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Opening new premises: The need for due diligence in uncertain times

Following a number of high profile closures in the restaurant and retail sectors, it is very likely that more sites will find their way onto the market in 2018 and beyond. 

With an increased number of sites available, there is an opportunity for new brands to move in or for existing brands to expand their current portfolio. However, it is very much a case of "buyer beware" – businesses must do their due diligence and make sure the venue is right for them and that they understand what they're taking on, so that the move works out in the long run. 

Licensing is one of the first considerations when assessing a potential site. The first thing to ascertain is whether the site already has a premises licence and what this says. It is also worth looking at the planning permission early on too. Caution needs to be exercised where the previous licence holder has become insolvent. The Licensing Act 2003 has strict rules about what happens to premises licences in the case of insolvency and if things haven’t been done correctly, the new occupier could inadvertently buy unlicensed premises with potentially limited prospects of obtaining as generous a licence in the future. 

If the site does benefit from a licence, consider whether there are any restrictions that would hamper the proposed use and if there are, what needs changing.

Businesses should also consider the site’s location in the context of the local licensing policy. Every licensing authority in England & Wales has one and it governs the decision-making process with regards to new licences and variations to existing permissions. Some authorities have areas where they say the impact of licensed premises is such that they don’t intend to grant further licences or certain types of licence. These policies are not absolute, but sites in these areas should be approached with significantly more caution and a preparedness to go all the way to a fully contested hearing, and possibly to the magistrates' court on appeal. 

The local licensing policy may also give clues about the types of applications that are welcomed in a certain area. Any businesses embarking on something “different” like the emerging "competitive socialising" market should speak to (at least) the licensing officer, the environmental health officer and the police to discuss the concept and proposals before submitting an application. They are valuable sources of information as to how things work in practice and whether there’s anything in particular to look out for.

If a business is already in negotiations, it’s important to consider “what if” scenarios like licensing and planning early on, and to try to build those into any agreements. 

With more sites likely to become available in the coming months, there are certainly rewards out there for those that are prepared to do their homework.

This article first appeared in The Caterer. 

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at June 2018. Specific advice should be sought for specific cases. For more information see our terms & conditions.

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