Due Diligence

Question:

I am in the final stages of negotiating the purchase of an existing Subway location from the owner. He is the owner operator of this particular location. My lawyer insists that I must meet with all of the employees before closing or else “no deal”. The seller refuses to let this happen. What do you suggest?

Answer:

In this particular case, I think your attorney is going overboard in his request. Don’t get me wrong, there are many instances of a business purchase where it is critical to meet with the key employee(s); however, that is only when a certain employee holds a crucial position within the business.

For example, if you were looking to purchase an absentee run business that was being run by a key manager, and your goal was to remain absentee, then certainly a meeting with the manager would be appropriate.

However, one must look at the individual situation.

With no disrespect to the Subway employees in this particular business, you are talking about hourly employees who will come and go over time.

Turnover is always an issue and part of your role will be to continually train and hire new employees.

I cannot imagine that any of the current employees are critical to the business’ ongoing success and while I don’t want to discount their role, they are, after all, basic employees with skill sets that can be taught by you as the new owner.

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