone. (God, who did I tort now!?)

Anyway, no-one has enough standing from all the above groups to sue me based on my cheap insult. (That’s good. It would get expensive.)

Jurisdiction

So if I helped others to breach Henneke’s copyright, then she would definitely be able to sue. Okay, not her, but her company Enchanting Writing Limited. (It’s the technical owner of her copyright).

Then we reach another layer of complexity. She’s in horrible England, I’m in gorgeous Sydney – so game, set, match… right? Kidding. Cross-jurisdictional agreements ensure that English can sue Australians for copyright breach, and visa versa. 

Paranoia

Like how medical students generate neurotic symptoms, the lawyer in me worries about copyright.  “Blawgs” (Legal Blogs) are manufactured by the largest group of former high school English geeks. 

Ever.

Oh… and they’ve writing professionally ever since. (Well sort of writing… have you read a contract?)

High school is often accused of not mattering. As a measure of future success, critics point out that it’s pretty awful…

But we’re talking writing here… And high school was the last place where sentences were produced inside a culture of competition.

And it led straight to BLAWGS. So I guess, high school doesn’t matter, when it comes to writing either… 

A marketing guru speaketh

Seth Godin popularised the term “idea virus” to describe how modern ideas spread. He gives the manifesto to anyone, Unleashing the Idea Virus here… (In case you’re 1 of 3 people who don’t subscribe to his evergreen blog).

It’s for marketers, but Idea Virus is for everyone’s benefit. It’s apropro that Godin gives his book away.

No copyright breach here. Here is a word-for-word quote (because I can) from 1 of the best copyright disclaimers I’ve ever read. 

Excerpted from page 2:

“You have permission to post this, email this, print this and pass it along for free to anyone you like, as long as you make no changes or edits to its contents or digital format. In fact, I’d love it if you’d make lots and lots of copies. The right to bind this and sell it as a book, however, is strictly reserved. While we’re at it, I’d like to keep the movie rights too. Unless you can get Paul Newman to play me.”

Now I may have underlined “pass it along for free to anyone you like” except for paranoia about the scope of Godin’s copyright. The essential condition attached to his extraordinary generosity was “as long as you make no changes or edits to its contents…

The Idea Virus describes the internet’s essence, is the way it facilitates how our ideas get transmitted involuntarily. Godin described this virus spread of ideas, as the essence of new media

Catching Your Disease

The challenge of Karma Lawyers is “catching” your attention. Like a sneeze. By people you don’t know. And sometimes don’t care to. Or like. Or would like, if you met them… etc.

That’s every businesses’ challenge. And it almost always circles back to the query… “Do I Care?”

So, I’ll admit it, copyright is a boring topic. But everyone can relate to being robbed. Then it becomes something else. It’s about violence and drama and what it’s like to be human and violated. 

But this isn’t even that. Encouraging you to “steal”Henneke’s spare chapter is not copyright infringement. No more then my placing hyperlinks to a weird website that lets you slap a guy in the face with an eel is real theft.

Because, that IS the point.Not the eel in the face thing but catching her (idea) virus.

Anyway my response ended up being predictable click-bait response to a great copywriter’s ploy. Henneke wants you to read her chapter without paying and then buy her reasonable priced book.

I bought the book, so who stole what? Kidding – it’s great. To finish with soaring eloquence, great blogs work like a cracking pandemic of herpes. 

Henneke, I couldn’t help it. I had an itch.