A practical LOI framework built for food service B2B acquisitions — covering purchase price, client retention earnouts, contract assignment, and key employee provisions specific to corporate catering deals.
A Letter of Intent (LOI) is the foundational document that frames your acquisition of a corporate catering company before a formal purchase agreement is drafted. In catering transactions, the LOI must go beyond standard price and structure terms to address the deal's most critical risks: client contract assignability, owner dependency on key accounts, key employee retention, and the potential for earnout provisions tied to post-close client retention metrics. Corporate catering businesses are valued primarily on the durability of their recurring client base, so your LOI should clearly define how that value is measured and protected. A well-structured LOI signals to the seller that you understand the business, establishes negotiating anchors before attorneys engage, and accelerates the due diligence process by surfacing critical issues early. This template is designed for asset purchases or stock purchases of corporate catering companies generating $1M–$5M in annual revenue, using SBA 7(a) financing, seller notes, or earnout structures common in lower middle market food service transactions.
Find Corporate Catering Company Businesses to AcquireParties and Transaction Overview
Identifies the buyer entity, seller entity, and the legal structure of the proposed transaction — asset purchase or stock purchase. For most corporate catering acquisitions, an asset purchase is preferred to avoid inheriting unknown liabilities such as prior health code violations, vendor disputes, or employment claims.
Example Language
This Letter of Intent is entered into as of [Date] between [Buyer Name or Entity] ('Buyer') and [Seller Name or Entity] ('Seller'), the owner of [Business Legal Name] ('the Company'), a corporate catering business located at [Address]. Buyer proposes to acquire substantially all of the assets of the Company, including but not limited to client contracts, equipment, vehicle fleet, proprietary recipes, trade names, catering software licenses, and goodwill, in an asset purchase transaction. Stock purchase structure may be considered subject to review of corporate liabilities during due diligence.
💡 Sellers of corporate catering businesses often prefer a stock sale for tax treatment purposes. Buyers typically push for an asset purchase to avoid inheriting prior liabilities including health department violations, wage claims, or vendor disputes. If the seller insists on a stock sale, ensure representations and warranties are robust and consider an escrow holdback to cover unknown pre-close liabilities.
Purchase Price and Valuation Basis
States the proposed purchase price, the valuation methodology used (typically a multiple of Seller's Discretionary Earnings or EBITDA), and how the price was derived from the seller's financial disclosures. Corporate catering companies in the lower middle market typically trade at 2.5x–4.5x EBITDA depending on client diversification, contract durability, and management depth.
Example Language
Buyer proposes a total purchase price of $[Amount] ('Purchase Price'), representing approximately [X.Xx] times the Company's trailing twelve-month EBITDA of $[Amount] as represented by Seller in the Confidential Information Memorandum dated [Date]. The Purchase Price reflects the Company's diversified corporate client roster, multi-year contract base, and demonstrated gross margins of [X]%. The final Purchase Price is subject to adjustment following completion of financial, operational, and client contract due diligence, and may be revised based on findings material to the Company's recurring revenue profile or client concentration.
💡 Anchor the multiple to documented, verified EBITDA — not seller-represented add-backs that haven't been substantiated. If the seller is claiming add-backs for owner compensation, vehicle expenses, or discretionary items, confirm these are clearly itemized before agreeing to a price. A downward price adjustment mechanism tied to due diligence findings on client concentration or contract terms is essential in catering deals where client lists drive the majority of value.
Transaction Structure and Financing
Outlines how the deal will be financed, including SBA 7(a) loan proceeds, buyer equity, seller note, and any earnout component. Most lower middle market catering acquisitions use a combination of SBA financing, a seller note to bridge any valuation gap, and an earnout tied to client retention metrics.
Example Language
The proposed transaction will be structured as follows: (i) SBA 7(a) loan proceeds of approximately $[Amount], representing [X]% of the Purchase Price; (ii) Buyer equity contribution of $[Amount], representing approximately 10–15% of the Purchase Price; (iii) Seller promissory note of $[Amount], representing [X]% of the Purchase Price, to be paid over [24–36] months at [X]% interest, subordinated to the SBA lender per SBA standby requirements; and (iv) an earnout of up to $[Amount] payable over [12–24] months contingent on client retention and revenue performance as described in Section [X]. Total consideration at close will be $[Amount] with the balance contingent on post-close performance.
