12 things to check before buying a restaurant in India

Buying a restaurant is one of the most common acquisitions on Nexown, and also one of the most complex. Here is the complete due diligence checklist.

1. FSSAI License

Verify the FSSAI license is current, in the seller's name, and transferable. Check expiry date. A lapsed license means the restaurant is technically not permitted to operate.

2. Lease Agreement

Get the original lease. Check: rent amount, remaining term, renewal clauses, landlord consent for transfer, and any rent escalation clauses.

3. GST Registration

Confirm GST registration is active and all returns are filed. Any GST liability transfers with the business unless you structure the acquisition carefully.

4. Staff & Employment

How many staff are on payroll vs. contract? Are PF and ESI contributions up to date? Will key staff (chef, manager) stay post-acquisition?

5. Kitchen Equipment

Get a full equipment list with purchase dates and maintenance records. Factor replacement costs into your offer.

6. Fire & Safety NOC

The fire NOC should be current. Check with the local fire department if in doubt.

7. Trade License

Verify the municipal trade license is valid and in the seller's name.

8. Vendor Agreements

Who are the key suppliers? Are there exclusive agreements? What are payment terms?

9. Last 12 Months Revenue

Request bank statements, not just POS reports. Compare GST-reported revenue to claimed revenue.

10. Pending Liabilities

Ask the seller for a written declaration of all pending liabilities: supplier dues, EMIs, advances taken from customers.

11. Online Reputation

Check Zomato, Swiggy, and Google ratings over the last 12 months. A declining rating trend is a serious flag.

12. Reason for Sale

Always ask — and verify. "Relocating" or "health reasons" are common legitimate answers. "Not profitable" should trigger more scrutiny.