The gastronomy scene in Germany and especially in Berlin is highly dynamic and offers interesting business opportunities. The international appeal attracts people from all over the world. Our legal practice shows that entrepreneurs from abroad prefer taking over an existing gastronomy business - and adapting it to their needs and concepts afterwards - over starting a new business from zero. However, taking over a business raises a high number of legal risks that not every entrepreneur is aware of. The (non-exhaustive) list illuminates some of the more common mistakes and risks of entrepreneurs, who take over a gastronomy business in Germany.
1. Entrepreneurs fail to inspect records of the business at the competent regulatory authority
Inspection of the records about the business at the competent regulatory authorities (“Ordnungsamt”, “Umweltamt” etc.) may provide information about previous legal issues connected to the business, like complaints of residents because of noise or issues regarding legal use of premise. An excerpt of the records, provided by the vendor is not sufficient.
2. Liability caused by transfer of claims
Unrevealed risks may be taken over from the previous owner together with the business. This is often a result of poor contract design or insufficient due diligence before the transaction.
3. Form of organization
Entrepreneurs do not think about their form of organization when taking over a business or don not chose an optimal legal form.
4. Tax issues
The parties of the transaction don’t consider tax issues. This may lead to high tax demands.
5. Change of business concept
Acquirer plans to change the business concept but fails to check feasibility before the transaction. Rental contract or requirements set by the public authorities my restrict use of premises or certain types of businesses.
6. Tenancy contract
Acquirer does not conduct a proper review of the tenancy contract. Without a proper arrangement, there is no legal obligation under German tenancy law for a landlord to accept a new lease. In the worst case, the acquirer may buy a business without a tenancy contract. Landlords may also use the situation to demand an increase of rent which may foil even a good the gastronomy business plan.