💡 SBA lenders will require the seller note to be on full standby for the duration of the SBA loan, meaning the seller may not receive payments on their note for up to 24 months post-close. Sellers are often surprised by this requirement — address it early to avoid deal delays. The earnout component is particularly important in catering deals where a significant portion of value is tied to whether key corporate accounts renew post-acquisition. Size the earnout to reflect realistic retention risk, typically 10–20% of total deal value.
Earnout Provisions and Client Retention Metrics
Defines the earnout structure, including the baseline client revenue used for measurement, the retention thresholds that trigger payments, the measurement period, and the payment schedule. This section is often the most heavily negotiated in corporate catering acquisitions given the client relationship dependency risk.
Example Language
Buyer agrees to pay Seller an earnout of up to $[Amount] based on the following client retention metrics measured over the [12] months following the closing date ('Earnout Period'): (i) If annualized revenue from clients transferred at close ('Transferred Client Revenue') equals or exceeds [90]% of the trailing twelve-month baseline of $[Amount], Seller shall receive the full earnout of $[Amount]; (ii) If Transferred Client Revenue is between [80]% and [90]% of baseline, Seller shall receive a pro-rated earnout calculated on a straight-line basis; (iii) If Transferred Client Revenue falls below [80]% of baseline, no earnout shall be payable. Transferred Client Revenue shall be measured on a cash-collected basis. Seller's eligibility for the earnout is conditioned on Seller's full cooperation during the transition period and compliance with non-compete and non-solicitation obligations.
💡 Sellers will push for earnouts measured on total revenue including new clients added post-close. Buyers should insist that earnouts measure only retained transferred clients, not new business the buyer generates. Define 'client loss' clearly — does it include clients who reduce order volume but remain active? Establish a floor threshold below which the client is deemed lost for earnout calculation purposes. Also clarify what happens if Buyer loses a client due to Buyer's own operational failures versus client-initiated departures.
Client Contract Assignment and Consent
Addresses the assignability of existing corporate catering contracts, the process for obtaining client consent where required, and the conditions under which the deal may be adjusted or terminated if material contracts cannot be assigned.
Example Language
Seller represents that the Company holds active catering service agreements with the clients listed in Exhibit A ('Client Roster'), generating aggregate annual revenue of approximately $[Amount]. Seller shall use commercially reasonable efforts to obtain written consent from all clients whose contracts require assignment consent prior to or concurrent with closing. In the event that clients representing more than [20]% of trailing twelve-month revenue have not provided written consent to assignment by the closing date, Buyer reserves the right to (i) extend the closing date by up to [30] days to obtain such consents, (ii) reduce the Purchase Price by a mutually agreed amount reflecting the lost revenue, or (iii) terminate this Letter of Intent without liability. Seller shall not contact clients regarding the pending sale without Buyer's prior written approval.
💡 Many corporate catering contracts contain change-of-control or assignment clauses that require client consent. Identify these contracts in due diligence as early as possible — some institutional clients (hospitals, law firms, large corporations) may have lengthy internal approval processes. Build a consent timeline into your LOI and closing schedule. The 20% revenue threshold for triggering purchase price adjustments is a common starting point; adjust based on the actual concentration of the client roster.
Key Employee Retention and Transition
Addresses the retention of critical personnel including executive chefs, catering managers, and account managers, and outlines the seller's obligations during a defined transition period. In corporate catering, key employees often carry direct client relationships that represent significant business value.
Example Language
Buyer's obligation to close is conditioned on the execution of employment or consulting agreements, in forms acceptable to Buyer, with the following key personnel: (i) [Head Chef / Culinary Director Name], on terms to be negotiated prior to closing; (ii) [Catering Operations Manager Name], on terms to be negotiated prior to closing; and (iii) [Senior Account Manager Name], on terms to be negotiated prior to closing. Seller agrees to remain available to Buyer for a transition period of [90–180] days post-close in a consulting capacity at a rate of $[Amount] per month, focused on client introductions, account relationship transfers, and operational knowledge transfer. Seller's consulting agreement will include non-compete and non-solicitation provisions with a geographic radius of [X] miles and a term of [24–36] months.
