Thinking of buying a pub? Pour a drink and settle in, because we’ve put together a handy guide with the key points to consider, including things like hospitality award rates, before you invest and become a publican.
Let’s start with the first and most important thing to ponder when buying a pub.
Leasehold Vs Freehold
Purchasing a leasehold interest means you’ll pay rent to the property’s landlord to operate the business within the space. Think of a Lease Agreement as your bible. It’s one of the most important documents you’ll sign and will impact everything from the venue improvements you can make to the profit margins you’ll be able to achieve.
It’s essential to review the lease terms carefully and engage a specialist property lawyer to negotiate the best outcomes for you.
In contrast, purchasing a freehold pub means buying the actual property, as well as the business. The capital required will be substantial so you’ll need to consider funding options , stamp duty and transaction costs, and do your research on the location.
Give Pub Locations Some Serious Thought
Just like buying residential property, when it comes to buying a pub, location is key! So, it's essential to consider the following factors to choose the perfect spot:
- The kind of people and amount of foot traffic in the area
- Whether you'd like to set up venue in the CBD, suburbs or the country
- The competition - how many other watering holes are in the vicinity?
- Any local council regulations such as noise limits or parking requirements
- Any upcoming developments planned for the area.
The location you choose will play a huge role in the success of your pub, so choose wisely!
Know the Hospitality Award Rates
Finding good staff in the post-Covid environment has been challenging for pub operators. So if you’re buying a pub, it’s in your best interest to retain the existing staff. It’s also wise to take employment advice early and negotiate any arrangements for the pub’s employees as part of the deal agreed upon with the seller.
Once you’re up and running, ensure you know the hospitality award pay rates. The consequences of getting payroll and the hospitality award wrong can be huge. (In Victoria, wage theft is now a crime and it could become a federal law too.) If you’re not sure where to start, check out our article on award classifications, wage theft and payroll processes . It’s got everything hospitality businesses need to know, and what experts to speak to about it.
Liquor Licences
Holding a liquor licence is mandatory for a pub operator. Without one, you won’t be able to sell alcohol and there’s nothing worse than a pub with no beer. The liquor licences will already be in place if you’re buying a trading pub. But reviewing the liquor licence agreement and transfer requirements in detail is still a must.
It’s also important to note that different states in Australia may have additional liquor licence requirements. Getting a lawyer to review the agreements will be beneficial to make sure that all the legal bases are covered.
Stock and Assets
A list of all the assets you’ll be buying as part of the purchase will be a handy thing to have. This will help you assess if additional funds are needed to buy more furniture and equipment.
Stock should be transferred on the day the purchase completes and should be valued professionally to avoid disputes over the price.
Due Diligence Checklist
When buying a pub we cannot recommend enough that you perform financial due diligence and review the below points at a minimum:
- Current and historical profitability of the business
- Key performance benchmark ratios like cost of sales to revenue, employment costs to revenue and occupancy costs to revenue
- Cash flow forecasts
- Quantum of additional funds required to rebrand or do a fit-out
- Outstanding debts and list of creditors
- Warranties and indemnities in place
- Employment agreements in place.
Experience the Pub and Review its Reputation
The best way to find out how the pub operates is to visit the pub as a patron. Take a good look around then stump up at the bar and consider the following:
- How are the staff and their customer service?
- How is the food?
- What’s the condition of the pub? Does it require renovations?
- Does the pub have a good reputation?
- Read online reviews on Google, Facebook and industry-related websites like TripAdvisor and Yelp.
Being there will help you make the right decision. If it doesn’t feel like the right place, move on and continue with your search until you find the perfect one that meets and suits all your requirements.
Join Hospitality Industry Associations
It’s worth considering being part of The Australian Hotels Association (AHA). They represent over 5,000 members across Australia, who own establishments from tiny country pubs to inner CBD 5-star hotels.
Need Help Buying a Business?
BlueRock’s business advisors specialise in helping hospitality businesses thrive, so if you’re looking to buy a pub, bar or restaurant, but you’re unsure about lease agreements, liquor licences or hospitality award rates, get in touch with our business advisors to start the adventure. With over 7,000 clients, we’re experts in many industries and can help you buy a business by providing financial due diligence , business valuations , funding and so much more.
