Templates
125-point due diligence checklist for restaurants

125-point due diligence checklist for restaurants

Use this comprehensive checklist to evaluate every aspect of a restaurant before buying or opening, including licenses, contracts, operating processes, and more.

Use this template
or download pdf
125-point due diligence checklist for restaurants

Use this comprehensive checklist to evaluate every aspect of a restaurant before buying or opening, including licenses, contracts, operating processes, and more.

Use this template
or download pdf

About the 125-point due diligence checklist for restaurants

When buying or opening a restaurant, having a clear view of its operations is crucial. Our 125-point due diligence checklist for restaurants offers an in-depth guide that covers everything from financial records to kitchen equipment inspections. Whether you’re reviewing lease agreements or ensuring health code compliance, it helps you gather all necessary information before making any commitments.

This checklist makes it easy for you to conduct a thorough evaluation. By breaking down the key aspects of restaurant operations, it empowers you to make confident, well-informed decisions.

Benefits of the 125-point due diligence checklist for restaurants

This detailed due diligence checklist is an essential tool if you’re considering buying, opening, or managing a restaurant. Due diligence involves thoroughly investigating and verifying all relevant information about the business, its operations, finances, and potential risks.

The checklist covers critical areas—including compliance with regulations, lease agreements, and seller support—to give you a thorough understanding of the business. By systematically working through each point, you ensure that nothing is overlooked, which can save you from unexpected issues later on.

With this checklist, you can gain clarity in areas that can often be complex, such as debt analysis and supplier contracts. You can then gain important insights before committing to a purchase or significant operational changes.

It also allows you to compare multiple businesses and identify potential red flags, making it a powerful tool to reduce risks and optimize decision-making.

How to use the 125-point due diligence checklist

Follow these steps to conduct effective evaluations with the checklist:

  1. Create and customize the template. Begin by opening the checklist within the Lumiform app. The checklist is already ready to use, but you can also modify sections to fit your specific needs, whether you want to focus on finances, health compliance, or equipment.
  2. Assign roles and tasks. Once the template is set up, you can assign different sections to team members. For example, finance managers can handle financial records while kitchen staff assess equipment. This streamlines responsibilities and keeps the evaluation organized.
  3. Go through the checklist. As you move through each section, fill out the checklist and take the time to review the required information in-depth. You can also add notes or upload photos anywhere in the checklist. For example, when reviewing kitchen equipment, you have the option to include its purchase date and condition.
  4. Track and manage progress. Use Lumiform’s action management feature to track what’s been completed and what requires further attention. The app allows you to assign tasks, set deadlines, and follow up on areas that need review.
  5. Analyze results for insights. Once the checklist is complete, use Lumiform’s data analysis feature to review the results. This allows you to identify areas of concern and get to know the restaurant in-depth, across different areas, before moving forward.

Download Lumiform’s 125-point due diligence checklist for evaluating restaurants

Make your restaurant evaluations smoother and more comprehensive with our 125-point due diligence checklist restaurant checklist. Designed to cover crucial details, from licenses to sales data, this template gives you a thorough understanding of the entire business. With its detailed sections, you’ll be equipped to capture and assess every aspect of the restaurant’s operations.

