Before committing to buy a café, request documents that let you independently test six things: sales, operating costs, workforce obligations, premises rights, asset ownership and regulatory compliance. A profit-and-loss statement and a lease are starting points, not a completed investigation.

Build a written request list, obtain records in their original formats and reconcile them across independent sources. The Australian Government’s buying guidance recommends reviewing financial records, operations and legal documents before signing, including licences, contracts, leases, equipment, inventory and liabilities (business.gov.au). The point is to identify what is proven, what depends on the seller’s explanation and what remains a condition to resolve.

Start with the transaction and the decision timetable

First ask what is actually for sale: selected assets, the entity that operates the café, or another structure. Request the draft heads of agreement or sale contract, asset and liability schedules, proposed stock treatment, deposit terms, restraints, warranties, adjustment mechanism and every condition proposed for completion. Have the buyer’s lawyer explain the consequences before anything binding is signed.

Record the legal seller’s name, ABN or ACN, business-name holder, trading address and any related entities that own equipment, employ staff or contract with suppliers. The name on the storefront may not be the party receiving sales or owning the espresso machine. Obtain current and historical registry extracts where advisers consider them relevant.

Use a request register with four columns: document requested, period covered, date received and exceptions. A document marked “received” is not necessarily complete. Keep unanswered questions, inconsistencies and expired documents visible until they are resolved or reflected in the decision.

Financial and sales records

Request at least enough complete periods to see seasonality, changed trading hours and unusual events. Australian Government guidance suggests examining three to five years of financials when conducting financial due diligence (business.gov.au); the appropriate period depends on the café’s history and the evidence available.

Ask for:

  • income tax returns, business activity statements and lodged financial statements;
  • detailed profit-and-loss reports, balance sheets, general ledger and chart of accounts;
  • bank statements for every account receiving café takings;
  • native point-of-sale exports showing transactions, tenders, discounts, voids, refunds, products, channels and trading times;
  • merchant-acquirer settlements and statements from delivery platforms;
  • cash-up sheets, till variances and cash-banking records;
  • accounts payable and receivable, supplier invoices and credit notes; and
  • stock counts, wastage records and owner drawings or related-party transactions.

The ATO says businesses must keep records of transactions relating to tax, superannuation and registration affairs, including documents for income and expenses (ATO). Ask for the underlying records, not only an accountant-prepared summary. Compare POS sales with merchant settlements, cash deposits, delivery-platform remittances, GST reporting and the general ledger. Differences may be explainable, but they should be quantified.

Lease, premises and operating permissions

Request the signed lease, disclosure material where applicable, variations, assignments, options, rent reviews, outgoings statements, bank guarantees, incentives, arrears correspondence and landlord notices. Obtain written information about assignment consent or a proposed new lease. Map lease expiry and options against the buyer’s expected ownership period, and ask a property lawyer to review permitted use, make-good, relocation, demolition and personal-guarantee provisions.

The permissions required for a café vary by state, territory and local council. Request the current food-business registration or notification, council inspection reports, improvement notices and correspondence; planning and occupancy approvals; outdoor dining, signage and liquor permissions where relevant; grease-trap and trade-waste arrangements; and any restrictions on trading hours, seating, music or extraction. Confirm transferability with the relevant authority rather than assuming an approval follows the assets.

Equipment, stock and supplier commitments

Create an asset register showing description, serial number, location, legal owner, purchase date, warranty, service history and condition. Match it to invoices, finance documents and the sale schedule. Separate owned assets from leased, rented, loaned or supplier-provided items—particularly espresso machines, grinders, dishwashers, refrigeration, ordering devices and gas cylinders.

The PPSR explains that an organisation search can identify registered security interests over an organisation’s assets, including where a buyer is considering second-hand equipment such as a coffee machine; it does not state the value of an interest or asset (PPSR). Lawyers should select the correct searches and releases because the seller’s structure and individual assets may require different search criteria.

Request coffee-supply, equipment-loan, linen, waste, pest-control, software, music, delivery-platform and maintenance agreements. Identify minimum volumes, exclusivity, price reviews, assignment consent, early termination charges and personal guarantees. For stock, obtain recent counts, expiry information and the proposed valuation basis; conduct a physical count at the agreed time.

Staff and owner labour

Request a de-identified employee schedule showing role, status, commencement date, classification, ordinary and actual hours, rates, penalties, allowances, leave balances and superannuation status. Then inspect employment agreements, rosters, timesheets, payroll reports, payslips, super records, award interpretations, individual arrangements, contractor agreements, workers compensation history and disputes using privacy-controlled access.

Fair Work says employers must retain time and wage records for seven years, covering matters including pay, hours, leave and superannuation (Fair Work Ombudsman). It also explains that a sale can create a transfer of business affecting employee entitlements when the statutory tests are met (Fair Work Ombudsman). Employment advisers should test classifications, unpaid work, owner coverage, accrued entitlements and the intended treatment of each worker.

Rebuild a realistic roster for the buyer’s operating model. If the seller regularly opens, closes, orders stock, covers the kitchen or handles administration without a market wage in the accounts, the reported profit may not represent the buyer’s cost base.

Food safety and compliance records

Request the café’s food-safety program where required, food safety supervisor certificate, food-handler training evidence, temperature and cleaning records, pest reports, allergen procedures, complaints, incident logs, recalls and regulator correspondence. FSANZ explains that Standard 3.2.2A generally covers cafés handling unpackaged potentially hazardous ready-to-eat food and requires food-safety management tools according to the business category (FSANZ). Confirm the café’s classification and local enforcement requirements with the regulator.

Also request insurance schedules and claims, workplace safety records, equipment test reports, fire and electrical servicing, data-security incidents, customer complaints and material litigation. Missing records do not prove non-compliance, but they change what can be verified and may require specialist inspection or a contractual response.

Stage access and test the evidence

Start with aggregated and de-identified information. The OAIC says vendors should consider de-identification and controlled access during a business sale; prospective buyers should generally avoid collecting personal information where possible (OAIC). Use confidentiality terms, a controlled data room and a process for returning or destroying information if the transaction does not proceed.

Apply three tests to every important claim:

  1. Existence: is there an original document or system export?
  2. Agreement: does it reconcile to an independent source such as bank receipts, tax records or third-party statements?
  3. Continuity: will the right, approval, employee arrangement or contract continue for the buyer?

Hypothetical example: the seller’s annual accounts show strong sales and moderate wages. POS exports agree with total sales, but rosters reveal the owner works 45 hours each week without a recorded wage, while the lease option requires landlord consent that has not been requested. The sales evidence may be sound, yet maintainable earnings and tenure remain unresolved. This example illustrates an investigation method, not a valuation conclusion.

Questions before moving past due diligence

  • Which revenue and cost figures reconcile, and over what period?
  • What is excluded from the sale or owned by someone else?
  • Which contracts, licences and permissions require consent or a fresh application?
  • What maintenance, replacement or make-good expenditure is foreseeable?
  • Which staff liabilities and working hours has an employment adviser tested?
  • Which seller explanations lack independent support?
  • What must be a pre-completion condition, price adjustment, warranty or reason to stop?

Sources

Disclaimer

This article provides general information only. It does not constitute legal, tax, accounting, financial, credit, valuation or other professional advice. Circumstances differ. Obtain advice from appropriately qualified advisers before acting or entering a transaction.