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Residential Lease Agreement for CaliforniaHouse Rules for Residential Lease When creating a good residential lease agreement you want to make sure to take care of the follow items (at a minimum):RentTerm of Lease (or Month to Month)Subleasing or Assignment ConsentMaintenance ObligationsLandlord obligations and release from certain liabilitiesParking/Storage/PetsNotices & Additional Addendums (Hazardous Waste, Asbestos, Mold)

I have bought and sold many cafes and restaurants and below are the important things that I and others check when buying one. Newbies are generally captivated by the emotional and visual criteria like the décor, the buzz and site's prestige value, whereas the experienced operators start with the not-so-visible things that can impact negatively on the business after settlement.I have listed the criteria that I use from what I consider to be the most important to the least important:Security of tenure: The vast majority of cafes and restaurants operate under a lease of property. This is the fundamental legal right that allows the business to trade, so you need to make sure it's secure. Whether it's an assigned lease or a new one, make sure a property lawyer handles the transaction. Make sure that there is a sufficient lease term for you to recover and profit from your investment and if possible additional time to allow a future purchaser to do the same. In an assigned lease, make sure that there are no outstanding breaches and there are no clauses that can unreasonably restrict your ability to do what you plan to do. Make sure that the business also has legal rights to use public spaces like footpath dining, parking and strata/lease guaranteed access to common areas, storage and toilets.Outstanding legal issues: Your lawyer should conduct a due diligence to uncover any legal issues that may exist against the property that could affect your ability to trade from the site. These may be notices of planned street/footpath changes, district re-development plans, demands to fix issues like kitchen exhaust, trade waste or trading times/activities or may involve heritage laws preventing you from making even minor changes to the property. Legal actions against the previous owner are best mitigated by buying the assets of the business only, rather than buying the underlying trading company. This choice impacts on the lease as well so again, make sure you engage a property lawyer.Profitability: This requires investigation into both the revenue and expenses of the business to establish a 'gut feel' about the profitability. I say 'gut feel' because you aren't going to get a definitive nor guaranteed result in this area. Financial statements or tax returns for cafes/restaurants report results long gone and don't always include all the revenue earned by the business and may include expenses that you won't use (interest on loans, expenses of a personal nature), so they can only give you some guidelines as to potential future profitability.Revenue: Ask as many questions as possible of the seller to help you better establish the metrics that make up the revenue. (i.e. average customer sales, volume of coffee beans used per week, weekly sales, good day's sales Vs bad day's sales, number of customers served per day, total weekly goods purchases, weekly wages expense, product category breakup, customer segment breakup). Take these metrics to a knowledgeable operator or an accountant experienced in this industry and they should be able to estimate the current revenue of the business. Make sure you also conduct a 2 weeks due diligence prior to settlement to verify the revenue claimed by the seller.Expenses: The two big expenses to identify are rent and wages. Rent is identified on the lease agreement. Divide this amount by the revenue for a corresponding period to establish the rent as a % of revenue. In a very busy cafe/restaurant this % could be as high as 18% and should be closer to 8% in slow revenue locations. Ask about the weekly work roster to see the hours worked and the positions filled. Knowing the market hourly pay rates for these positions should help you establish the weekly wages bill. Make sure the working owner/manager's hours are included to establish the true labour costs. Divide this total labour costs by the revenue for a corresponding period to establish the wages as a % of revenue. In a very busy location this could be in the 20-25% bracket and in the 30-35% in the slower owner operator locations.Asking price: First ask the current owner why they are selling. Maybe they know something about the business prospects that you don't or are doing so for personal reasons. Now if the tenure is long and secure, there are no legal impediments and the profitability looks sound, then check that the price asked by the seller reflects the profit potential of the business. As a rule, you should be looking for a minimum of 40% annual return on the asking price without factoring in your wages. So divide the asking price by 2.5 and see if that equates to the annual budgeted profit calculated by your accountant or experienced operator. If it doesn't, then start your negotiations, otherwise proceed.Equipment: Check the current state of all the equipment and ensure that it is in good working order, otherwise negotiate the asking price. Check service records and ask about the age and past problems with equipment. Check the operation of the big-ticket items like the air-conditioning, grease trap and kitchen ventilation system if applicable. Verify the ownership of all equipment (i.e. owned, leased or landlord's). Here you are looking for potential areas of costly repair in the future and to make sure you get what you paid for.Staffing: It may be good business to keep existing staff if they are fundamental to the goodwill of the business. Changing a well established and well liked barista/chef may cause you to lose the very business you paid for in the goodwill. On the other hand, a change in this area may be what is required to restore profitability to the business. You need to engage with the staff as a 'silent customer' in the early days and in face to face discussions as the settlement day approaches to make this important decision.There are plenty of other things that I check, but these are my most important ones. I assume that most other issues have been adequately addressed by the previous owner in getting the business to this stage.Meanwhile, here is a good website by a fellow Aussie, Craig Reid, who provides some worthwhile blogs and templates for people looking to buy a cafe or restaurant The Cafe Ninja: Buying a Cafe. He also sells his guide books (which I haven't read) about buying a cafe or restaurant, but Aussies generally know the secret to a successful coffee shop.

