Planning23 August 2026 · 20 min read

You're Not Buying a Café. You're Buying Someone Else's Lease.

Founder, Locatalyze

Trading café interior with staff behind the counter and customers seated, a business operating as a going concern

Every café for sale in Australia is advertised with a number. Takings of so much a week, adjusted net profit of so much a year, priced at some multiple of it. The number is usually not a lie. It is an account of the past, prepared by the person who wants you to buy, describing a business you have not run, trading from a lease you have not read.

Business PurchaseDue DiligenceGoodwillCommercial LeaseCafe

Some links on this page are affiliate links. If you sign up through one, Locatalyze may receive a commission at no additional cost to you. We only include products we believe are relevant, and none of the recommendations change if the links are removed. This article is general information, not legal, accounting, tax or financial advice. A business purchase needs a commercial solicitor and an accountant who has read your specific documents.

Buying an existing café can be a genuinely better decision than building one. The trade already exists, the fit-out is paid for, the approvals are in place, and you can watch real customers walk through a real door before you commit a dollar. Those are large advantages and this article is not an argument against them.

It is an argument about what you are actually buying. Because the thing being sold is not a café. It is a bundle: some equipment at an agreed value, some stock, the right to step into a lease that somebody else negotiated on terms you did not set, and a payment for goodwill that only makes sense if the trade continues under you for long enough to earn it back.

That last part is where most purchase decisions quietly go wrong, and it has almost nothing to do with the price.

Goodwill amortises over the tenure you can rely on, not over forever. Ask what term is left before you agree what the goodwill is worth.

Question 1: Why is it really for sale?

Most sales are legitimate. People retire, move interstate, get sick, have a second child, or simply run out of enthusiasm for 4am starts. If every café for sale were a disaster, none of them would ever change hands profitably, and plenty do.

But the stated reason is the beginning of the enquiry, not the end of it, because the reason tells you what you are inheriting. A tired owner who has stopped marketing and let the menu drift is selling you an opportunity. An owner who has seen a development application lodged for a competing site two doors down is selling you a problem. Both of them will tell you they are ready for a change.

What to establish before you take the reason at face value

How long has it been listed, and has it been listed before? A café that has been on the market for eight months at a falling price is telling you something the advertisement is not.

When does the lease expire, and when is the next rent review? A sale timed just before a market rent review or an expiry is a sale timed for a reason.

What has opened nearby in the last twelve months, and what is under construction? Walk the strip. Check the council's development application register for the surrounding block.

Is the anchor that drives the foot traffic staying? A café that lives off a neighbouring gym, school, office building or supermarket is exposed to that neighbour's lease, not just its own.

Have the trading hours been cut recently? Reduced hours flatter margin percentages and hide a revenue decline.

Ask for three years of figures, not one. A business sold on the back of its single best year is a business sold at the top of its own cycle.

The cheapest due diligence available

Sit in the venue during trade. Not for twenty minutes with the owner watching, but for a full day, and then again on a different day of the week. Count transactions. Watch who comes in and at what time. You will learn more about whether the claimed average is plausible than any spreadsheet will tell you, and it costs you nothing but time.

Question 2: Are the takings real?

Every figure you are shown has an author and a purpose. That does not make any of them dishonest. It does mean they are not equally reliable, and treating them as though they are is the most expensive mistake in this whole process.

So rank the evidence. Here is the hierarchy I would use, from the material that proves nothing to the material that is genuinely hard to fake.

Evidence	What it is worth
The seller's verbal figure	Nothing. Not because sellers lie, but because nobody's recollection of their own takings is accurate, and it is always rounded in a helpful direction.
The broker's information memorandum	A marketing document. Useful for understanding what is being claimed, not for verifying it.
An adjusted or normalised profit statement	Every add-back is a claim. Make the seller justify each one individually. The owner's wage, the family car, the phone bill and the trip to a coffee expo are not all equally addable.
Accountant-prepared financial statements	Better, and still prepared from what the seller supplied. An accountant compiles; they do not audit unless engaged to.
Business activity statements lodged with the ATO	Genuinely useful. This is a statement to a regulator with consequences attached, so it is harder to inflate than a document prepared for a buyer.
Bank statements	Money that actually arrived. Ask for the full account, not extracts, and for the same period as the BAS.
Merchant terminal settlement statements	Card revenue, generated by a third party the seller does not control. Strong.
POS daily sales reports and Z-reads	Transaction-level detail: covers, average spend, revenue by daypart. This is the operating data you actually need to run the place.
All four, reconciled against each other for the same period	The only thing that genuinely constitutes proof. This is the work you are paying your accountant for.