💡 Executive chefs and account managers in corporate catering often have direct relationships with the HR directors, office managers, and facilities teams at client companies. If these employees leave post-close, clients may follow. Consider retention bonuses funded at close and paid to key employees over 12–24 months contingent on continued employment. For the seller's transition period, ensure the consulting agreement has clear deliverables around client introductions rather than vague 'availability' commitments.
Due Diligence Period and Access
Defines the due diligence period, the scope of information Buyer will review, and the access Seller will provide to financial records, client contracts, facility inspections, and key employee interviews. Corporate catering due diligence has unique requirements around health compliance, food cost records, and client contract review.
Example Language
Buyer shall have [45–60] calendar days from the date of Seller's execution of this Letter of Intent ('Due Diligence Period') to conduct financial, operational, legal, and commercial due diligence. Seller shall provide Buyer with access to: (i) three years of federal tax returns, profit and loss statements, and balance sheets; (ii) all active client contracts, pricing agreements, and renewal correspondence; (iii) food cost records, supplier invoices, and gross margin analysis by client and service type; (iv) health department inspection reports and compliance history for the past three years; (v) employee records, compensation schedules, and benefit plan documents; (vi) commercial kitchen lease, equipment maintenance logs, and vehicle fleet titles and registrations; and (vii) catering management software data including order history, client frequency, and seasonal revenue patterns. Buyer and its advisors shall have the right to conduct a physical inspection of the commercial kitchen and storage facilities at a mutually agreeable time.
💡 Sellers are often reluctant to share client lists or allow buyer contact with clients before signing a definitive purchase agreement. Structure client due diligence carefully — request anonymized revenue data by client tier first, then seek identified client details under a strict NDA with a clear protocol for any buyer-client contact. Health department inspection history is non-negotiable due diligence for any catering acquisition and should be reviewed before finalizing price.
Exclusivity and No-Shop Provision
Establishes the exclusivity period during which the seller agrees not to solicit, negotiate, or accept offers from other potential buyers while the buyer conducts due diligence and arranges financing.
Example Language
In consideration of Buyer's commitment of time and resources to due diligence and financing, Seller agrees that from the date of execution of this Letter of Intent through the end of the Due Diligence Period, and for an additional [30] days thereafter if Buyer has delivered a draft purchase agreement ('Exclusivity Period'), Seller shall not directly or indirectly solicit, encourage, negotiate, or accept any offer or inquiry from any third party relating to the sale, merger, recapitalization, or other disposition of the Company or its assets. Seller shall promptly notify Buyer in writing if Seller receives any unsolicited third-party inquiry during the Exclusivity Period.
💡 For corporate catering acquisitions requiring SBA financing, request a minimum 60-day exclusivity period to accommodate bank underwriting timelines, which typically run 30–45 days for SBA 7(a) loans. Sellers may push back on long exclusivity windows — offer to accelerate due diligence milestones in exchange for the seller's agreement to a longer period. A mutual termination right with clear notice requirements protects both parties if the deal cannot proceed.
Conditions to Closing
Lists the material conditions that must be satisfied before the buyer is obligated to proceed to closing, including financing approval, satisfactory due diligence, third-party consents, and regulatory clearances.
Example Language
Buyer's obligation to consummate the transaction is conditioned upon the following: (i) Buyer's receipt of SBA 7(a) loan approval and commitment letter on terms acceptable to Buyer; (ii) completion of due diligence to Buyer's reasonable satisfaction, including verification of client contract terms, financial representations, and compliance history; (iii) execution of assignment consents from clients representing at least [80]% of trailing twelve-month revenue; (iv) execution of employment or consulting agreements with key personnel identified in Section [X]; (v) transfer or reissuance of all required health permits, food handler licenses, and business licenses in Buyer's name; (vi) no material adverse change in the Company's business, client roster, financial condition, or key personnel between the date of this LOI and closing; and (vii) execution of a Seller transition consulting agreement and non-compete agreement on terms acceptable to Buyer.
