By: Doug Bend
There are nine steps necessary to purchase a restaurant in California with a liquor license:
1. Find The Restaurant You Will Be Purchasing
A good way to find a potential restaurant to purchase is to work with a business broker. Typically, the business broker is paid a commission by the seller and there is no cost for the buyer.
2. Letter of Intent
Once you find the restaurant, the buyer and seller often sign a letter of intent to make sure they agree on the 20,000-ft terms of the deal before investing time and money into due diligence.
3. Due Diligence
After a letter of intent has been signed, there is often a due diligence period in which the buyer has the opportunity to review the tax returns and financials of the restaurant.
4. Purchase Agreement
If everything checks out during due diligence, the buyer and seller will first negotiate, and then sign, a purchase agreement that is contingent on the transfer of the liquor license.
5. Escrow Account
Once the purchase agreement has been signed, the buyer and seller are required to open an escrow account with an escrow agent. If the restaurant includes the transfer of a liquor license, the buyer is required to put the full purchase price into escrow.
6. County Transfer Notice
Once the escrow agent has been hired, they will file a notice of transfer with the county.
7. ABC Transfer Notice
You are also required to submit a transfer application with the ABC, which often includes a request for a 120 day temporary permit. Within 30 days of submission the buyer must submit a statement to the ABC that the full purchase price has been placed in escrow.
8. Public Notice
A public notice of application for the ownership change must be posted at the premises for 30 days. The escrow agent will also file a notice with the newspaper.
If all goes well with the public posting, the escrow agent will submit a form to the ABC that all contingencies have been met.
9. Transfer Of Funds
Once the ABC transfers the license, the funds are held in escrow until (i) the seller deposits the required releases from the various state agencies, such as Board of Equalization, the Employment Development Department (EDD), and Franchise Tax Board (FTB) and (ii) possession is transferred to the buyer.
The escrow agent will then release the purchase price to the seller. This is generally within about 75 days of the original open of escrow unless there is public opposition to the transfer.
Unfortunately, there is no way around this timeline as it is mandated by law and the ABC’s requirements.
Please do not hesitate to contact us at info@bendlawoffice.com or (415) 633-6841 if you would like our help with the purchase or sale of a restaurant.
Disclaimer: This article discusses general legal issues and developments. Such materials are for informational purposes only and may not reflect the most current law in your jurisdiction. These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction. Bend Law Group, PC expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this article.