A practical, deal-ready LOI framework built for independent deli, sub shop, and QSR sandwich concept acquisitions — covering purchase price, lease contingencies, SBA financing, and food cost normalization.
A Letter of Intent (LOI) is the foundational document in any sandwich shop acquisition. It signals serious buyer intent, establishes the key commercial terms, and creates an agreed framework before attorneys draft the formal Asset Purchase Agreement. For sandwich shop deals in the $500K–$3M revenue range, the LOI must address several industry-specific realities: lease assignment approval from the landlord is often the single biggest deal-killer, SBA 7(a) financing requires a lender-approved valuation and seller note subordination, and EBITDA normalization through owner add-backs must be agreed upon before a purchase price is locked in. Unlike software or service businesses, sandwich shops carry tangible risks in food cost volatility, health inspection history, and key-person dependency — all of which should be reflected in your LOI contingencies and due diligence period. This template and guide walks buyers and sellers through every section of a sandwich shop LOI, with example language, negotiation notes, and common mistakes to avoid.
Find Sandwich Shop Businesses to AcquireBuyer and Seller Identification
Clearly identify the legal names of both parties. Buyers using an SBA loan will typically form a new entity (LLC or S-Corp) prior to closing, so the LOI should reference the buyer's intended acquisition entity or a nominee clause allowing assignment to a newly formed entity.
Example Language
This Letter of Intent is submitted by [Buyer Name], an individual or entity to be formed ('Buyer'), and [Seller Legal Name], owner of [Business DBA Name] located at [Address] ('Seller'). Buyer intends to acquire the business assets of [DBA] through a newly formed entity prior to closing.
💡 Sellers should confirm the buyer has provided proof of funds or a pre-qualification letter from an SBA lender before signing the LOI. Buyers should resist pressure to identify the final acquisition entity until an SBA lender is confirmed, as lender requirements may dictate entity structure.
Purchase Price and Valuation Basis
State the proposed purchase price, the valuation methodology used (typically a multiple of Seller's Discretionary Earnings or EBITDA), and whether the price is contingent on financial verification. Sandwich shops in the lower middle market typically trade at 2x–3.5x SDE, depending on lease quality, revenue trend, and owner dependency.
Example Language
Buyer proposes a total purchase price of $[Amount], representing approximately [X]x Seller's Discretionary Earnings of $[SDE Amount] as represented by Seller for the trailing twelve months ended [Date]. This purchase price is subject to verification of financial statements, tax returns, and POS transaction data during the due diligence period. Any material variance greater than 10% in verified SDE will entitle Buyer to renegotiate the purchase price.
💡 Sellers should present a clean add-back schedule prior to LOI execution to anchor the SDE figure. Buyers should insist on a price adjustment clause tied to verified SDE — it is common for sandwich shop owner add-backs to include personal vehicle expenses, family payroll, and non-recurring repairs that may not hold up to scrutiny. A 2x–2.5x multiple is appropriate for shops with high owner dependency or short lease terms; 3x–3.5x is justified for shops with documented SOPs, stable staff, and a lease with 5+ years remaining.
Asset vs. Stock Purchase Structure
Define whether the transaction is structured as an asset purchase or a stock purchase. The vast majority of sandwich shop acquisitions are structured as asset purchases, allowing the buyer to exclude unknown liabilities and receive a stepped-up tax basis on equipment and leasehold improvements.
Example Language
The proposed transaction shall be structured as an Asset Purchase, in which Buyer acquires all tangible and intangible assets of the Business, including but not limited to kitchen equipment, POS systems, furniture and fixtures, leasehold improvements, inventory at cost as of closing, trade name, recipes, supplier relationships, catering client lists, and all assignable contracts. Buyer shall not assume any liabilities of Seller unless explicitly listed in the Asset Purchase Agreement.
💡 Sellers may prefer a stock sale for tax efficiency, but buyers using SBA financing almost always require an asset purchase structure. Clarify early which assets are included — specifically whether the sandwich shop name, proprietary recipes, and any catering contracts transfer. Exclude Seller's personal vehicle, any real estate held in a separate entity, and pre-closing accounts payable from the asset schedule.
Included and Excluded Assets
Enumerate the specific assets included in the sale to avoid disputes at closing. For sandwich shops, this includes all kitchen equipment, smallwares, POS hardware and software, delivery vehicle (if any), trade name, phone number, website, social media accounts, and existing inventory.
