4 Keys to Buying and Selling Coffee Shops
Coffee shops are constantly changing hands, especially in New York City.
If you are buying or selling a coffee shop, your lawyer needs to be laser focused on at least 4 points:
Real Estate
IP and Branding
Taxes
Staffing, Supplies, and Equipment
rEAL ESTATE
Key real estate questions and issues include:
If the seller leases the location, will the lease be transferred or will there be a new lease?
In order for the lease to be transferred, will the landlord need to provide written consent and can the landlord charge a transfer fee? If so, who will pay the transfer fee?
If the lease is transferred, what are the terms of the existing lease and will those terms change in connection with the purchase? Specifically, look out for the termination date of the lease and ensure it is extended as necessary. If the buyer cannot negotiate a lease that’s guaranteed for at least 5-10 years from the closing, that may be a dealbreaker. Also look out for allocation of responsibility between the landlord and the tenant for making repairs to the property.
If the seller owns the location, will they lease it to the buyer or sell the property to the buyer?
IP and branding
Key intellectual property and branding questions and issues include:
Does the name of the coffee shop actively infringe on any existing trademarks? Has anyone ever checked this?
Does the name of the coffee shop have a state level trade name registration? Is the coffee shop required to have this?
To secure ownership of the name of the coffee shop, you need to check for the name in two places: (1) federal trademark database and (2) state database of trade names aka DBAs (“doing business as”).
Does the coffee shop rely on advertising materials that may constitute a copyright, including graphic designs and word copy? Who will own those materials after closing?
Does the coffee shop have any proprietary methods or recipes that could constitute a trade secret? Who will own those methods and recipes after closing?
If there are other skills and relationships that need to be transferred from owner to owner, to what extent is the seller required to support that transition process?
taxes
How will the seller be taxed for the income from the sale? Will the income be taxed at the full income tax rate or will it be taxed at the lower capital gains tax rate?
To the extent there are transfer taxes, such as on real estate, intellectual property or permits, who will cover those costs?
Does the coffee shop have any lingering tax liability from unpaid taxes? Could the buyer be liable for those tax liabilities?
Are the buyer and seller required to cooperate with each other if there is a post-closing audit? Who will lead that auditing process and make decisions?
staffing, supplies, and equipment
Are the workers W2 or 1099?
How will the workers be transferred over to the new owner?
Will the terms of their employment or contract change?
Will the existing suppliers continue as if nothing changed or will they renegotiate with the new owner?
Is the seller guaranteeing that all the equipment is in good condition?
Will the buyer be able to inspect the premises with professionals prior to closing?
Adam Yohanan represents entrepreneurs, investors, freelancers, startups, small businesses, artists, and entertainers in a wide variety of transactional and regulatory matters, with an emphasis on complex commercial contracts, business formations, corporate governance, M&A, finance, intellectual property, and entertainment law. His office can be reached at 212-859-5041.
This guide is meant for educational and informational purposes only and should not be considered legal advice. It is essential to consult with an attorney or other advisors regarding all legal and other important matters.
