Letter of Intent Template & Guide for Acquiring a Breakfast & Brunch Cafe

Parties and Business Identification

Clearly identify the buyer (individual or entity), the seller, the legal business name, and the specific operating location or locations being acquired. For breakfast and brunch cafe acquisitions, confirm whether the deal includes the entity (stock/membership interest sale) or just the assets, as this affects lease assignment, licensing transfers, and liability exposure.

💡 Most breakfast and brunch cafe sellers prefer asset sales to limit ongoing liability, while buyers also typically favor this structure to avoid inheriting unknown liabilities. If the lease is held in the business entity's name, discuss early with the landlord whether an asset sale triggers a new assignment requirement or whether an entity sale preserves the existing lease terms — this can significantly affect deal structure preference.

Purchase Price and Valuation Basis

State the proposed purchase price, the valuation methodology used (typically a multiple of SDE for breakfast cafes), and any allocation between goodwill, equipment, inventory, and leasehold improvements. Breakfast and brunch cafes typically trade at 2.0x–3.5x SDE depending on revenue trajectory, lease quality, and owner dependency.

💡 Push the seller to provide a preliminary SDE calculation with add-backs clearly itemized before signing the LOI. For brunch cafes where owner salaries, personal vehicle expenses, and owner meals are common add-backs, verify each one against actual bank statements. If the seller's SDE includes significant discretionary add-backs above $50K, build in a due diligence contingency that allows price renegotiation if verified SDE differs materially from represented SDE.

Deal Structure and Financing Contingency

Outline how the purchase will be financed, including any SBA loan contingency, seller note, or earnest money structure. SBA 7(a) financing is the most common capital source for breakfast and brunch cafe acquisitions and typically requires the buyer to inject 10–15% equity with the seller potentially carrying a standby note for a portion of the gap.

💡 SBA lenders will heavily scrutinize revenue documentation for cash-intensive breakfast operations. Build the financing contingency window to at least 45–60 days to allow time for POS reconciliation and lender underwriting. If the seller is unwilling to provide POS data access during the contingency period, treat this as a significant red flag. Seller financing of 10–20% can meaningfully improve deal economics and signals seller confidence in the transition.

Earnest Money Deposit

Specify the earnest money amount, where it will be held, the conditions under which it becomes non-refundable, and the circumstances under which it is refundable to the buyer. For breakfast and brunch cafe acquisitions, earnest money typically ranges from $10,000–$50,000 depending on deal size.

💡 Sellers in competitive markets or with multiple interested buyers will push for a larger non-refundable deposit and a shorter refundability window. Buyers should resist making any portion non-refundable until after at least a preliminary review of POS data, the lease, and the most recent health inspection records. Structure the non-refundable trigger to coincide with your genuine go/no-go decision point, not an arbitrary calendar date.

Due Diligence Period and Access

Define the length of the due diligence period, what records and access the seller must provide, and the conditions of that access. For breakfast and brunch cafes, due diligence must include POS system review, health department inspection history, lease and landlord communication, staff interviews (with seller permission), equipment inspection, and supplier contract review.

💡 The POS reconciliation against tax returns and bank statements is the single most critical due diligence task for any breakfast or brunch cafe acquisition. Build in a provision allowing Buyer to engage an independent accountant to conduct this reconciliation at Buyer's expense. If the seller has not used a POS system consistently or cannot provide clean monthly data, this is a material risk that should be reflected in either price or deal structure. For lease review, engage your attorney to confirm the assignment clause is operative and identify any landlord approval requirements early.

Lease Assignment Contingency

Make the transaction explicitly contingent on successful lease assignment or a new lease agreement on acceptable terms. The lease is often the single most valuable asset in a breakfast and brunch cafe acquisition, particularly in high-traffic, high-visibility neighborhood locations.

💡 Do not proceed past LOI stage without confirming the lease contains an assignment clause and identifying the landlord's likely posture toward a new operator. Some breakfast cafe locations derive their value almost entirely from the lease — losing the space would eliminate the business's goodwill overnight. If the landlord requires a personal guarantee from Buyer, negotiate for a burn-down provision that limits the guarantee exposure over time. If the lease has less than 3 years remaining with no option, consider walking away or repricing the deal significantly.

Non-Compete and Non-Solicitation

Define the geographic scope, duration, and activities restricted under the seller's non-compete covenant. For breakfast and brunch cafes, the non-compete should prevent the seller from opening or operating a competing morning dining concept within a defined radius and time period.

💡 In breakfast and brunch cafe acquisitions, personal goodwill is often significant — regulars may follow the original owner if they open nearby. Push for the longest enforceable non-compete term permitted in the applicable state (typically 3–5 years) and a meaningful geographic radius that covers the cafe's realistic trade area. Courts in some states scrutinize overly broad non-competes; work with local counsel to ensure enforceability. If the seller plans to retire or relocate, longer terms are typically easier to negotiate.

Seller Transition and Training

Specify the seller's obligation to remain involved post-closing for training and transition support, including the duration, compensation (if any), and scope of responsibilities. Breakfast and brunch cafe operations often have strong owner personality dependency that requires a structured handoff.

💡 For breakfast and brunch cafes where the owner is well-known in the community and personally greets regulars, a longer and more structured transition is critical. Consider requiring the seller to personally introduce Buyer to the top 20–30 regulars and any catering clients during the transition period. Sellers who resist meaningful transition commitments may be signaling that the business is more owner-dependent than disclosed — address this risk in the purchase price or deal structure.

Exclusivity and No-Shop Period

Establish an exclusivity period during which the seller agrees not to solicit or entertain offers from other buyers, giving Buyer time to complete due diligence and negotiate final transaction documents without competition.

💡 A 60–90 day exclusivity window is standard for breakfast and brunch cafe deals of this size and complexity, accounting for SBA underwriting timelines, lease negotiation with the landlord, and full due diligence. Sellers who resist a meaningful exclusivity period may be running a competitive auction process — understand this dynamic before committing significant time and due diligence expense. If a shorter exclusivity period is non-negotiable, prioritize lease and POS review in the first two weeks to identify deal-breakers early.

Representations and Warranties

Outline the key representations the seller is making about the business, including financial accuracy, licensing compliance, staff disclosures, and the absence of material undisclosed liabilities. These representations form the foundation for post-closing remedies if material misrepresentations are discovered.

💡 For breakfast and brunch cafes with significant cash transaction volume, the financial accuracy representation is particularly important. Consider adding a specific representation that the seller has not excluded any revenue from POS records or tax filings. Health department compliance is non-negotiable — require the seller to disclose all inspection reports from the past 3 years and any corrective actions taken. Misrepresentation of staff tenure or key employee willingness to remain post-sale is a common issue in cafe acquisitions; consider adding a specific representation about disclosed employment arrangements.