Earnest money on a grocery LOI

Earnest money — The deposit the buyer posts with the LOI or APA to bind the process. It usually stays refundable through a written diligence window, then becomes hard. Grocery deposits should feel the stockroom and the license calendar. A token that invites a walk on count night is not earnest; it is an option.

Write the amount, the holder, and the release before anyone starts copying files. Grocery Store Business Broker — HedgeStone Business Advisors, led by Jason Taken — treats the deposit as part of the offer, not as stationery. Book a confidential intro when you are ready to put a number next to the rooms you will open.

Soft deposit versus hard money

Soft means the buyer can terminate under the LOI and retrieve the check. That window is for due diligence: recast, lease, licenses, and a look at the room. Hard means a walk without a surviving condition forfeits the deposit to the seller. LOI terms for buyers and for sellers should name that flip date in writing.

Later conditions can still release hard money: a landlord who will not assign, a liquor authority that will not issue, a lender who declines after a good-faith recast. Those have to be listed. “Financing” as an endless escape is how sellers waste a season. “As-is after Monday” with no rooms at all is how buyers overpay.

Do not confuse the deposit with escrow of the whole price. Earnest money is a slice that later credits to cash at close. The rest of the wire still has to show up.

Sizing the check to grocery risk

Grocery has a count. Inventory at cost can be a large second check. How inventory is counted at closing is the procedure. If the buyer can walk the night of the count because the deposit is a rounding error, the seller has given a free option on a fully stocked store. Size the deposit so that walk is expensive.

License clocks create a different risk. A buyer who has opened the SNAP file and the liquor file in good faith should not lose the deposit because an agency sat on a desk. Write that. A buyer who never filed should.

This page does not invent a deposit percent of price. The right check is the one that matches the stockroom, the remaining lease term, and how replaceable the buyer is. A thin independent with a short lease and a hard count needs a serious number. A long diligence with many outs can support a smaller one only if the seller agrees.

Where the money sits until close

Name the escrow agent or trust account in the LOI. Wire instructions should match that name. The APA then says how the deposit credits to the price and what happens if the count true-up or a tax holdback also sits in escrow. A holdback is a later slice of seller proceeds. Do not use one clause for both.

If the deal dies under a listed out, the holder returns the deposit on written instruction. If the buyer defaults after hard money, the seller’s remedy starts with that check. Counsel drafts the forfeiture language. Operators should still understand which failures are outs and which are defaults.

Bring the draft LOI and the inventory guess. Book the intro with those two pages. The hour is to size the deposit to this store, not to copy a house-sale custom onto a stockroom.

How a buyer would price Earnest money on a grocery LOI

Price language for Earnest money on a grocery LOI is (recast SDE x a defendable multiple) + inventory at cost, plus or minus lease and license risk. The table is one consistent example for this URL.

Input or output	Illustrative figure
Weekly sales (illustrative)	$228,000
Annual sales	$11,856,000
Recast SDE	$687,648 (5.8% of sales)
Inventory at cost	$846,857 (~14 turns)
Occupancy check	$438,672 / year (3.7% of sales)
Low going-concern	$2,119,006 at 1.85x SDE + inventory
High going-concern	$2,806,654 at 2.85x SDE + inventory
Sketch DSCR on a note	1.55

Inventory is cash at close, not a multiple. Confusing the two is how sellers over-ask and buyers under-cash the wire.

Book the intro call with your side of the table ready: seller files or buyer capital. The calendar is the only next step.