💡 The material adverse change (MAC) clause is particularly important in catering businesses, where the loss of even one or two large corporate accounts between LOI signing and closing can materially impact value. Define 'material adverse change' to include loss of any single client representing more than [10–15]% of revenue, departure of key kitchen or management staff, or any health department action or violation occurring between LOI and close.
Confidentiality and Non-Disclosure
Confirms that both parties are bound by confidentiality obligations regarding the transaction and the information exchanged during due diligence, typically governed by a separately executed NDA that predates the LOI.
Example Language
Both parties acknowledge that the terms of this Letter of Intent and all information exchanged in connection with the proposed transaction, including but not limited to client lists, financial records, employee information, and proprietary recipes and menus, are strictly confidential. Both parties agree to be bound by the terms of the Mutual Non-Disclosure Agreement executed between the parties on [Date], which is incorporated herein by reference. Neither party shall disclose the existence or terms of this Letter of Intent to employees, clients, suppliers, or competitors without the prior written consent of the other party, except as required by law or as necessary to obtain financing or legal counsel.
💡 In catering businesses, confidentiality is particularly sensitive because clients, employees, and suppliers may react negatively to news of a pending sale. Employees may seek new employment, and corporate clients may begin evaluating alternative catering providers if word of a sale leaks prematurely. Limit knowledge of the transaction to essential advisors only and consider a coordinated communication plan for employees and clients to be executed at or immediately following closing.
Binding and Non-Binding Provisions
Clearly delineates which provisions of the LOI are legally binding and which are non-binding expressions of intent, consistent with standard M&A practice.
Example Language
This Letter of Intent is intended to summarize the principal terms of a proposed transaction and does not constitute a legally binding agreement to purchase or sell the Company, except that the following provisions shall be legally binding upon the parties: (i) the Exclusivity and No-Shop provisions in Section [X]; (ii) the Confidentiality provisions in Section [X]; and (iii) the governing law, jurisdiction, and dispute resolution provisions set forth herein. All other provisions of this Letter of Intent, including Purchase Price, transaction structure, earnout terms, and conditions to closing, are non-binding expressions of intent subject to the negotiation and execution of a definitive Purchase Agreement. Either party may terminate discussions at any time prior to execution of a definitive agreement without liability, except with respect to the binding provisions stated above.
💡 Ensure the binding provisions — exclusivity, confidentiality, and governing law — are clearly separated from the non-binding commercial terms. Courts have occasionally found LOIs to be binding contracts where language was ambiguous. Use explicit non-binding disclaimers throughout commercial term sections and have legal counsel review the final LOI before execution.
Client Retention Earnout Threshold and Measurement Period
The earnout retention threshold determines how much of the post-close client attrition risk is borne by the seller versus the buyer. Sellers want a low threshold (e.g., 70% retention triggers full earnout payment) while buyers want a high threshold (90%+) to ensure the client base they paid for actually transfers. Negotiate both the threshold and the measurement period — a 12-month earnout period is standard, but buyers may push for 18–24 months in businesses with longer corporate contract cycles. Ensure the baseline revenue figure is clearly defined and agreed upon before signing.
Seller Non-Compete Geographic Scope and Duration
Non-compete terms are critical in corporate catering acquisitions because seller relationships with corporate clients are a core component of business value. A seller who starts a new catering operation or consults for a competitor immediately after closing can directly cannibalize the acquired client base. Negotiate a non-compete radius that covers the seller's active service territory and a duration of at least 24–36 months. Include non-solicitation of both clients and employees in the same provision.
Transition Consulting Period Length and Deliverables
The seller's post-close transition period is essential for transferring client relationships, institutional knowledge of proprietary menus and kitchen operations, and supplier relationships. A 90-day transition is often insufficient for corporate catering businesses where account relationships are personal. Push for 180 days of structured consulting with specific deliverables — client introduction meetings, chef and manager training handoffs, and supplier contract transitions — rather than vague availability commitments.
Health Permit and License Transfer Conditions
Commercial kitchen operating permits, food service licenses, and health department certifications are often issued to specific legal entities and must be transferred, reissued, or reapplied for in the buyer's name. Some jurisdictions require a new health inspection before a license transfer is approved. Identify all required permits and licenses in due diligence, confirm transfer timelines with the relevant agencies, and make license transfer a closing condition to avoid operating a business without required authorizations.
