If you are looking to acquire a hospitality asset in 2026, you will find more opportunities than at any point in the past decade. You will also find more ways to lose money.

Getting restaurant purchase legal advice before signing a contract is not optional when dealing with distressed assets. These businesses are struggling for reasons that may not appear in the sales brochure. Your job during due diligence is to find those reasons and decide whether you can fix them, or whether you are about to inherit someone else's problems.

Why Distressed Hospitality Assets Need Different Due Diligence

A standard business sale gives you time. The vendor wants a good price and will usually cooperate with reasonable information requests. Distressed sales are different. The vendor may be under pressure from creditors, facing lease expiry, or simply exhausted from running a loss-making operation. They want out quickly.

This pressure creates two problems for buyers. First, information may be incomplete or poorly organised. Second, there is less time to investigate before another buyer steps in. As the Australian Government's business guidance notes, buyers should always research thoroughly before committing, but distressed sales compress that timeline.

The solution is not to skip due diligence. It is to focus on the issues most likely to cause problems in hospitality businesses and address them first.

Buy Restaurant Legal Advice: The Liquor Licence Question

Every hospitality business sale involving alcohol starts with the same question: what happens to the licence?

In Victoria, liquor licences are issued under the Liquor Control Reform Act 1998 and cannot be automatically transferred to a new owner. You must apply to Liquor Control Victoria (LCV) for a transfer, and LCV will assess your suitability as a licensee. This process typically takes 6 to 8 weeks for straightforward transfers, and LCV advises lodging applications at least 8 weeks in advance.

For distressed assets, the licence situation is often complicated:

  • The licence may have conditions attached due to past compliance issues
  • There may be outstanding infringement notices or pending disciplinary action
  • The licence category may not match your intended business model
  • Late night trading permits may not transfer with the main licence

A brewery with an on-premises licence operates under different rules than one with a producer's licence. A hotel with gaming machines has additional requirements under the Victorian Gambling and Casino Control Commission. Before you commit to any purchase, you need to confirm exactly what licence exists, what conditions apply, and whether you can realistically obtain a transfer.

Commercial Due Diligence: Following the Money

Distressed businesses often have messy finances. Revenue may be declining, but the books might not tell you why. Your commercial due diligence should focus on several specific areas.

Supplier Debts and Trade Creditors

Check whether the business owes money to suppliers. In an asset purchase, you do not automatically inherit these debts, but suppliers may refuse to deal with the new owner until old accounts are settled. For a brewery, this might mean no access to hops, malt, or packaging materials. For a hotel, it could mean no linen service or food deliveries.

Equipment Ownership

Brewing equipment is expensive. So are commercial kitchens, cold rooms, and hotel fit-outs. Not all of it may actually belong to the business. Check for:

  • Equipment under finance agreements or chattel mortgages
  • Leased items that must be returned or have the lease assumed
  • Equipment belonging to suppliers (such as branded fridges or taps)
  • Items subject to retention of title claims from unpaid suppliers

A PPSR search (Personal Property Securities Register) will reveal registered security interests, but not all arrangements are registered. Ask for copies of all equipment agreements.

Employee Entitlements

This is where many buyers get caught. If you purchase a business as a going concern, you may inherit obligations for accrued annual leave, long service leave, and redundancy entitlements. In a distressed business, these liabilities can be substantial, particularly if staff have been there for years and the previous owner has not been setting aside funds.

Get a complete list of all employees with their start dates, leave balances, and employment terms. Calculate the total liability. Factor this into your purchase price.

The Lease: Your Biggest Fixed Cost

Most hospitality businesses do not own their premises. The lease is often the single largest fixed cost and the biggest source of risk.

For distressed assets, examine:

  • How long remains on the lease term and any options
  • Whether the landlord must consent to assignment (they almost always do)
  • Any personal guarantees required from the new tenant
  • Rent review mechanisms and recent market rent assessments
  • Make-good obligations at lease end
  • Outstanding rent arrears or breach notices

A brewery that is failing partly because rent is too high will not become profitable just because you are running it. If the lease terms are unworkable, you need to negotiate changes before settlement or walk away.

Regulatory Compliance History

Check the venue's compliance history with the local council and LCV. This includes:

  • Planning permit conditions and any enforcement action
  • Food safety audit results and any improvement notices
  • Noise complaints and any restrictions imposed
  • Building compliance, particularly for older hotels
  • Fire safety orders or requirements

A venue with a history of complaints may have conditions that limit trading hours, require expensive soundproofing, or restrict patron numbers. These conditions follow the premises, not the previous owner.

Structuring the Purchase: Assets vs Business

For distressed acquisitions, buying assets rather than the whole business often provides better protection. You select the equipment, intellectual property, and contracts you want. You leave behind the debts, disputes, and liabilities.

The trade-off is complexity. You need to negotiate new supplier agreements, apply for a fresh liquor licence (or transfer the existing one), and potentially re-employ staff on new terms. For some buyers, purchasing the business and negotiating warranties and indemnities from the vendor makes more sense, particularly if the vendor has assets to back those promises.

Your lawyer can advise on the right structure based on the specific circumstances. There is no single answer that works for every deal.

Moving Quickly Without Moving Recklessly

Distressed sales create pressure to act fast. Other buyers may be circling. The vendor may have deadlines from creditors or landlords. But speed should not mean skipping proper due diligence.

Focus your early efforts on the issues that can kill the deal: licence transferability, lease terms, and total liabilities. If these check out, you can proceed to detailed investigation of operations, equipment, and staff. If they do not, you have saved yourself weeks of work and potentially hundreds of thousands of dollars.

The hospitality business sales market in 2026 will continue to produce opportunities as venues struggle with softer trading conditions and higher costs. The buyers who succeed will be those who understand what they are purchasing before they sign.