Categories

  • Risk management and compliance templates
  • Hospitality templates
  • Risk assessment templates
Preview of the template
Page 1
Financial Records and Evaluation
Profit and Loss Statements for the Past 3 Years
Balance Sheets for the Past 3 Years
Cash Flow Statements for the Past 3 Years
Tax Returns for the Past 3 Years
Amount of free cash flow (available to you as new owner)
Evaluation of Asking Price vs. Market Value
Gross Margins on Product A Sales
Percentage of Sales from Product A (Core Business)
Cost of Goods Sold (COGS) Analysis
Operating Expenses Review
Provide a breakdown of major operating costs (e.g., payroll, rent, utilities)
Debt or Liabilities on the Business
Amount of outstanding debt
Year-end balance sheet verified for furniture, fixtures, and equipment (F/F/E)
Based on the provided financial records, how would you rate the financial health of the restaurant?
Licenses and Permits
Certificate of Occupancy
Food Service License
Food Handler's Permit
Building Health Permit
Sign Permit
Resale Permit
Sales Tax License
Liquor License (if applicable)
Health Department Inspection Report
Fire Department Inspection Report
Workers' Compensation Insurance
General Liability Insurance
Is the restaurant in compliance with local zoning laws?
Have there been any violations for permits?
Contracts and Legal Obligations
Are there signed contracts with suppliers?
Review of contract terms:
Are vendor agreements in place?
Continuity of service verified with suppliers?
Is there a valid lease agreement for the property?
Lease expiration date
Option to renew:
Are there any restrictions on use of premises?
Are there any service contracts in place?
Are service levels acceptable?
Is there valid general liability insurance?
Are there signed employee contracts, especially for key employees?
Is the restaurant part of a franchise?
Are there any restrictions or obligations as part of the franchise?
Franchise royalty fees:
Based on the provided contracts and legal obligations, how would you rate the restaurant's legal compliance?
Staff and Key Employees
How would you rate the overall experience of the management team?
What is the retention rate of employees over the last 12 months?
Are current staffing levels sufficient to maintain operations?
Total number of employees
Number of full-time employees
Number of part-time employees
Are payroll costs in line with industry benchmarks?
Are employee benefits offered (health insurance, paid time off, etc.)?
What is the turnover rate for the past 12 months?
Are the key employees skilled in essential areas (e.g., kitchen operations, inventory management, customer service)?
Is the restaurant compliant with labor laws (minimum wage, overtime, etc.)?
Are employees trained in health and safety regulations?
Operations and Processes
Are there formal, documented processes for daily operations?
Are there documented recipes for all house-made menu items?
Are proprietary recipes protected (e.g., non-disclosure agreements)?
Are there documented procedures for opening and closing the restaurant?
Is there a formal system in place for managing inventory?
Are there documented quality control procedures for food preparation and service?
Are there documented procedures for handling customer service, complaints, and feedback?
Are there procedures in place for waste disposal and recycling?
Are there formal procedures for handling cash, deposits, and security?
Based on the processes in place, how would you rate the overall operational efficiency of the restaurant?
Comments on operational efficiency
Property and Equipment
Is there a comprehensive list of all kitchen equipment and machinery?
Are there records for when the equipment was purchased?
How would you rate the overall condition of the kitchen equipment?
Estimate the remaining useful life of critical kitchen equipment (e.g., refrigerators, ovens, stoves):
Does the kitchen equipment comply with health and safety codes?
Is the storage and refrigeration space adequate for current operations?
How would you rate the condition of the restaurant's physical structure (e.g., floors, walls, ceilings)?
Is parking available and easily accessible for customers and staff?
Health and Safe Compliance
Is there a valid business license?
Is there a valid food service permit?
Is the restaurant fully compliant with local health codes?
Is there valid worker's compensation insurance in place?
Are food handling and sanitation procedures documented and followed?
Is there a pest control service contract in place?
Are there proper procedures for sanitation and waste disposal?
Based on the provided documentation, how would you rate the overall health and safety compliance of the restaurant?
Comments on overall compliance:
Marketing and Competitive Landscape
Is there a documented marketing and advertising plan?
What is the annual marketing budget?
What is the marketing budget?
Is the budget in line with industry standards?
What are the primary customer acquisition channels?
Which channel has the highest return on investment (ROI)?
Does the restaurant have an active online presence (e.g., website, social media profiles)?
What are the average customer review ratings?
What are the most common customer complaints or praises?
What are the restaurant's key competitive strengths?
What are the biggest competitive threats?
Does the restaurant experience seasonal fluctuations in sales?
How is the restaurant perceived in the market (e.g., budget-friendly, upscale, family-oriented)?
Based on available data, how would you rate the overall effectiveness of the restaurant's marketing efforts?
Supplier and Vendor Relations
Is there a comprehensive list of suppliers and their contact information?
Are suppliers willing to continue service post-acquisition?
Are the current pricing terms with suppliers competitive and fair?
Are there any overdue payments?
How reliable are the suppliers in terms of delivery and quality?
Are there any key suppliers the restaurant is heavily dependent on?
Is there a comprehensive list of vendors (e.g., maintenance, cleaning services)?
Are service agreements in place with vendors (e.g., for equipment maintenance, pest control)?
How would you rate the performance of key vendors?
Is there a transition plan in place for working with suppliers and vendors post-acquisition?
Based on the relationships and agreements, how would you rate the overall supplier and vendor relationships?
Transition and Seller Support
Is the seller willing to stay on for a defined period to assist with the transition?
Duration of assistance:
What is the agreed-upon length of the transition period?
Has the seller agreed to provide training and onboarding for the new owner?
Will key management personnel be available during the transition?
Is there a plan for introducing the new owner to the staff?
Will the seller facilitate introductions to key suppliers and vendors?
Has the seller agreed to hand over key operational information (e.g., passwords, software access)?
Will the seller assist in transferring necessary licenses and permits?
Is there a plan to introduce the new owner to existing customers or update the restaurant's marketing to reflect the change?
Is the seller willing to sign a non-compete agreement?
Is the seller available for consultation after the transition period?
Has the seller provided all necessary financial information (e.g., financial records, tax filings, etc.)?
Has the seller agreed to transfer any intellectual property rights (e.g., trademarks, proprietary recipes)?
Based on the agreements and plans in place, how would you rate the seller's overall support for the transition?