The reconciliation is the point. Any single document can be explained. POS reports that agree with merchant settlements, which agree with bank deposits, which agree with what was declared on the BAS, are very difficult to construct after the fact. If the four do not line up, the gap is the conversation.

On the cash that is not in the books

At some point a seller may tell you there is another substantial sum coming through each week in cash that does not appear in the figures. Treat this as the end of the negotiation, not a bonus. You cannot verify it. You cannot bank on it. You cannot finance against it. You are being asked to pay goodwill, in real money, for undeclared income you are taking entirely on faith, from someone who has just demonstrated how they treat obligations they find inconvenient. Value the business on the declared figures or walk away from it.

Tool worth looking at

Xero

Best for. Taking over the books cleanly at settlement, and giving your accountant direct access to the seller's file during due diligence rather than working from exported PDFs.

Why it belongs here. Most Australian small business sales in hospitality involve a Xero file on one side or both, and being able to grant your accountant read access to the actual ledger, with bank feeds attached, is materially better than reviewing a summary somebody assembled for you. After settlement you need your own file from day one anyway, because the first BAS arrives sooner than people expect.

Check before you commit. That software is not doing the verification. A ledger shows you what was recorded, not what was earned. Your accountant reconciling the ledger against BAS, bank and merchant statements is the actual work, and no subscription substitutes for it. Also confirm what happens to the seller's file at settlement: you are usually starting a new file, not inheriting theirs, and the historical data comes across as records rather than as a live ledger.

Worth comparing against. MYOB or QuickBooks do the same job. The right one is whichever your accountant works in, because their hourly rate around an unfamiliar system costs more than the subscription difference.

Explore Xero →

Question 3: How much lease is actually left?

This is the question that decides more purchases than any other, and it is the one most often answered with a shrug and the phrase "there's a lease in place".

You are not signing a new lease. You are taking an assignment of the seller's lease, in whatever condition they left it, with whatever term remains. If they signed a five-year term three years ago and there is no option, you have two years. Everything you pay for goodwill has to be earned back inside those two years, plus whatever you can negotiate afterwards from a position where the landlord knows you have a fit-out you cannot move and a business that only exists at that address.

That is the entire argument of the figure at the top of this article. A $150,000 goodwill payment across eight years of secure tenure costs about $1,563 a month. The same payment with two years left costs $6,250 a month. The price on the listing is identical. The decision is not remotely the same decision.

Secure tenure is the remaining term plus the options you actually control. Everything else is a hope you are being asked to pay for.

What to establish about the lease, in order

Read the lease before you agree the price

1
Remaining term and options. How many years are left, how many options exist, and have any already been exercised? An option that has been used is gone.
2
Whether the options are still available to you. Options usually carry preconditions: notice within a defined window, and no subsisting breach. Ask whether the current tenant is in breach of anything, including arrears you cannot see.
3
Rent reviews scheduled inside your term. A market review twelve months after settlement can reprice the business you just bought. Fixed reviews are at least predictable; model them across the full term.
4
Assignment consent. Most leases require the landlord's prior written consent. Under retail leasing legislation a landlord generally cannot withhold consent unreasonably where the disclosure requirements are met, but they can require reasonable checks on you, and they will.
5
What the landlord will require from you personally. Expect a request for a personal guarantee and possibly an increased bank guarantee. The seller's security arrangement does not automatically become yours.
6
Make-good. You are stepping into an obligation to return the premises to a defined condition at the end of the term, potentially including works the previous tenant did. Establish what that condition is and what it would cost.
7
Permitted use. Confirm it covers what you intend to do, including anything you plan to add later such as extended hours, licensed trade, or a different food offer.
8
Outgoings. Ask for the last reconciliation, not the estimate.

