Buying or selling a hospitality business: Key considerations for East Anglia’s tourism and leisure sector

Whether you are acquiring your first café, expanding a group of hotels, pubs or visitor attractions, or preparing to sell a successful leisure business, the sector has its own legal and commercial features which need careful attention.

East Anglia: opportunity with local character

Tourism and leisure remain central to the economy of East Anglia. From the North Norfolk coast and the Suffolk heritage coastline to Cambridge, Ely, King’s Lynn and the rural market towns in between, the region offers a strong mix of destination hotels, pubs, restaurants, holiday accommodation, attractions, wedding venues, campsites and leisure facilities. That opportunity is not without pressure.

Visitor demand may be healthy, and domestic tourism continues to support many operators, but hospitality businesses are still trading in a cost-sensitive environment. Staffing, energy, business rates, supplier costs, licensing obligations and changing customer expectations can all affect value. For buyers and sellers, the legal process should therefore do more than transfer ownership. It should investigate whether the business being bought, sold or restructured is capable of performing as expected after completion.

Start with the structure of the deal

One of the first questions is whether the transaction is to be structured as an asset purchase, a share purchase or a property transaction with associated business assets. All are potential options, but the route that is chosen will affect tax, liability, staff transfer, contracts, licences, finance and the level of due diligence required.

In an asset purchase, the buyer usually selects which parts of the business to acquire. This might include the premises, goodwill, fixtures and fittings, stock, bookings, website, intellectual property and key contracts.

In a share purchase, the buyer acquires the company which owns the business, together with its history, liabilities and obligations. That can be attractive where continuity is important, but it usually calls for more detailed investigation and stronger warranty protection.

Sellers should take advice before heads of terms are agreed. Early decisions about purchase price (including any deferred consideration), price adjustments, deposits, stock valuation, employee liabilities and restrictions on future competition can have a significant impact later.

Property is often the core asset

For many hospitality and leisure businesses, the premises are not simply where the trade takes place. They are part of the offer. A coastal hotel, a pub with letting rooms, a rural wedding venue, a farm diversification site, a holiday park or a restaurant in a prominent town centre location may depend heavily on the rights, restrictions and planning status attached to the land.

If the property is leasehold, the buyer will need to understand the length of the lease, rent review provisions, break clauses, repair obligations, permitted use, alienation provisions and whether landlord’s consent is required for the assignment. Dilapidations can be a major issue, especially where buildings are older, heavily used or altered over time.

Freehold purchases raise their own questions. The most obvious are access, parking, drainage and boundaries, restrictive covenants, rights of way, environmental matters, listed building status. Flood risk and development potential are also possible considerations. In East Anglia, rural and coastal sites often need particularly careful review because they may involve private roads, shared services, drainage arrangements, agricultural land history, coastal erosion issues or seasonal access constraints.

Licensing, permissions and compliance

A hospitality business can look commercially attractive but still be vulnerable if its permissions are incomplete or misunderstood. Alcohol licences and late-night refreshment permissions, music permissions and gaming machine permits will need to be checked.  Depending on location a pavement licence may also be a consideration. Planning consents, fire safety compliance, food hygiene records and health and safety procedures will also all need to be verified.

Buyers should confirm not just that licences exist, but that they cover the way the business actually operates. Are weddings, outdoor events, live music, takeaway sales, temporary bars or extended seasonal hours included? Is the premises licence held by the seller, the company, the landlord or an individual? Is there a suitable designated premises supervisor?

Small gaps can cause major disruption.

People, seasonality and TUPE

Hospitality is a people business. Staff knowledge, customer relationships and local reputation may be as important as the fixtures and fittings. Where a business is being sold as an asset sale, the Transfer of Undertakings (Protection of Employment) Regulations, commonly known as TUPE, will apply if the business has employees who will be staying with the business once completion takes place. This means that the employees will transfer to the buyer on their existing terms of employment and with continuity of employment preserved.

The buyer will need specific details of employees, including (but not limited to) their hours, pay, holiday entitlement and pension obligations. In a seasonal business, it is also important to understand the use of any informal staff, zero-hours arrangements or agency workers and if there is any accommodation provided to employees.

For sellers, employment records should be organised before marketing the business. A well-prepared seller is more likely to maintain momentum, reduce queries and protect the sale value of their asset.

