Is a grocery LOI the same as the asset purchase agreement?
No. The LOI sets price and conditions. The APA is the binding contract with schedules. Grocery files die when the LOI is vague and the APA tries to invent the count.
LOI — Letter of intent: the largely non-binding term sheet covering price, inventory treatment, exclusivity, and conditions. In a grocery deal it should say how inventory at cost is counted, whether lease assignment is a condition, and how alcohol and federal food-benefit applications are handled. An LOI silent on the stockroom is not a grocery LOI.
Draft those lines before anyone tours the cutter. Grocery Store Business Broker — HedgeStone Business Advisors, led by Jason Taken — would rather argue a written inventory rule than a rumor price. Book a confidential intro with a marked-up term sheet, even if it is still ugly. The hour is for conditions that close, not for a headline.
What the grocery term sheet has to say
LOI terms that matter for buyers and for sellers are the two reading lists. This page is the definition. Price is one line. The next lines decide whether that price is real. Name the going-concern number and the inventory true-up as two checks. Name who pays the count crew and what is unsellable. Name remaining lease term and whether consent can recast rent. Name that USDA FNS SNAP authorization does not transfer and that the buyer files as a new owner. Name alcohol as class, quota, or control-state product — not “licenses convey.” Name lottery if commission is material and the contract is personal. Name a holdback if tax or count risk needs a bucket.
Earnest money should match the size of the inventory true-up. A token deposit next to a six-figure room invites a walk-away on count night. Exclusivity should last long enough to finish diligence and the landlord package, and short enough that a stalled buyer does not freeze the seller. The NDA already signed before the CIM is not a substitute for exclusivity in the LOI.
Binding islands in a non-binding letter
Most of the letter stays non-binding on purpose. Counsel should still mark what is binding: confidentiality, no-shop or exclusivity, governing law, and often the deposit. Do not let a “non-binding” header swallow a paragraph you intended to enforce. Do not let a binding exclusivity sit next to a price that was never a meeting of the minds. The asset purchase agreement is where the store becomes a contract. APA essentials and what is an APA are the next documents. Grocery APAs need exhibit-level license, inventory, employee, and wholesaler-consent schedules. If those exhibits contradict the LOI, you are having a second price fight.
Preview purchase price allocation in the LOI so Form 8594 is a photograph, not a new negotiation. Preview transition hours so the seller’s last two weeks are a close condition, not a favor. Name wholesaler consent if the buyer needs the book, the rebates, or the banner. A grocery LOI that ignores the wholesaler is still a retail template. The supply agreement can kill Monday as surely as a missing lease.
From letter to close without a second price
Comparing offers means cash at close, note terms, inventory treatment, license risk, and holdback — not the largest headline. A buyer who writes the grocery mechanics will beat a buyer who copies a car-wash LOI. If you have a draft, book the term-sheet hour. Bring the lease abstract and an inventory range. We will mark the lines a supermarket actually closes on.
Worked math for Grocery LOI terms that actually close
These figures are a teaching walk-through for Grocery LOI terms that actually close, not a quote and not a sold comp. Order of operations: weekly sales, recast SDE, inventory at cost, then a multiple band.
| Input or output | Illustrative figure |
|---|---|
| Weekly sales (illustrative) | $108,000 |
| Annual sales | $5,616,000 |
| Recast SDE | $174,096 (3.1% of sales) |
| Inventory at cost | $468,000 (~12 turns) |
| Occupancy check | $134,784 / year (2.4% of sales) |
| Low going-concern | $816,192 at 2.00x SDE + inventory |
| High going-concern | $964,174 at 2.85x SDE + inventory |
| Sketch DSCR on a note | 1.38 |
If weekly sales or shrink move 8 percent, the SDE and the note move with them. That is why Jason Taken starts with scan data and the lease, not with a neighbor's rumor multiple.
Book the intro call with your side of the table ready: seller files or buyer capital. The calendar is the only next step.