One asymmetry worth knowing, because it explains behaviour you will encounter: in an assignment, the outgoing tenant and their guarantors often remain liable for the lease unless the landlord releases them, and some state retail leasing regimes provide a release only where a formal assignor's disclosure statement is properly given. That is the seller's problem rather than yours, but it is why sellers can be highly motivated to complete an assignment properly and quickly, and it is worth knowing you hold that card.

Make settlement conditional on this

The landlord's written consent to the assignment, on terms you have seen. Not verbal comfort from the agent, and not an assumption that consent is a formality. If the landlord intends to require a larger bank guarantee, a personal guarantee, or a rent increase as a condition of consent, you need to know that before you are contractually committed, not after.

Question 4: Would you open here from scratch?

Strip the business away for a moment. Imagine the shop is empty, the fit-out is gone, and you are choosing a site. At this rent, in this position, with these neighbours and this catchment and this much competition, would you pick it?

If the answer is no, be very careful about what you are doing. An existing trade is real evidence that the location supports a business, and that evidence is genuinely valuable. It is also evidence about this location under one particular operator, with their format, their hours, their prices and their skill. It does not transfer to you automatically, and it does not tell you the site will still support a business in year four.

There is a version of this purchase that is excellent: a site you would happily choose from scratch, where an existing trade removes your ramp-up risk and the fit-out is already paid for. And there is a version that is a trap: paying goodwill to inherit a site you would never have selected, funded by the assumption that the previous owner's takings are a property of the address rather than a property of them.

What to check about the location, independently of the business

Rent as a percentage of the verified revenue, not the claimed revenue. Above roughly 18% your margin for error thins; above 22% the business generally only works if the revenue assumption holds first time. Those are Locatalyze thresholds rather than a legislated standard, and they vary by format.

Direct competitors within walking distance, and what has opened in the last year. A site that supported one café in 2023 may be supporting three in 2026.

Whether the trade is genuinely local or borrowed from a single neighbour who could leave.

The trading pattern by daypart. A venue that makes its money in a two-hour weekday window is a different business from one with even trade, and it has a different staffing cost.

What is planned nearby. Development applications, road works, changes to parking, and any transport project that alters how people move past the door.

Check the address independently of the seller's numbers

Locatalyze analyses the specific site against competitor density, catchment, demand signals and the actual rent, and returns a PROCEED, VERIFY or AVOID read with the workings behind it. It is a view of the location that is not prepared by anyone with an interest in the sale.

Analyse the address

Question 5: What else are you inheriting?

The contract will list the assets. The liabilities are the part you have to go looking for.

Staff, and the entitlement question people get wrong

When a business changes hands and employees come across, the Fair Work rules on a transfer of business decide what you inherit. Where the old and new employers are not associated entities, which is the normal position in an arm's length sale, the new employer can decide not to recognise an employee's service with the old employer for annual leave purposes. But that decision has to be communicated to the employee in writing before the new employment starts, and the old employer then has to pay out the untaken accumulated annual leave.

Miss that step and you have quietly taken on somebody else's accrued leave liability. On a team of six with several long-serving staff, that is not a rounding error. The old employer also has to give you records of transferring employees, including their leave entitlements, so ask for them and have the balances valued and adjusted at settlement. Check the current position with the Fair Work Ombudsman, because these rules are detailed and the exceptions matter.

While you are there: ask for evidence that superannuation has actually been paid, not just accrued. Unpaid super is a live liability that tends to surface at the worst possible time, and since 1 July 2026 super has to reach employees' funds within 7 business days of each payday, so a seller who is behind is behind in a way that is now much more visible.

