Liquor Store Due Diligence Checklist for Buyers
By the time a buyer signs a letter of intent on a liquor store, they have usually walked the aisles, seen a summary of sales and talked with the seller about the business. Liquor store due diligence is where those impressions are tested against records, licenses, agreements and inspections. It is the buyer’s best opportunity to uncover problems before they become the buyer’s problems.
This checklist gives a broad overview of what buyers typically review. Licensing, inventory and the lease each deserve deeper attention and are covered in separate articles. This is not legal, regulatory, tax or licensing advice; work with qualified professionals on the matters that apply to your transaction.
1. Financial Records
- Business tax returns for several years
- Profit and loss statements and balance sheets, including year-to-date
- Bank statements for business accounts
- Point-of-sale reports showing sales by category, such as spirits, wine, beer and other products
- Purchase records and supplier invoices
- Payroll records and owner compensation
- Records of any other income, such as lottery commissions or vendor payments
Compare sales reported on tax returns with point-of-sale reports, bank deposits and purchase records. Consistent records build confidence; unexplained gaps deserve questions.
2. Licensing and Compliance
- Current licenses and permits, and who holds them
- Whether licenses can be transferred or whether new licenses are required where the store is located
- Violations, citations, suspensions or pending matters
- Age verification practices and training records
- Any local restrictions on hours, products or operations
Licensing rules vary by state and locality. Our guide to liquor license transfer explains the considerations buyers commonly face.
3. Inventory
- Recent inventory reports and how inventory is tracked
- Slow-moving, discontinued or damaged product
- Product that may not be sellable under the buyer’s license
- How inventory will be counted and priced at closing
Our article on liquor store inventory covers counting and valuing inventory in more detail.
4. The Lease or Property
- The full lease, amendments, renewal options and assignment provisions
- Rent, increases and shared costs
- Permitted use and any exclusivity rights
- For property purchases: title, survey, appraisal, inspections and any environmental review
See our guide to the liquor store lease.
5. Operations and Staff
- Hours, staffing levels and key employees
- Employee pay, agreements and training
- Security systems, cameras and cash-handling procedures
- Shrinkage and theft history
- Point-of-sale system ownership and data access
6. Suppliers and Vendor Relationships
- Primary suppliers and purchasing terms
- Any credit terms, deposits or outstanding balances
- Whether accounts must be re-established by a new owner
- Vendor agreements for coolers, displays or other items
7. Other Revenue Streams
Lottery, tobacco, snacks, ice and other products may add revenue but come with their own licensing, contracts and considerations. See our guide to liquor store lottery and tobacco sales.
8. Fixtures and Equipment
- Condition of coolers, walk-ins, shelving and refrigeration
- Security equipment and point-of-sale hardware
- Any equipment that is leased or financed and would need to be paid off or assumed
9. Location and Competition
- Traffic, parking, visibility and neighborhood trends
- Nearby liquor stores and other retailers that sell alcohol where permitted
- Changes in the area that could affect demand
10. Items Your Lender Will Request
Lenders typically request many of the same records, along with the purchase agreement, licensing information and your personal financial information. Organizing diligence materials with your lender in mind can make underwriting smoother. See our guide to liquor store loan requirements.
Using What You Find
Diligence findings may confirm the deal, change the price, add conditions to closing or lead you to walk away. Issues can be addressed through price adjustments, holdbacks, repairs before closing or other terms, subject to negotiation and lender requirements.
US Professional Funding works with buyers acquiring existing liquor stores. Learn more about our liquor store acquisition financing.
