A third of all new restaurants fail in the first year.
Here's how to make sure yours isn't one of them
Finding the right venue for your new restaurant can be challenging at the best of times. Brimming with ideas, you're likely to be concentrating on identifying a market, a ripe catchment area and an attractive location.
You may even mentally be painting the walls.
Carried away with the excitement of opening a new restaurant, it's easy to forget the more prosaic legal considerations. The British Hospitality Association's CEO, Bob Cotton, has remarked that around 30 per cent of new restaurants in the UK fail to make it into their second year of trading. To make sure that your business goes the distance, you might want to consider the following: First, get yourself a good lawyer Not all lawyers have the relevant experience and you should interview them to ensure that they are used to dealing with licensed properties. A good lawyer who knows the licensed-property business can help you decide whether to pursue your purchase, or to walk away from a venue that may not be fit for the purpose and will drain your time and resources.
Do you have the right planning consents?
To operate as a restaurant, the property needs to have an A3 Planning Consent. If it does not, the deal will need to be made conditional on one being obtained. Other permissions might be required for external ducting and equipment.
Do you have a premises licence?
The premises licence is granted by the council to allow the sale of alcohol.
Like planning consents, these licences are usually granted subject to conditions, and may be affected by local policy or location. Don't assume that a licence for a business previously operating on-site will be automatically transferred. If it is, understanding any restrictions of the existing licence or planning consent is a must.
For example, your cash flow projections may be based on the assumption that you will use one floor as a bar, but this may not be authorised by planning consent.
Variations can be made to planning or licensing consent. Again, your will lawyer need to make your acquisition conditional on achieving this variation, or advise you if the chances are slim.
Has the last restaurant gone bust?
Any historic insolvency must be closely investigated, as it could invalidate the premises licence even if it was not picked up by the local licensing authorities.
Has the last restaurant only just closed?
Watch out for liability that you may assume for the previous restaurant's staff. The majority of employment laws are there to protect employees and there are farreaching statutory provisions that could affect you. To avoid a costly lawsuit, it's wise to build an indemnity into your contract.
Or, even better, some of the purchase money can be held back for an agreed period, to be used in case of any liability.
What type of surveys do I need to get carried out?
If you are leasing, you could either be granted a lease of the whole property including the structure, or just the interior, with the landlord responsible for the exterior and you paying a service charge. In both circumstances, you would be advised to have a full structural survey so you can see whether any major repairs are likely to be needed. If the lease is for a small part of a much larger building, your lawyer will ask to see historic service charge accounts and a budget for the next year. If the property is a new build, you should ask for warranties from the landlord's professional team as protection for any problems with the construction.
What other legal issues should I consider before going ahead?
Issues range from asbestos management to fire escape rights to the public highway and from refuse disposal to housing plant on the outside of the building. It can be a minefield but, with the right legal advice and plenty of thorough planning and research, you can navigate the obstacles and get down to the more interesting business of operating a successful restaurant.
Jane Lockyer is a Partner in the Commercial Property Team at law firm, Davenport Lyons.