Buying an existing brewpub and the due diligence to do first
Taking over a brewpub that already has a brewhouse, a kitchen and regulars can save a year. It can also hand you someone else's unpaid dues and a licence that cannot move. This is the order we would check things in.
Share purchase or asset purchase
The first question is what you are actually buying. In a share purchase you buy the company that holds the licences, the lease and the liabilities. In an asset purchase you buy the equipment and goodwill and usually have to apply for licences in your own name.
Licences in the liquor trade are generally issued to a named entity and premises. Many states do not allow them to be transferred freely. That pushes many deals towards a share purchase, which means every old liability comes with the company. Your lawyer and licensing adviser should settle this before anything else.
Licences and compliance
List every licence and approval with its holder, premises, validity and renewal date: excise licences for brewing and serving, food safety, fire, building occupancy, trade licence, pollution consent, shops and establishments registration and signage. Our brewery compliance checklist covers the usual set.
Ask the excise department, through your adviser, whether there are pending notices, unpaid duty or open inspections. Ask whether a change in directors or shareholding needs prior approval in that state.
Excise registers against sales
This is the brewer's part of the diligence. Compare the excise production registers, the POS sales data and raw material purchase invoices for the last twelve months. Malt bought, wort brewed, beer declared and beer sold should tell one consistent story.
A rough check: a pale lager brewed at around 12 °P needs very roughly 18 to 20 kg of malt per hectolitre of finished beer at normal brewhouse efficiency. If the malt invoices and declared volumes are far apart, either the records are wrong or the beer is. Both become your problem after signing.
The lease
The lease can sink the deal on its own. Check the remaining term, lock-in period, rent escalation, assignment and change-of-control clauses and the landlord's consent. Confirm the landlord accepts the brewhouse loads, drainage and the hours a bar keeps. See leasing space for a brewpub for what a good lease covers.
Equipment, people and reputation
Inspect the brewhouse, fermenters, glycol chiller and kitchen as you would used kit, with pressure tests on jackets. Brew a test batch with the current brewer if you can.
Get a list of staff with salaries, joining dates and statutory dues, including provident fund and gratuity where they apply. Unpaid dues often follow the company. Talk to the head brewer, who may or may not stay.
Ask for the recipe book, the yeast handling records and the cleaning schedule. A brewpub whose recipes live only in one brewer's head loses much of its value if that brewer walks out the week you take over.
Read two years of online reviews and ask neighbours about noise and smell complaints. A brewpub with a running dispute with the residents' association is buying you a fight.
The books against the story
Sellers tell a story about busy weekends and loyal regulars. The books tell another one. Ask for two years of audited accounts, monthly management accounts if they exist, bank statements and GST returns for the food side. Check that card settlements in the bank match POS sales. Large cash sales that do not reach the bank are a warning sign.
Look at the beer and food margins separately and at how revenue moves by month. A brewpub that only makes money in the festive season and New Year has a different value from one that is steady through the monsoon.
A sensible timeline
Give the diligence enough time. A rushed deal is usually rushed by the seller. Sign a short letter of intent with an exclusivity period, then work through licences, records, the lease, equipment and staff in that order. Keep part of the price back until licence changes and approvals are confirmed in writing. Write that condition into the agreement with your lawyer's help.
Price the fix, then the business
Once diligence is done, list what needs fixing and what it costs, from licence regularisation to a new chiller. Value the business on its real, verified earnings, then deduct the fixes. Many founders do the reverse and pay for the seller's story.
Reading a brewpub's numbers and excise trail side by side is a skill most first-time buyers do not have yet. The price of learning it after signing is high.
Common questions
Can a brewpub licence be transferred to a new owner?
Many states do not allow free transfer of liquor licences, which is why many deals are share purchases. Rules vary by state, so check with a licensing adviser and a lawyer.
What records should I check first?
Excise production registers, POS sales and raw material invoices for the last year. They should agree with each other.
Do staff dues come with the business?
In a share purchase, liabilities such as unpaid statutory dues usually stay with the company you are buying. Get a full list and have it verified.
Should I keep the existing brewer?
Talk to them early. Their knowledge of the kit and recipes is valuable, but make the deal work whether or not they stay.