Example Language
Assets included in the purchase price shall include: all kitchen equipment and smallwares as listed in Exhibit A, POS system and historical sales data, leasehold improvements, business name and DBA, phone numbers, website domain and social media accounts, existing supplier accounts and pricing agreements (subject to supplier consent), catering customer list, and inventory at Seller's landed cost as of the closing date (estimated at $[Amount]). Excluded assets include: Seller's personal vehicle, cash in registers and bank accounts as of closing, and any real estate not subject to the operating lease.
💡 Buyers should request a full equipment list with age and condition before executing the LOI. Outdated or failing kitchen equipment — walk-in coolers, commercial slicers, bread ovens — can represent $20K–$80K in near-term capital expenditure that should either reduce the purchase price or be repaired by Seller before closing. Social media accounts and Google Business Profile ownership are frequently overlooked and should be explicitly named.
Earnest Money Deposit
Define the amount of the good faith deposit, where it will be held, and under what conditions it is refundable. This deposit signals buyer seriousness and compensates the seller for taking the business off the market during due diligence.
Example Language
Upon execution of this LOI by both parties, Buyer shall deposit $[Amount, typically $10,000–$25,000] into escrow with [Escrow Agent or Attorney]. The deposit shall be fully refundable if Buyer terminates this LOI in writing during the due diligence period for any reason. The deposit shall become non-refundable upon Buyer's written waiver of all contingencies or expiration of the due diligence period without termination, and shall be applied to the purchase price at closing.
💡 For sandwich shop deals under $750K, a $10,000 deposit is standard. For deals between $750K and $2M, expect $15,000–$25,000. Sellers should resist allowing buyers to make the deposit non-refundable too early — tie the non-refundability trigger to contingency waiver, not the passage of time. Buyers should confirm that their SBA lender's timeline is compatible with the due diligence window before the deposit goes hard.
Due Diligence Period and Scope
Establish the length of the due diligence period and the categories of information the seller must provide. For sandwich shop acquisitions, due diligence should cover financials, lease, health inspections, equipment, food cost analysis, and staff structure.
Example Language
Buyer shall have [30–45] calendar days from the date of full LOI execution ('Due Diligence Period') to review and verify all aspects of the Business. Seller shall provide within five (5) business days of LOI execution: (i) three years of federal tax returns and monthly P&L statements; (ii) current lease and all amendments; (iii) last 24 months of POS sales data including transaction counts and daypart breakdowns; (iv) food cost reports and current supplier contracts and pricing; (v) last three health department inspection reports; (vi) complete equipment list with age and maintenance records; (vii) all employee records including roles, pay rates, and tenure; (viii) any outstanding liens, litigation, or code violations.
💡 Sandwich shop sellers should have all documents organized in a virtual data room before LOI execution to prevent delays that erode buyer confidence. Buyers should pay particular attention to daily transaction counts and average ticket size from POS data — these metrics reveal true revenue quality more reliably than reported P&L figures. Request month-by-month sales data to identify seasonality and whether revenue is trending up, flat, or declining.
Lease Assignment Contingency
The lease assignment contingency is arguably the most critical provision in a sandwich shop LOI. The business has no value without the right to occupy the premises, and landlord consent to assign the lease is not guaranteed.
Example Language
This LOI and Buyer's obligations hereunder are expressly contingent upon: (i) Seller obtaining written landlord consent to assign the existing lease to Buyer or Buyer's designated entity on terms acceptable to Buyer; (ii) Buyer's review and approval of the lease, including remaining term, base rent, CAM charges, rent escalation schedule, and renewal options; and (iii) the lease having a remaining term (including exercisable renewal options) of no less than [5] years from the anticipated closing date. If landlord consent is not obtained within [30] days of LOI execution, either party may terminate this LOI without penalty.
💡 Buyers should review the lease before executing the LOI, not after. Red flags include leases expiring within 24 months with no renewal options, personal guarantee requirements the seller has not disclosed, co-tenancy clauses tied to anchor tenants, and rent-to-revenue ratios above 10%. Sellers should proactively contact their landlord about assignment early in the process — some landlords require a formal application and weeks to respond. A landlord who refuses assignment or demands excessive lease modifications is a deal-killer that no amount of price negotiation can fix.
SBA Financing Contingency
If the buyer intends to use SBA 7(a) financing, the LOI should include a financing contingency that protects the buyer if the loan is not approved and establishes a timeline for lender commitment.