Client Contract Assignment Consent Process and Deal Impact
Corporate catering contracts with large institutional clients — hospitals, law firms, financial services firms, universities — frequently contain assignment restrictions that require client consent to a change of ownership. Negotiate a clear process in the LOI for how and when client consents will be sought, who will make contact (seller, buyer, or both jointly), and what the financial impact will be if consents are not obtained. Define the revenue threshold below which the deal adjusts versus terminates, and build in adequate time for institutional consent processes that can take 30–60 days.
Find Corporate Catering Company Businesses to Acquire
Enough information to write a strong LOI on day one — free to join.
Corporate catering companies in the lower middle market typically trade at 2.5x to 4.5x EBITDA, with the specific multiple driven by client diversification, contract durability, management depth, and gross margin consistency. A business with a diversified roster of multi-year corporate contracts, 30%+ gross margins, and an experienced management team that operates independently of the owner will command multiples at the higher end of that range. A business with heavy owner dependency, client concentration above 25% in a single account, or inconsistent financial records will trade closer to 2.5x. For SBA-financed deals, the purchase price typically needs to be supportable by the business's cash flow after debt service, which acts as a practical ceiling on valuation regardless of comparable multiples.
Most buyers of corporate catering companies prefer an asset purchase structure to avoid inheriting unknown pre-close liabilities, including prior health code violations, employment disputes, unpaid vendor invoices, or tax obligations. An asset purchase allows the buyer to select which assets and contracts to acquire and leaves residual liabilities with the seller's entity. However, if the catering business holds licenses or permits that are easier to transfer in a stock purchase — or if the seller has a meaningful tax preference for a stock sale — a stock purchase with robust representations, warranties, and an escrow holdback may be worth considering. In either structure, verify client contract assignability requirements carefully, as assignment provisions can differ based on whether the transaction is structured as an asset sale or a change of control.
Earnouts in corporate catering acquisitions are most commonly tied to client retention metrics measured over the 12–24 months following close, reflecting the reality that the primary value driver is the recurring corporate client base. A well-structured earnout defines a specific baseline revenue figure from transferred clients, sets a retention threshold above which the full earnout is earned (typically 85–90% of baseline), and includes a pro-rata payment scale for partial retention. Earnout payments should be measured on cash-collected revenue from transferred clients only — not new accounts the buyer generates post-close. The earnout should also be conditioned on the seller's compliance with transition consulting and non-compete obligations, since a seller who violates a non-compete has effectively undermined the client retention the earnout was designed to measure.
The most critical due diligence areas for a corporate catering acquisition are: (1) Client contract review — verify assignability, renewal terms, pricing provisions, and termination rights for all top-10 accounts; (2) Client concentration analysis — confirm no single client exceeds 20–25% of revenue and assess renewal probability based on contract history; (3) Health department compliance history — review inspection reports for the past three years and confirm all licenses are current and transferable; (4) Food cost and gross margin analysis — review monthly food cost as a percentage of revenue for at least 24 months to identify volatility and assess margin sustainability; and (5) Key employee retention risk — assess whether chefs, managers, and account managers are willing to stay post-close and what retention incentives may be needed. Skipping any of these areas can result in paying for revenue that does not survive the ownership transition.
A corporate catering acquisition using SBA 7(a) financing typically takes 60–120 days from LOI signing to close, with the timeline driven primarily by SBA lender underwriting (30–45 days after a complete package is submitted), client contract consent processes, and the time required to transfer or reissue health permits and food service licenses. Deals involving commercial kitchen lease assignments or vehicle fleet title transfers may add additional time. Build a 90-day exclusivity period into your LOI to accommodate SBA underwriting timelines, and use the exclusivity period proactively to advance client consent and licensing transfer processes in parallel with financing, rather than sequentially, to avoid timeline compression near closing.
More Corporate Catering Company Guides
More LOI Templates
Get enough diligence data to write a confident LOI from day one.
Create your free accountNo credit card required
For Buyers
For Sellers