A restaurant changes ownership, and the buyer wants to keep the existing POS equipment.
Sounds simple, right?
Not necessarily.
I recently had a situation where a restaurant owner contacted me and essentially said:
“Joe, I just sold the restaurant. We included the POS equipment in the sale, so the new owner purchased it along with the other assets. How do I get this out of my name and into theirs?”
My first question was:
“When is the transfer happening?”
“Three days.”
😳
Okay… we have some work to do.
But my first question actually wasn’t about the POS equipment.
It was:
What exactly did the buyer purchase?
That question matters much more than many restaurant owners realize.
Did the buyer purchase the business or the business assets?
When a business is sold, there can be a major difference between purchasing the existing business entity and purchasing the assets of the business.
For example, a buyer might purchase assets such as:
- POS equipment
- Furniture and fixtures
- Kitchen equipment
- Recipes
- Inventory
- The operating name
- Customer relationships
- The existing menu
- Other business assets
Alternatively, the buyer could purchase the existing business entity itself.
One of the most important questions is whether the new owner is operating under the existing business entity or forming a new business entity.
That distinction can completely change how the merchant-services and POS transition needs to be handled.
Owning the POS equipment doesn’t mean owning the merchant account
This is one of the biggest points I want restaurant owners and buyers to understand.
If the buyer purchases the physical POS equipment as part of the sale, that equipment may absolutely have value and can transfer to the new owner.
But that doesn’t automatically mean the buyer can simply take over the seller’s merchant account or POS account.
Those are separate things.
Think about it this way:
The equipment is an asset.
The merchant account is an account established for a particular business, business entity and ownership structure.
The two shouldn’t be treated as the same thing.
In the situation I’m describing, the buyer purchased the restaurant’s assets and is starting under a new business entity.
From my perspective, that means I’m dealing with a new merchant and a new business, even though we’re trying to preserve much of the existing restaurant operation.
And that’s where the transition gets more complicated.
What needs to happen when the business changes hands?
When a restaurant is being purchased through an asset sale and the buyer is operating under a new business entity, there are several pieces that need to be addressed.
1. New business entity and DBA
The new owner needs the appropriate business structure and operating name in place.
That may mean a new legal entity and/or DBA depending on how the business is being operated.
2. New EIN
If the buyer is operating under a new business entity, the appropriate tax identification information needs to be established.
3. New business bank account
The new business needs its own bank account so that deposits from payment processing go to the correct owner and business.
4. New merchant application and underwriting
The new owner generally needs to go through the appropriate merchant application and underwriting process.
This is important because the processor needs to know who the new merchant is and what business is actually processing the transactions.
5. New merchant/POS account
The new merchant account and POS environment need to be established for the new business.
This is where the transition starts to become more than simply changing a name on a piece of equipment.
6. Reprovisioning the existing equipment
If the buyer purchased the POS equipment, there’s no reason to automatically throw it away and purchase an entirely new system.
Where possible, the existing equipment can be reprovisioned and connected to the new merchant/POS account.
This is one of the reasons it is important to understand exactly what the buyer purchased.
7. Moving the restaurant’s menu
The existing menu may contain hundreds of items, modifiers, prices and other settings.
Rather than rebuilding everything from scratch, the existing menu may be exported and imported into the new environment where the system allows it.
That can save a huge amount of time.
8. Reconnecting third-party delivery
Restaurants often rely on platforms such as DoorDash, Uber Eats and Grubhub.
Those integrations need to be reviewed and, where necessary, established under the new business and account structure.
You don’t want the restaurant to change ownership on Monday and discover on Tuesday that online delivery orders aren’t reaching the kitchen.
9. Reviewing online ordering and integrations
The POS may connect to an online ordering system, website, loyalty program or other software.
Those integrations need to be reviewed as part of the transition.
10. Checking printers, kitchen routing, taxes and tipping
This is where the small details can cause major problems.
You need to make sure things such as:
- Receipt printers
- Kitchen printers
- Kitchen routing
- Tax settings
- Tipping
- Menu pricing
- Order types
- Discounts
- Service charges
are all working correctly under the new setup.
11. Test the system before going live
And finally, test it.
Don’t wait until the restaurant is busy on Friday night to discover that something isn’t working.
Run test transactions and make sure the money is actually flowing to the new owner’s bank account.
The objective is to confirm that the entire process works before the new owner is relying on it for their first day’s revenue.
And meanwhile, the restaurant still has to operate
This is what makes these transitions particularly important.
A restaurant doesn’t get to shut down for several days while everyone figures out the technology.
The kitchen still needs to take orders.
Customers still need to pay.
Delivery orders still need to come through.
Receipts still need to print.
Tips still need to be recorded.
And, most importantly, the new owner needs to receive their money.
That’s why managing the cutover is so important.
A good merchant-services agent should be thinking about the transition as a whole rather than simply selling the new owner another piece of equipment.
An inexperienced agent might say:
“You can’t use the old equipment. You need to buy a new system.”
That isn’t necessarily true.
The better question is:
What equipment did the buyer purchase, and what can we preserve?
The goal isn’t to start over
If someone has purchased a restaurant’s assets, the goal shouldn’t automatically be to throw away everything they just purchased.
The POS equipment has value.
The menu has value.
The existing setup has value.
The operational knowledge built into the system has value.
Where possible, the goal should be to preserve that value while properly separating the old business from the new business.
Ideally, the transition looks something like this:
Same restaurant.
Same menu.
Same POS equipment where possible.
Same customer experience.
Different business underneath it.
That’s the distinction that matters.
Why planning ahead matters
The biggest problem with situations like this isn’t necessarily that the transition is complicated.
It’s that people often don’t start planning it until the last minute.
If I hear:
“The restaurant closes in three days and the new owner takes over Monday.”
that’s a very different situation from:
“We’re selling the restaurant in six weeks. Here’s what the buyer is purchasing and here’s the new business information.”
The second situation gives everyone time to prepare.
You can identify what is being transferred, establish the new merchant account, work through underwriting, prepare the POS equipment, move the menu, review integrations and test everything before the new owner takes over.
The more time you have, the fewer surprises you’re likely to encounter.
So, what exactly was sold?
That’s why one of my first questions when I’m told a business has been sold is:
“What exactly was sold?”
Was the existing business entity purchased?
Or were the assets purchased and a new business created?
That distinction can send the merchant-services transition down two very different paths.
And if the POS equipment was included in the sale, that doesn’t mean the new owner automatically takes over the seller’s merchant account.
The equipment, the POS account and the merchant account are three things that need to be considered separately.
With the right planning, however, the transition doesn’t have to mean throwing everything away and starting from scratch.
It can mean preserving what the buyer paid for while properly establishing the new business underneath it.
And preferably, we determine which path we’re taking more than three days before closing. 😂
Buying or selling a restaurant with an existing POS system?
If you’re buying or selling a restaurant and the existing POS equipment is part of the deal, don’t wait until the last few days to figure out what happens next.
The earlier you understand what was purchased and how the new business will be structured, the easier it is to plan the merchant-services and POS transition.
If you’re buying or selling a business with an existing POS system you want to keep in place, contact me and let’s talk through the transition before closing.
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