How to Buy a Cafe – A Comprehensive Guide For Buyers

1.  Know Your Budget

Before starting your business buying journey, understanding your budget is essential. How much are you willing and capable to spend on this venture? Determining your budget provides boundaries that help filter out irrelevant options, helping you to focus on what’s achievable. Financial resources such as MoneySmart by the Australian Securities & Investments Commission (ASIC) can assist in budget planning https://moneysmart.gov.au/budgeting

Find more information about the costs involved in buying a business and how to work out your budget here:

https://www.gsehospitalitybrokers.com.au/two-minute-tips-when-buying-a-hospitality-business-know-your-budget/

2.  Check Your Finance Requirements

Next, identify your borrowing capacity. One popular approach is to speak to a lender or a financial advisor. This provides an overview of your financial capacity, ensuring you’re not biting off more than you can chew. Companies like Aussie Home Loans https://www.aussie.com.au/home-loans.html can help you understand your borrowing potential.

Find a list of finance brokers that GSE work with here: https://www.gsehospitalitybrokers.com.au/partners/

3.  Concept and Preferred Location

Identify your preferred business model – would you prefer a day trade cafe, a restaurant, or a bar? Are you equipped to handle a liquor license? Would you need a grease trap or a commercial kitchen? Also, consider your preferred location, the Australian Bureau of Statistics https://www.abs.gov.au/ provides useful demographic data that can guide you.

4.  Make an Inquiry

Once you’ve identified a potential business, contact the listing broker for initial inquiries. Websites like GSE Hospitality Brokers can connect you with specialist brokers across Australia.

View all cafes for sale here

5.  Confidentiality Agreement or Non-Disclosure Agreement

This step involves ensuring privacy for all parties involved. As per business selling etiquette, it is required to complete and return a Confidentiality Agreement or Non-Disclosure Agreement.

You will find the GSE Confidentiality Agreement Here:

https://www.gsehospitalitybrokers.com.au/confidentiality-agreement/

6.  Contact the Broker

After expressing your interest, expect a call from the broker to discuss further details. Remember, building a good relationship with your broker is invaluable when buying a business.

How to get in touch with us https://www.gsehospitalitybrokers.com.au/about-us/

7.  Receive the Information Memorandum (IM)

The Information Memorandum (IM) is a document that gives potential buyers key details about a café that’s for sale. It helps them understand the business before deciding if they’re seriously interested.

What’s Inside?

• Business Overview: What the café does, its style, and key selling points.
• Financial Summary: Basic figures like sales, profit, and costs.
• Operations: How the café runs—staff, suppliers, and daily operations.
• Lease Details: Info about the lease, rent, and terms.
• Growth Potential: Ideas on how the new owner could grow the business.

Why It’s Important:
The IM gives buyers enough information to decide if they want to take the next step—like asking more questions, meeting the owner, or making an offer.

Think of it as a brochure, but with more details to help you make an informed decision.

8.  Review the IM and Visit the Business

After reviewing the Information Memorandum (IM), visiting the business as a regular customer provides invaluable first-hand experience of its operations and customer experience. Observing the staff, service quality, and ambience without revealing your intentions ensures an authentic understanding of the business. This approach allows you to make more informed decisions about whether or not you will proceed.

Visiting the business as a customer before your official inspection is important because it lets you see the business in action. You can observe how busy it gets, the quality of food and coffee, the customer service, and the overall vibe. This helps you get a real feel for the place and spot any potential issues.

It’s important to be discreet during your visit. Blend in like any other customer and avoid approaching staff or asking questions about the business. This helps protect the confidentiality of the sale, as the staff and customers may not know the business is for sale.

9.  Follow Up

Expect a call from the broker for feedback. The seller values your opinions and a genuine, honest response is always appreciated.

10. Arrange an Inspection

Organise a private inspection with the broker and the business owner. Discuss operational details and any potential issues.

The purpose of an initial inspection of a café is to give you a first-hand look at the business. It helps you see the layout, condition of the equipment, and overall feel of the place. You can check if it matches the listing details, spot any potential issues, and get a sense of how busy the area is. It’s also a great chance to ask the owner questions about how the café operates, like staffing, peak hours, and day-to-day processes. This helps you decide if it feels like the right fit before moving further.

11. Negotiate Terms

Now it’s time to negotiate deal terms and make an offer. This demonstrates your serious intent to buy the business.

Why You Should Avoid Making a Very Low Offer When Buying a Café

While it’s natural to want the best deal, making an offer that’s too low can backfire. Here’s why:

1. It Can Offend the Seller:
   Sellers are often emotionally attached to their business. A very low offer might feel disrespectful, causing them to shut down negotiations altogether.
2. You Might Lose Credibility:
   A lowball offer can make you seem like you’re not serious about buying, which means the seller might not take future offers from you seriously.
3. It Can Close Doors:
   Instead of starting a productive negotiation, it can create tension, making it harder to find common ground later.
4. Missed Opportunities:
   If the seller feels insulted, they might prefer dealing with other buyers, even if you come back with a better offer later.

