Grocery Store Due Diligence Checklist for Buyers
By the time a buyer signs a letter of intent, they have usually walked the aisles, seen summary financials and formed an opinion about the store. Grocery store due diligence is the stage where those impressions are tested against records, contracts, permits and inspections. It is also when the buyer’s lender gathers much of what it needs to evaluate the loan.
This checklist is general information for buyers of existing, operating grocery stores and supermarkets. It does not address opening a new store or financing equipment on its own. Requirements vary by state and locality, and buyers should rely on qualified attorneys, accountants, inspectors and other professionals. Nothing here is legal, tax or regulatory advice.
Financial Records
- Several years of business tax returns and year-to-date financial statements
- Point-of-sale sales reports by department, reconciled to tax returns and bank deposits
- Monthly sales trends to show seasonal patterns
- Payroll records and labor cost by department where available
- Documentation for any proposed add-backs
- A schedule of existing debt, leases and liens
Purchasing, Vendors and Pricing
- Vendor list with payment terms and any written supply agreements
- Whether agreements can be assigned and whether any include exclusivity, minimum purchases or rebates tied to the current owner
- Pricing practices, promotional programs and how prices are set
- Accounts payable aging and any past-due balances
Vendor programs and terms should not be assumed to continue for a new owner.
Inventory and Shrink
- Recent physical inventory counts and how they were taken
- Shrink records and how losses are tracked by department
- Policies for perishables, markdowns and disposal
- The method for the closing inventory count
Our article on grocery store inventory at closing covers these issues in detail.
Licenses, Permits and Authorizations
- Food establishment permits and recent health inspection reports
- Alcohol, tobacco and lottery licenses, if applicable
- Benefits-program retailer authorizations such as SNAP and WIC, if applicable
- Scale, weights-and-measures and other local permits
- Any notices of violation and how they were resolved
These should not be assumed to transfer. See our article on grocery store licenses and permits.
Lease and Real Estate
- The full lease with all amendments, renewal options and assignment provisions
- Landlord consent requirements and any estoppel certificate
- Responsibility for roof, parking, HVAC and shared-area costs
- If the real estate is included, title, survey, environmental review and appraisal as the lender requires
Our guide to the grocery store lease explains what to look for.
Physical Condition
- Inspection of refrigeration, freezers, walk-in coolers and compressors
- Roof, HVAC, electrical, plumbing and floor condition
- Maintenance and service records
- Any repairs the seller has postponed
See our article on grocery store deferred maintenance.
Employees
- Staff roster with roles, tenure and pay
- Department managers and other key employees
- Any union agreements, employment agreements or benefit plans
- Employment claims or open disputes
Employment and labor matters should be reviewed with qualified counsel. Our guide to grocery store employee retention covers keeping key people through a sale.
Insurance and Legal
- Insurance policies and claims history
- Pending or threatened litigation
- Entity documents and authority to sell
What Lenders Will Want
Lenders frequently request much of the same information, along with the buyer’s personal financial statement, resume, a business plan and where the equity will come from. Organizing diligence materials in a way that also serves the lender can help keep the transaction moving, though timing depends on the lender and the deal.
US Professional Funding helps buyers finance the acquisition of existing, operating grocery stores and supermarkets. Learn more about our grocery store acquisition financing.