Frequently asked questions

What is due diligence in the food industry?

Due diligence in the food industry is a thorough review process to assess a business’s compliance with regulations, financial health, and operational practices. This includes evaluating food safety standards, hygiene protocols, supplier relationships, and employee training to avoid legal or financial risks. It’s crucial for both buyers and owners to identify potential issues before making any commitments.

What should I prioritize when conducting due diligence for a restaurant?

For restaurants, prioritize areas that impact daily operations and long-term profitability. Start by reviewing financial records, including profit margins and liabilities. Next, assess kitchen equipment, lease agreements, and health code compliance. Don’t forget to evaluate staffing levels, payroll accuracy, and supplier contracts to ensure smooth operations and minimal disruptions.

What are common red flags to look out for during a restaurant inspection?

Common red flags in a restaurant inspection include poor hygiene practices, such as unclean kitchen areas, expired food, or improper storage. Also, be wary of unresolved health code violations, outdated kitchen equipment, or staff that lack proper safety training. Operational inefficiencies like frequent turnover or hidden financial liabilities can signal deeper issues that may affect long-term success.

How do I verify the accuracy of a restaurant’s financial records?

To verify a restaurant’s financial records, begin by comparing tax returns with profit and loss statements from the past few years. Review cash flow and balance sheets for inconsistencies. Cross-check invoices with expenses and inspect for any discrepancies in accounts payable or receivable. Engaging an accountant to perform an audit can provide extra security and confirm accuracy.

How can I assess a restaurant’s compliance with local health codes?

You can assess a restaurant’s compliance with local health codes by reviewing recent health inspection reports for any violations. Examine food storage areas, cleanliness standards, and employee hygiene practices. Pay attention to the state of kitchen equipment, pest control measures, and how waste is managed. You can also interview staff to confirm they are properly trained in food safety procedures.

This template, developed by Lumiform employees, serves as a starting point for businesses using the Lumiform platform and is intended as a hypothetical example only. It does not replace professional advice. Companies should consult qualified professionals to assess the suitability and legality of using this template in their specific workplace or jurisdiction. Lumiform is not liable for any errors or omissions in this template or for any actions taken based on its content.