What to Do Instead:
Make a fair offer based on solid research. Aim for a price that’s reasonable but leaves room to negotiate. This shows respect for the seller’s hard work while keeping the conversation open for a deal that works for both sides.

12. Offer Accepted or Letter of Intent

If your offer is accepted, a Letter of Intent (LOI) is issued outlining the agreed terms and next steps.

An LOI, or Letter of Intent, is a document you give to the seller to show you’re serious about buying their café. It’s not a final contract but more like a handshake in writing.

It outlines the key details of your offer, like:

• The price you’re willing to pay
• Terms of the deal (like what’s included—equipment, stock, etc.)
• Timeframes for things like due diligence and settlement

The LOI helps both you and the seller get on the same page before moving to the formal contract stage. It saves time and reduces misunderstandings.

Key Point: It’s usually non-binding, meaning you’re not locked in yet—it just shows you’re ready to move forward seriously.

13. Due Diligence 

Due diligence is the process of checking everything about the café before you buy it to make sure it’s a good investment. Think of it like doing a thorough inspection before buying a house.

Here’s what you’ll look at:

1. Financials: Review the profit and loss statements, tax returns, and bank statements to see if the café makes the money the seller claims.
2. Lease Agreement: Check the lease terms—how long it lasts, the rent amount, and any conditions that could affect your business.
3. Licenses & Permits: Make sure the café has all the correct licenses to operate legally (food safety, council permits, etc.).
4. Equipment & Assets: Inspect the equipment to confirm it’s in good working order and matches what’s listed in the sale.
5. Staff & Wages: Understand who works there, their roles, and wages to see if you’ll keep them or need changes.
6. Supplier Contracts: Check any agreements with suppliers to see if they’re ongoing and suitable for you.
7. Business Performance: Look at customer reviews, foot traffic, and how busy the café is at different times.

14. Solicitor Consultation

Have your solicitor review the draft contract, and advise them on your intent to buy the business. The Law Society of NSW https://www.lawsociety.com.au/ can connect you with a solicitor.

The solicitors that we work with can be found here: https://www.gsehospitalitybrokers.com.au/partners/

15. Landlord Application

Prepare your application for the landlord. This step is crucial for avoiding potential hurdles.

Find more information about the lease assignment process here:

https://www.gsehospitalitybrokers.com.au/be-prepared-for-the-lease-assignment-process/

If you would like some help preparing a Business Plan, we recommend The Launch Crew

https://www.thelaunchcrew.co/business-plans/business-plan-sydney

16. Contract Exchange and Landlord Approval

After exchanging contracts with the owner (sometimes before this), your broker introduces you to the landlord for approval.

Here’s how it works:

1. Application: You’ll fill out a form from the landlord or property manager, sharing details about your business experience, financial situation, and plans for the cafe.
2. Review: The landlord will check if you’re a suitable tenant. They’ll look at your ability to pay rent on time and manage the business well.
3. Meeting (Sometimes): Some landlords might want to meet you to discuss your plans and understand who you are.
4. Decision: If the landlord is happy, they’ll give written approval. This step is essential before the sale can be finalised.

Tip: Be prepared with your financials, business background, and a simple plan for the cafe to make the process smoother.

17. The Training Period

1. When Training Happens:
   Training can take place either after the exchange of contracts or after settlement, depending on what’s agreed in the contract of sale.
2. Introduction Period:
   The seller will introduce you to the day-to-day operations of the cafe. This includes meeting key staff, suppliers, and understanding how things run behind the scenes.
3. On-the-Job Training:
   The seller will work alongside you, showing you how to manage the cafe, including opening/closing procedures, using equipment, handling orders, managing stock, and overseeing staff.
4. Supplier and System Handover:
   You’ll be introduced to suppliers, learn how to place orders, and get familiar with the point-of-sale (POS) system, bookkeeping processes, and any software used.
5. Gradual Transition:
   As you become more confident, the seller will take a step back, offering support only when needed. This helps you build independence while still having guidance if required.
6. Ongoing Support:
   After the official handover, the seller is usually available for phone or email support for a set period (often 2–4 weeks) to answer any final questions.

This process helps you feel confident running the cafe while ensuring a smooth transition for staff and customers.

18. Settlement and Handover

Finally, after legal settlement and stocktake, the business is yours.

After settlement, the handover period is a brief phase to ensure a smooth transition. Most of the key training will already have been covered before this stage. Here’s what to expect:

1. Ongoing Support: The seller will be available for a short time (usually 1-2 weeks) to answer questions and offer guidance as needed.
2. Supplier & Staff Introductions: Final introductions to key suppliers and staff may take place to strengthen relationships.
3. Troubleshooting: If any unexpected issues come up, the seller can help you navigate them during this period.
4. Full Takeover: Once you’re confident, the seller steps back completely, and you take full control of the cafe.

The handover period is more about support and reassurance than training, helping you settle in with confidence.

Congratulations on becoming a new business owner!