Equipment, contracts and the things with somebody else's name on them

What to check	Why
PPSR search on the equipment	If the gear carries a security interest, the financier can repossess it from your premises even after you have paid the seller for it. A search costs a couple of dollars at ppsr.gov.au.
Age and remaining life of the plant	A fifteen-year-old cool room included at a generous value is a capital expense you have deferred, not avoided.
Coffee supply agreements	Machines are frequently supplied under a roaster agreement with minimum volume commitments and a tie-in period. You may be inheriting an obligation, not an asset.
Equipment leases and rental agreements	Terminals, dishwashers, water filtration and coffee machines are often rented. Establish what transfers, what terminates, and what you are re-signing.
Delivery platform agreements	Commission rates vary and materially affect the margin on a revenue line the seller may be presenting at face value.
Service contracts	Waste, grease trap servicing, linen, pest control, cleaning, POS subscriptions. Individually small, collectively a real monthly number.
Council and authority notices	Any outstanding orders, food inspection findings, or trade waste issues attached to the premises.
The online reputation	You inherit the Google rating and the review history. Read the last two years of reviews, including the ones about things that would be your problem from day one.

What the price should be built from

A price built from three defensible components is negotiable. A single number with a multiple attached to it is not, because there is nothing to argue with.

Build it up rather than negotiating it down

1
Equipment, at a realistic written-down value. Not replacement cost, and not what the seller paid in 2019. What would you get for it at auction, adjusted upward for the convenience of it already being installed and working?
2
Stock, at cost, counted at settlement rather than estimated beforehand.
3
Goodwill, which is the only genuinely negotiable component. It should be a multiple of a verified, sustainable net profit to a working owner, after a market wage for whoever actually runs the place.

That last adjustment matters more than any multiple. If the seller works forty hours a week in the business and has not paid themselves a wage, their net profit is not profit. It is partly wages. Deduct what it would cost to employ someone to do what they do, and the remaining figure is what you are actually buying an income stream from.

On multiples themselves, apply the same scepticism this article started with: the published guidance on what hospitality businesses are worth is largely produced by business brokers, whose income is a percentage of the sale price. The ranges are not necessarily wrong. They are simply not neutral, and a multiple is in any case only meaningful once the profit figure underneath it has been verified and the secure lease term is known.

Protections worth having in the contract

Ask your solicitor about each of these

Settlement conditional on landlord consent to the assignment, on terms disclosed to you.

Settlement conditional on satisfactory due diligence, with a defined period and a definition of satisfactory that is yours rather than reasonable-in-the-abstract.

A restraint of trade covering a sensible radius and duration. Nothing stops a departing owner opening again three streets away except a clause that says they cannot.

A handover and training period, written into the contract with a specified number of days, not promised verbally.

Supplier and staff introductions as an obligation rather than a courtesy.

Adjustment at settlement for stock, prepaid outgoings, accrued staff entitlements and any rent paid in advance.

Going-concern GST treatment, if it applies. A sale can be GST-free as the supply of a going concern where the conditions are met, including that both parties agree in writing that it is a going concern and the seller supplies everything necessary for the continued operation. Getting this wrong means funding an extra sum at settlement and waiting to claim it back. Confirm the requirements with the ATO and your accountant.

Due diligence checklist

Before you make an offer

Costs you time only. Do all of it.

Three years of financial statements requested, not one
Full trading days observed in person, on at least two different days of the week
Listing history checked: how long, at what price, previously listed
Competitors within walking distance visited and counted
Council development application register checked for the surrounding block
Lease expiry, options and next rent review confirmed in writing
Rent as a percentage of claimed revenue calculated
The from-scratch question answered honestly

Before you go unconditional

This is the work you pay professionals for

POS reports, merchant settlements, bank statements and BAS reconciled for the same period by your accountant
Every add-back in the adjusted profit justified individually
Net profit restated after a market wage for the owner's role
Full lease reviewed by a commercial solicitor
Landlord's consent to assignment obtained or confirmed in principle, with any conditions disclosed
Bank guarantee and personal guarantee requirements understood
Make-good obligation identified and costed
PPSR search completed on all equipment
Supply, roaster, equipment lease and delivery platform agreements read
Staff list with service dates, entitlement balances and award classifications obtained
Superannuation payment history evidenced, not just stated
Outstanding council or authority notices checked
Two years of online reviews read