I have a friend whose family owns a business with about fifty employees. A clerk, an office manager, a VP/Owner, and the President/Owner man the main office with regard to that business. On top of that, the President separately owns a chain of mini-warehouses (→ storage units for rent), and in the beginning, he had one more clerk in that office who solely worked on that side business.The bigger business had a great system of controls. Business data was entered into the best version of the premier accounting software; this data was received and analyzed, monthly, by the preeminent accounting firm in our city. For you bookkeeping fans, that means the books were closed and reopened every month, which is a more stringent form of checks and balances than many small businesses would use. For instance, these end-of-period adjustments might happen annually, for income tax purposes; or, quarterly.It’s germane to state that the President was not aloof in this process. He came to work every day and didn’t delegate much decisionmaking to subordinates, despite them having titles like office manager or vice-president.The smaller business — the storage unit business — did not have anything like that level of control built into its administrative and operational structure.The President intervened when new units were constructed and when delinquent renters had the property in their units auctioned off. The clerk or the VP would sign pro forma (template-style) lease agreements, and the clerk received and processed payments. — Here’s the rub.Rather than using QuickBooks, bookkeeping software that makes printing off reports easy based on data that has been entered, and — since it is set up with double-entry bookkeeping in mind — makes fudging transactions more difficult, the President just had the (accounts receivable [A/R]) clerk working in MS Excel.Every month, the spreadsheet would have the name of each tenant and how much each tenant owed. When the tenant came in and paid, the “amount due” cell was zeroed out (→ $0.00), and in printed form, it would serve as a “report” of who had paid and who was delinquent just based on who didn’t have a $0.00 next to his or her unit number.I’m not saying that someone in QuickBooks couldn’t game this system to hide theft of rental income, but it’d be more difficult. Receipt of a payment from a unit tenant should make the bank account, a current asset account, rise in amount and, correspondingly, the amount of rental income, an income account, rise by the same amount.One easily could print out a QuickReport showing how people had paid from month to month, and the likelihood of finding irregularities, in my opinion, would have been very much higher. Why the President didn’t want the clerk to use QuickBooks and instead use a 1990s technology instead, I really don’t know, but it would come back to bite him, big time.The clerk, at some point, began pocketing the cash that renters brought in and depositing only the checks. Probably, this happened over time, lest it be obvious, no matter how you recorded the A/R, that something major had happened.Whether the cash or checks were deposited in the bank, all she had to do to prevent the next month’s statement from showing delinquency (due to her embezzlement) on the renter’s account was to change the number from $X to $0.00 in her Excel spreadsheet. — That kept the renters from knowing what she was doing. Specifically, putting the cash in her purse.This went on for long enough that, by the end, the President and his son did not know exactly how much she’d stolen. They thought, at first, it was around $50,000. But, in the end, it was determined that she’d stolen more than $100,000.A few things were suspicious, maybe, about a change in her lifestyle. She had five children, and pretty soon, most of them had braces. She got a boob job (you can’t make this up). — When suspicions of her theft arose, she quit and falsified a résumé she submitted to a local dentist for employment as his new office manager. Hilariously, she got the job, but the President and his wife found out just in time to give the dentist a call.Her first ten minutes or so were her only ten minutes or so as the office manager of that dental office. The dentist took her aside and fired her upon arriving for her first shift.Due to the shabby way the President had her keeping the books for that business, it was difficult to determine what actually she’d done. As you can imagine, that made it difficult for the local district attorney to charge her with a crime, because it was unclear what crime she’d committed. They couldn’t (like with some forensic accountant’s unqualified opinion) accuse her of stealing $$$,$$$.$$. At least, not at first.Because she had embezzled so much money, she was able to retain a felony criminal attorney, who had, in the past, been the misdemeanor criminal/not-yet-district-court civil/family court judge for the county. — That meant she was able to prolong the presentation to the grand jury and, after that, and after she was formally arraigned, to negotiate a plea while her case was dropped from the docket due to continuous continuance requests.In Texas (and, in business, I know this personally, as I’ve had to file felony charges against people before), you want a plea deal to be struck, because you have, basically, and at least in this county, two options: (1) send the people to prison; you get no restitution; or, (2) the person/people get(s) probation and you get enforceable restitution.If you don’t get the court to order restitution (or the DA to request it per these rules), then your only other remedy is a civil lawsuit; and, in Texas, the law is heavily weighted in favor of debtors. Even criminally liable ones. — If you are single, you’re allowed to have one house, one car, and something akin to enough money to live on and survive on, which is a vague aspect of the statute, and probably is somewhere around $5,000 cash. If the single person has more assets than this, then you may be able to get a court to order the sheriff to seize them for you. Maybe.If the person is married, then it goes to two houses, two cars, and <blah blah blah about money> ~= $10,000+, which I assume is an amount a judge determines. Having five school-age kids with braces makes me think the number would be much higher.Needless to say, you want the person to get on felony probation; comply with that probation for the term set out; and, to pay you restitution until you are made whole again. In this case, that is — if you can determine, or otherwise agree upon an amount with the alleged party and her ex-judge attorney.After three years, she took a plea offer and agreed to reimburse, in the form of restitution, over $100,000 to her ex-employer, representing funds that she embezzled from a side business of the President of a relatively small corporation.Thankfully, she took that course, because — keeping it on the criminal docket — the state’s attorney represented the victim (i.e., there were no costs of prosecution due from the victims).That would have been very different had this gone to court in the local district court. Then, the people already out $100,000 would have had to retain their own attorney, because — since this lady had already retained an attorney, I would not consider this to be something about which you could represent yourself while still running multiple businesses).A wonderful end-of-case scenario: You lose your case. She has countersued and loses. The judge issues a take-nothing judgment and makes both parties responsible for his or her own attorneys’ fees, meaning you’re now out, at least, another $30,000.