What to Know Before Buying a Food Retail Business in Australia

Australia’s food retail scene is thriving, driven by its multicultural food landscape and strong consumer demand. Buying a business in this industry can be quite an exciting experience!

However, you must be extra cautious before you acquire a business to ensure you make great profits. Here’s everything you must know!

1. Choose the Right Type of Food Retail Business

The food retail sector is extremely diverse. From juice bars to bakeries, the choice is endless. Every business has unique operations and processes.

Firstly, you’ve got to figure out whether you want an independent business or a franchise. Next, understand if you want to deal with a business that deals with customers who physically visit your shop or one where you mostly deliver to their homes.

Consider whether you want a seasonal business or an all-year-round active one. Compare your existing skills and experience with each option.

These little things about the business model will help you zero in on the exact business in the food sector!

2. Understand the Market Before You Buy

Your next task is to assess the market. Narrow down the geographic area where you’d like to operate—be it a bustling suburb, a major city, or a regional town.  

You can use your network for this, but it’s best to rely on a professional business marketplace. For instance, if you’re looking for a bakery for sale in Australia, you can browse the available categories to find the Bakery option under the Food, Beverage, & Hospitality section.

Further, refine your search for the business by applying filters for location. Based on the available businesses on sale at every location, you must research each of their local markets.

For instance, identify their target audience, whether other businesses are selling similar goods or if they sell a specific popular food type (e.g., baked goods using organic ingredients, vegan ingredients, or gluten-free ones).

You must also check whether the location ensures high traffic to the business, if it’s visible to potential customers and if there is a parking space attached.

3. Review the Financials in Detail

Once you shortlist a few businesses on sale, request the owner for financial documents, including profit and loss statements, tax returns, cash flow statements, and balance sheets. Next, ask for inventory records, supplier contracts, and staff wages and roster.

You can seek a financial advisor to interpret all documents if you’re unaware of how it’s done. Check for signs of consistent growth in revenues and good profit margins of around 2-10% minimum. Ensure there’s no outstanding loan or payment.

Be wary of businesses with poor sales, expenses for unknown reasons, and high employee turnover.

4. Know the Legal and Regulatory Requirements

The food sector has to deal with multiple strict regulations that involve safety, hygiene, and health. Ask the business owner about all the legal requirements.

This can be a food business license from local governments, food safety supervisor certificates, or a registration certificate with Food Standards Australia New Zealand (FSANZ). The business must comply with Australian Consumer Law and the Fair Work Act. If there’s alcohol involved, you also need a liquor license.

Make sure the business complies with all current laws and that the licenses are transferrable.

5. Inspect Inventory and Equipment Carefully

In the food sector, businesses have to deal with high volumes of inventory. If they already have a high stock, learn if you will buy the business, including them. Learn if they are even usable in the long run or if they will expire fast.

Another important part is the equipment, including kitchen appliances, refrigerators, and point-of-sale units. Ensure they are all functioning properly and are maintained regularly. Ask if the equipment is part of the sale price or if it’s valued separately. This helps avoid unexpected costs after the deal is done.

6. Examine the Lease Agreement (If Applicable)

If the business is on leased property, learn about the remaining duration, rent, frequency of increase, any shared expenses, property restrictions, and lease transfer and renewal conditions.

It’s better to negotiate with the landlord from scratch and get a written confirmation about your lease transfer right after the purchase. This can save you from unforeseen troubles later on.

7. Understand Your Responsibilities Toward Existing Staff

If you’re going to take over the business along with the current staff, then you should know about a few details before investing in the business.

These include employment contracts, staff members’ roles, responsibilities, wages, and perks. Know if they offer additional long service leave or pay during holidays.

Generally, you will inherit these employment obligations. Having experienced staff on board can be a big plus during the transition, but only if it works with your vision and your budget.

Conclusion

Besides these, ensure you only buy a business with a good reputation, online rating and loyal customer base in the locality. Research their goodwill and marketing strategies online, and make a move only when you’re sure!