At settlement

Mechanical, and easy to fumble under time pressure

Stock counted and valued on the day
Adjustments made for prepaid outgoings and rent in advance
Accrued staff entitlements dealt with explicitly, in writing, before new employment starts
Deed of assignment executed and landlord consent in hand
Going-concern GST treatment documented in the contract
Keys, alarm codes, supplier accounts, utility accounts and online listings transferred
Google Business Profile ownership transferred, not just the password shared
Insurance in place from the moment of settlement, not the day after

When to walk

You will have spent money on professional fees by the time most of these become visible, and that money is gone either way. It is a much smaller number than the one you are about to commit.

Any one of these is enough

The seller will not provide bank statements or lodged BAS for the periods they are claiming

The figures change when you ask for evidence

You are asked to value the business on cash income that does not appear in the books

Under three years of secure tenure, and a full goodwill price regardless

The landlord will not confirm they are prepared to consent to an assignment

The reason for sale keeps changing

The reconciliation does not reconcile and nobody can explain the gap

You would not open here from scratch

For the other side of this decision, what it actually costs to open a café from scratch sets out the number a build has to beat for buying to be the better option, and the Australian small-business setup checklist covers the sequence once you have committed either way. On the lease specifically, before you sign that lease applies to an assignment as much as to a new term.

Before you agree a goodwill figure, get an independent read on the address

Competitor density, catchment, demand signals and break-even against the actual rent, for the specific site.

Run the location analysis

Last reviewed 23 August 2026. Employment, tax and leasing requirements described here were current at that date and change regularly. Confirm the current position with the Fair Work Ombudsman, the ATO, the PPSR, business.gov.au and your state's small business commissioner or fair trading body. Retail leasing rules on assignment and disclosure differ by state and territory. This article is general information only and is not legal, accounting, tax or financial advice.

Frequently asked questions

Reconcile four independent sources for the same period: POS daily sales reports, merchant terminal settlement statements, bank statements and business activity statements lodged with the ATO. Any single document can be explained away, but four that agree are very hard to construct after the fact. Have your accountant do the reconciliation. A seller's verbal figure, a broker's information memorandum and an adjusted profit statement are claims, not evidence.

There is no universal minimum, but the remaining secure term decides what the goodwill is actually worth. The same $150,000 goodwill payment costs about $1,563 a month across eight years of secure tenure and $6,250 a month across two years. Secure tenure means the remaining term plus options you genuinely control and can still exercise. If there is little term left and the goodwill is priced as if there were plenty, that gap is the negotiation.

Under the Fair Work transfer of business rules, where the old and new employers are not associated entities, a new employer can decide not to recognise an employee's service with the old employer for annual leave purposes. That decision must be given to the employee in writing before the new employment starts, and the old employer then pays out the untaken accumulated annual leave. Miss that step and the accrued liability can become yours. The old employer must also give you records of transferring employees, including leave entitlements.

A sale can be GST-free as the supply of a going concern where the ATO's conditions are met, including that the parties agree in writing that the sale is of a going concern and the seller supplies everything necessary for the continued operation of the business. If the treatment is wrong, you may have to fund an additional amount at settlement and wait to claim it back, which is a real cash flow cost. Confirm the requirements with your accountant before contracts are exchanged.

Buying removes ramp-up risk and gives you a fit-out that is already paid for and approvals already in place, which are substantial advantages. Building lets you choose the site and the format from scratch. The honest test is whether you would choose this location from scratch at this rent. If yes, an existing trade is a genuine advantage. If no, you are paying goodwill to inherit a site you would not have selected, and the existing takings may reflect the previous operator rather than the address.

About the author

Prashant Guleria

Founder, Locatalyze

Prashant co-founded Locatalyze after encountering the difficulty of evaluating commercial locations for his own businesses. He leads the product around the practical questions independent operators need to answer before committing to a lease.