Example Language
Buyer's obligations under this LOI are contingent upon Buyer obtaining a written conditional commitment for SBA 7(a) financing in an amount sufficient to complete the transaction, on terms acceptable to Buyer, within [21–30] calendar days of LOI execution. Buyer agrees to submit a complete SBA loan application to [Lender Name or 'a qualified SBA preferred lender'] within five (5) business days of LOI execution and to diligently pursue financing approval. Seller agrees to cooperate with lender requests for business documentation, IRS 4506-C tax transcripts, and a business valuation.
💡 SBA lenders will order an independent business valuation — typically from a certified business appraiser — and will not lend above that appraised value. If the LOI purchase price exceeds the appraised value, the buyer must cover the gap with additional equity or a seller note subordinated to the SBA loan. Sellers should understand that SBA lenders require a full standby period on any seller note, meaning the seller cannot receive payments on their note for 24 months post-closing. Build this into the deal structure conversation before the LOI is signed.
Non-Compete and Transition Agreement
Define the seller's post-closing obligations, including the geographic scope and duration of the non-compete, and the length and nature of the transition training period.
Example Language
Seller agrees to provide Buyer with a transition and training period of no less than [30–60] days post-closing at no additional cost, covering vendor relationships, recipes, catering client introductions, staff management, and daily operating procedures. Seller shall execute a non-compete agreement at closing restricting Seller from owning, operating, or consulting for any sandwich, deli, or sub shop concept within [5–10 miles] of the Business location for a period of [3–5 years] from the closing date.
💡 A 30-day training period is the minimum for an owner-operated sandwich shop; 60 days is preferred when the seller has undocumented recipes, long-standing vendor relationships, or catering accounts that require personal introductions. The geographic radius of the non-compete should reflect the actual trade area — a downtown urban shop may need only a 2-mile radius, while a suburban location may need 5–10 miles. Non-competes beyond 5 years or 10 miles may face enforceability challenges depending on state law.
Confidentiality and Exclusivity
Establish mutual confidentiality obligations and a period of exclusivity during which the seller agrees not to market the business or negotiate with other buyers.
Example Language
Both parties agree to maintain strict confidentiality regarding the existence and terms of this LOI, the financial details of the Business, and all due diligence materials exchanged. Seller agrees to grant Buyer an exclusive negotiating period of [45–60] days from LOI execution, during which Seller will not solicit, entertain, or negotiate offers from other prospective buyers. In the event of a breach of confidentiality by either party, the non-breaching party shall be entitled to seek injunctive relief in addition to monetary damages.
💡 Confidentiality is critical in sandwich shop deals because employees, suppliers, and customers can react negatively to news of a sale — causing staff turnover, supplier disruption, or customer attrition before the deal closes. Buyers should request that the seller not inform employees of the sale until closing unless a specific key employee must be retained and disclosed. Sellers should limit exclusivity to 45 days with clear milestones — if the buyer is not actively progressing the SBA application or due diligence, the seller should retain the right to re-engage other prospects.
Closing Conditions and Target Closing Date
Set a target closing date and enumerate the conditions that must be satisfied for closing to occur, including lease assignment, financing approval, health permit transfer, and delivery of final financials.
Example Language
The parties target a closing date of [Date], contingent upon satisfaction of the following conditions: (i) execution of a definitive Asset Purchase Agreement by both parties; (ii) written landlord consent to lease assignment; (iii) SBA lender funding commitment; (iv) transfer or re-issuance of all required local health permits, food handler certifications, and business licenses; (v) final walkthrough confirming all included equipment is in working order; (vi) Seller's delivery of a final inventory count and accounts receivable schedule; and (vii) no material adverse change in the Business's revenues or operations from the LOI date to closing.
💡 Build in a 30-day extension clause in case SBA funding or lease assignment is delayed — these are the two most common causes of closing delays in sandwich shop deals and are rarely within either party's full control. The material adverse change clause protects buyers if the shop loses a key catering account, fails a health inspection, or experiences a sudden revenue drop between LOI signing and closing.
Seller's Discretionary Earnings Add-Back Schedule
The foundation of sandwich shop valuation is a verified SDE figure. Buyers must negotiate an agreed add-back schedule before finalizing the purchase price. Common add-backs include owner salary above market-rate manager replacement cost, family members on payroll not performing meaningful work, personal vehicle and cell phone expenses, owner health insurance, and one-time repairs or equipment purchases. A $50,000 discrepancy in SDE at a 3x multiple equals $150,000 in purchase price — get this agreed in writing before the LOI is executed.