The numbers behind the trade

Turnover alone rarely tells the full story. Depending on the exact nature of the business, a buyer will want to understand some, or all, of the following: margins; utility costs; supplier terms; booking patterns; deposits; voucher liabilities; subscriptions; maintenance costs and capital expenditure requirements.

In the leisure sector, timing also matters. A business may look very different at different times of year, for instance depending on whether completion takes place before the summer season or after the Christmas trading period.

Stock, deposits, advance bookings, gift vouchers and event payments should be dealt with clearly in the contract. Where part of the price is deferred or linked to future performance, earn-out provisions must be drafted carefully. The parties should agree what is being measured, who controls the business during the earn-out period, what information must be provided, and what happens if trading is affected by events outside either party’s control.

Contracts, bookings and reputation

A successful hospitality business is sometimes built on a web of practical arrangements, many of which will have change of ownership provisions.  These could include: brewery ties, supplier agreements, franchise terms, online travel agent arrangements, card processing contracts, laundry services, waste collection, maintenance agreements, event bookings, customer terms and website platforms.

Some contracts may transfer easily. Others may require consent or may terminate on a change of ownership. Buyers should identify which arrangements are essential and which can be replaced. Sellers should be clear about what is included in the sale and what is personal to them.

Reputation deserves the same attention. The business name, website domain names, social media accounts, reviews, mailing lists, recipes, menus, branding, photographs and booking data may all hold real value. Data protection obligations should be considered before any customer database or marketing list is transferred.

Expanding an existing group

For operators expanding a chain or portfolio, the issues are slightly different. The legal review should consider how the new site fits the wider business model. Can management systems, supplier arrangements, employment contracts, booking platforms and brand standards be integrated without disrupting trade?

A second or third site can bring buying power and brand recognition, but it can also expose weaknesses in management capacity, funding arrangements and operational control. If the acquisition is debt-funded, lenders may require security over property, company assets or personal guarantees. Those requirements should be understood at the outset.

Growth is exciting, but it should still be disciplined.

Planning an exit

Owners who are thinking about selling should start preparing long before the business is put on the market. A buyer’s confidence will depend on the quality of the information provided. Clean accounts, current licences, clear employee records, properly documented contracts, up-to-date property paperwork and evidence of repeat trade can all help to support value.

It is also sensible to consider what the seller wants after completion. Will there be a handover period? Will the seller stay on as a consultant? Are there family members involved in the business? Are there shareholders whose approval is needed?

Will any property be retained and leased to the buyer? These questions should be addressed early so that the sale structure supports the seller’s commercial and personal objectives.

A planned exit is almost always easier than a rushed one.

Local knowledge matters

Hospitality and leisure businesses in East Anglia are shaped by their location. The issues affecting a city centre restaurant may be very different from those affecting a rural holiday park, a coastal hotel, a village pub, a farm café or a visitor attraction. Local planning policies, seasonal trade, transport links, drainage, staff availability, tourism patterns and community relationships can all influence the success of a transaction.

That is why sector understanding is valuable. The legal work should be practical, commercial and collaborative, bringing together corporate, commercial property, employment and dispute resolution where needed.

Getting the right advice early

Buying or selling a hospitality business is rarely just a matter of agreeing a price. It involves people, property, permissions, trading history, future bookings, goodwill and risk. For buyers, good advice helps to identify what is really being acquired. For sellers, it helps to present the business clearly and avoid last-minute obstacles.

If you are considering buying, expanding or selling a tourism, leisure or hospitality business in East Anglia, taking advice at the start can make the process smoother, protect value and give all parties a clearer route to completion.

Our corporate and commercial solicitors at Fraser Dawbarns are here to help, whether you are buying or selling a leisure or tourism business, or purchasing additional premises to expand an existing business. Contact any of our offices or complete our enquiry form and we’ll be in touch.

How To Contact Us:

To contact a member of our team, you can fill in our online enquiry form, email info@fraserdawbarns.com, or call your nearest office below. If you’d like to speak to a member of our team at one of our offices across Norfolk and Cambridgeshire, visit our offices page.

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This article aims to supply general information, but it is not intended to constitute advice. Every effort is made to ensure that the law referred to is correct at the date of publication and to avoid any statement which may mislead. However, no duty of care is assumed to any person and no liability is accepted for any omission or inaccuracy. Always seek advice specific to your own circumstances. Fraser Dawbarns LLP is always happy to provide such advice.