Lease Remaining Term and Renewal Options
A sandwich shop with less than 3 years of lease remaining and no renewal options is functionally unleasable for SBA purposes and carries significant location risk for the buyer. Negotiate a minimum lease term requirement in the LOI — typically 5 years including exercisable options — and confirm the landlord's willingness to assign before proceeding. Rent escalation caps, exclusivity clauses prohibiting competing food uses in the same shopping center, and co-tenancy protections are all worth negotiating with the landlord at the time of assignment.
Inventory Valuation and Adjustment at Closing
Sandwich shop inventory — bread, proteins, produce, condiments, packaging — turns over rapidly and can fluctuate significantly. Negotiate a closing-day inventory count at Seller's landed cost, with the buyer paying for inventory separately at cost rather than including it in the purchase price. This prevents the seller from overstocking before closing or running inventory down below normal operating levels. A typical sandwich shop carries $5,000–$20,000 in usable inventory at any given time.
Equipment Condition Representations and Repair Obligations
Negotiate a representation from the seller that all included kitchen equipment — refrigeration units, commercial slicers, bread ovens, prep stations, and POS hardware — is in working order as of the closing date. Include a provision requiring the seller to repair or replace any equipment that fails between LOI execution and closing at the seller's expense. For equipment with known deferred maintenance, negotiate a purchase price reduction or seller credit rather than relying on a post-closing repair obligation.
Seller Financing and SBA Note Subordination
When SBA financing is used, the SBA requires any seller note to be on full standby for 24 months post-closing, meaning the seller receives no principal or interest payments during that period. Sellers who are unaware of this requirement are often surprised and resistant when the SBA lender raises it. Negotiate the seller note terms — typically 5–10% of purchase price at 5–8% interest over 3–5 years — early in the LOI process to avoid late-stage deal collapse when the SBA lender formalizes the requirement.
Find Sandwich Shop Businesses to Acquire
Enough information to write a strong LOI on day one — free to join.
Independent sandwich shops in the lower middle market typically trade at 2x–3.5x Seller's Discretionary Earnings. A shop with high owner dependency, a short lease, or declining revenue will fall at the lower end (2x–2.5x). A shop with documented SOPs, stable trained staff, a long-term assignable lease, growing catering revenue, and consistent financials can command 3x–3.5x. Revenue multiples are less common but generally range from 0.3x–0.6x annual revenue for this segment.
A 30–45 day due diligence period is standard for most sandwich shop acquisitions. If the deal involves SBA financing, 45 days is more realistic because lenders need time to order and receive an independent business appraisal. Complex deals involving multiple locations, real estate, or significant catering operations may warrant 60 days. The clock should start only after the seller has delivered a complete due diligence package — not from the day the LOI is signed.
Most LOI provisions are intentionally non-binding, including the purchase price, deal structure, and asset schedule. However, certain provisions are typically written as legally binding: the confidentiality clause, the exclusivity period, the earnest money deposit terms, and the obligation of both parties to negotiate in good faith. Buyers and sellers should have an attorney review the LOI before signing to confirm which sections are binding and ensure the language matches their intent.
If the landlord refuses to assign the lease, the deal as structured typically cannot proceed — a sandwich shop cannot be relocated without losing most of its customer base and the investment in leasehold improvements. The buyer should terminate the LOI and receive a full refund of the earnest money deposit, provided the lease assignment contingency is properly drafted. In some cases, buyers negotiate directly with the landlord for a new lease in their own name, but this gives the landlord leverage to raise rent or shorten the term. Always include a specific landlord consent deadline in the LOI.
No — sellers should maintain strict confidentiality until closing. Announcing a sale too early can cause key staff to begin job hunting, reduce employee morale and service quality, alarm loyal customers, and even affect catering accounts. The recommended approach is for the seller to inform key staff only when absolutely necessary (such as when a manager is needed to cover during ownership transition training) and to do so under a confidentiality agreement. The buyer and seller should agree on a communication plan for employees, customers, and suppliers as part of the closing checklist.
Yes — sandwich shop acquisitions are among the most SBA 7(a)-eligible food service transactions. The SBA will finance 80–90% of the purchase price for qualified buyers, typically requiring 10–20% equity injection from the buyer. The seller must provide three years of federal tax returns and a signed IRS Form 4506-C authorizing the lender to obtain tax transcripts directly from the IRS. The lender will also require the seller's cooperation with an independent business valuation. Sellers should be aware that if a seller note is part of the deal structure, the SBA will require it to be on full standby (no payments) for 24 months after closing.
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